Legal funding glossary

Non-recourse · Consumer legal funding · Pre-settlement funding · Contingent right · Proceeds · Contingency fee · Lien · Letter of protection · Subrogation · Adjuster · Policy limits · UM / UIM coverage · Med pay · Comparative fault · Economic damages · Non-economic damages · Demand letter · Discovery · Deposition · Mediation · Settlement · Judgment · Statute of limitations · Underwriting · Payoff · Buyout · Attorney acknowledgment · Right to cancel · Survival action · Wrongful death

Non-recourse

A transaction in which the funder's right to repayment exists only against a specific source — here, the proceeds of your claim. If the claim recovers nothing, nothing is owed. This is the defining feature of consumer legal funding and what separates it from a loan.

Consumer legal funding

The formal name for pre-settlement funding. California defines it as a nonrecourse transaction in which a company purchases, and a consumer assigns, a contingent right to receive a portion of the potential proceeds of a settlement, judgment, award or verdict.

Pre-settlement funding

The common term for consumer legal funding provided while a claim is still pending, as opposed to after it resolves.

Contingent right

A right that exists only if a specified event occurs. A funder's right to be repaid is contingent on the claim producing proceeds.

Proceeds

The money actually recovered from a claim through settlement, judgment, award or verdict, before deductions. Liens, fees and advances are paid out of proceeds.

Contingency fee

An arrangement in which your attorney is paid a percentage of the recovery rather than hourly. If there is no recovery, there is no fee. Nearly all personal injury representation works this way.

Lien

A legal claim against your recovery. Medical providers, health insurers and government programs may all assert liens, and they are paid out of the proceeds before you receive your share.

Letter of protection

A written assurance from your attorney to a medical provider that the provider will be paid from the eventual recovery. It allows treatment to continue when a plaintiff cannot pay up front.

Subrogation

The right of an insurer that paid your medical bills to be reimbursed out of your recovery from the party at fault.

Adjuster

The insurance company employee who investigates and evaluates a claim and makes settlement offers on the insurer's behalf.

Policy limits

The maximum an insurance policy will pay. Often the practical ceiling on what a claim can recover, regardless of the harm done.

UM / UIM coverage

Uninsured and underinsured motorist coverage on your own auto policy, which can apply when the at-fault driver has no insurance or not enough of it.

Med pay

Medical payments coverage on an auto policy that pays certain medical expenses regardless of fault, usually in modest amounts.

Comparative fault

The principle that a plaintiff's recovery is reduced by their own share of responsibility. California reduces recovery proportionally rather than barring it outright.

Economic damages

Quantifiable financial losses: medical expenses, lost wages, future care costs and lost earning capacity.

Non-economic damages

Losses without a receipt attached: pain, suffering, disfigurement and loss of enjoyment of life. California caps these in medical malpractice cases under Civil Code section 3333.2.

Demand letter

The written package your attorney sends the insurer setting out liability, the injuries and treatment, and the amount sought. It usually marks the start of serious negotiation.

Discovery

The formal exchange of evidence between parties in a lawsuit — documents, written questions, depositions. Often the longest stage of a case.

Deposition

Sworn testimony taken outside court, recorded by a court reporter, used to establish what a witness will say at trial.

Mediation

A settlement conference run by a neutral third party who helps the sides reach agreement. Most personal injury cases resolve without a trial.

Settlement

An agreement resolving a claim without a verdict. The large majority of personal injury claims end this way.

Judgment

A court's formal decision. A judgment in your favor still has to be collected, which is not always straightforward.

Statute of limitations

The deadline for filing a lawsuit. Miss it and the claim is generally barred regardless of merit. Deadlines vary by claim type and are a question for your attorney.

Underwriting

The funder's evaluation of whether and how much to advance. In consumer legal funding this assesses the claim — liability, injuries, treatment and available coverage — rather than the applicant's credit.

Payoff

The total amount owed to the funding company when the case resolves, paid out of the proceeds by your attorney.

Buyout

When one funding company pays off a consumer's existing advance from another company and replaces it with its own.

Attorney acknowledgment

A written confirmation signed by your attorney, required in California consumer legal funding contracts, in which the attorney acknowledges the funding and the obligation to pay the funder from the proceeds.

Right to cancel

A statutory window during which a consumer may cancel a funding contract by returning the funds. California provides five business days after the funding date.

Survival action

A claim that belonged to a person who died and that continues on behalf of their estate, distinct from a wrongful death claim brought by surviving family members.

Wrongful death

A claim brought by specified surviving family members for their own losses arising from a death caused by another's wrongful act. Who may bring it is set by statute.