Recently, a bill was introduced in the Kentucky House that would place restrictions on litigation funding companies. Litigation funding companies loan money to clients who are pursuing some type of litigation, typically a personal injury lawsuit. In most cases, the loans are used to pay living expenses, such as rent or a mortgage and automobile payments. The loans are needed because often the people involved have missed work due to their injuries and need money for bills until the lawsuit is resolved.
Under current Kentucky law, litigation funding companies operate in the state without limitations. However, the proposed bill would require litigation funding companies to work through an accident victim’s attorney, rather than allowing them to work directly with the injured client. The bill would also call for litigation funding companies to clearly lay out the terms of the agreements, as well as to register with the Kentucky Attorney General’s office. Additionally, these companies would be prevented from sending referral fees to lawyers or doctors.