Law and Economics graduate, Jean Xiao, has had a revised version of Chapter 1 of her dissertation “An Empirical Examination Of Consumer Litigation Funding” accepted for publication in the Journal of Empirical Legal Studies. The article is titled “Consumer Litigation Funding and Medical Malpractice Litigation: Examining the Effect of Rancman v. Interim Settlement Funding Corporation,” and is forthcoming in 2017.
Consumer litigation funding, a growing industry in the United States, is an alternative credit source for cash-strapped tort plaintiffs. Financiers give plaintiffs nonrecourse loans that are premised on lawsuit outcomes. This paper is the first to empirically examine the effect of consumer litigation funding. Specifically, it explores the impact of these nonrecourse loans on medical malpractice litigation outcomes by exploiting the variation in timing and geography from two Ohio policy changes: the Ohio Supreme Court’s 2003 ban of funding in Rancman v. Interim Settlement Funding Corporation and the state’s subsequent legislative legalization of funding in 2008. Using closed claim data from the National Practitioner Data Bank, this paper finds evidence that the availability of funding increases claim payment and claim duration.