Selling Umbrellas, Cursing the Rain: Insurers at the Crossroads of Litigation Funding
By Erick Robinson, Partner, Cherry Johnson Siegmund James, PC
August 26, 2026
Bottom Line Up Front
The insurance industry is running the most expensive and best-organized campaign in America against third-party litigation funding ("TPLF" or "funding"), and its chosen weapon is not prohibition. It is disclosure: automatic, suspicionless, adversary-facing disclosure of funder identities and complete funding agreements in every civil case in the country. The industry's lead argument is a claimed symmetry: defendants must disclose their insurance policies under Federal Rule of Civil Procedure 26(a)(1)(A)(iv), so plaintiffs should disclose everything about their funding. That argument fails on the text of the rule, on the rationale behind the rule, on the facts, and on the economics. Insurance is disclosed because the policy is the asset that pays the judgment and because the carrier frequently runs the defense. A funding agreement pays no judgment, and funders are legally forbidden, by the very state statutes the insurance lobby drafted, from controlling anything.
The deeper problem with the campaign is that its proponents do not believe their own principle. The same industry attacking litigation funding as a menace to civilization sells intellectual property enforcement insurance that pays patent owners to sue infringers, writes judgment preservation insurance on plaintiffs' verdicts, and wraps litigation funders' own portfolios in insurance paper. Westfleet Advisors reports that 21 percent of new commercial funding commitments in 2025 were insured in some way. Carriers are not opposed to litigation finance. They are opposed to litigation finance they do not sell, aimed at defendants they do insure.
This article walks through the crossroads where these two industries meet: what funding is and whom it serves, the insurers' case and its evidentiary holes, the industry's own thriving litigation-finance business, why the Rule 26 parity argument collapses under scrutiny, what overbroad disclosure would actually do to plaintiffs (and especially to patent owners), the current state of the legislative and regulatory fight as of August 2026, and what honest reform would look like. The short version: litigation funding is how the little guy gets to court, the case against it is asserted more than proven, and the disclosure crusade is an attrition weapon dressed up as transparency. Courts should know who has a stake in litigation. Adversaries are not entitled to their opponent's war chest, budget, and strategy. That distinction decides this entire debate.
I. Introduction: A Fight Between Two Kinds of Litigation Money
On April 30, 2026, the U.S. International Trade Commission proposed new Section 337 rules requiring disclosure of entities holding a financial interest in, or exercising control over, parties appearing before the Commission. That proposal joined two federal disclosure bills that died in House Judiciary markups within the preceding six months, a third that made it out of committee, a Senate bill introduced in February, an active study by the federal Advisory Committee on Civil Rules, a patchwork of state statutes, and the first outright state ban on commercial litigation funding in American history, signed in North Carolina on June 22, 2026. The political force behind nearly all of it comes from two overlapping sources: the property-casualty insurance industry and the largest corporate defendants in the country, organized principally through the U.S. Chamber of Commerce's Institute for Legal Reform.
Here is the part that repays scrutiny. The industry supplying that political force is itself one of the largest litigation financiers on earth. Liability insurance is defense-side litigation funding: the carrier pays the lawyers, directs the strategy, and controls settlement. Beyond that, insurers sell enforcement insurance that finances plaintiff-side patent suits, judgment preservation insurance that protects plaintiffs' awards on appeal, adverse judgment insurance, patent monetization insurance, and portfolio wraps that insure the books of the very funders the industry publicly attacks. Chubb and Liberty Mutual, two of the loudest voices against TPLF, have built substantial contingent legal risk portfolios. Allianz ran its own litigation funding business until 2011 and exited because it conflicted with the group's core insurance operations, not because anyone thought the business was wrong.
So the situation, on its face, points in two opposite directions. One industry position holds that outside capital in litigation is a corrosive force turning courtrooms into casinos. The other industry position, expressed in underwriting rather than press releases, holds that litigation risk is an attractive asset class to price, insure, and profit from. Both positions are held by the same companies at the same time. The contradiction dissolves only when you stop listening to the rhetoric and follow the loss ledger: casualty insurers sit on the defense side of the "v." in nearly every funded case, so funding that strengthens plaintiffs costs them money, while specialty units profit from selling litigation-risk paper of their own. This is not a philosophical dispute about the purity of the courts. It is a market-share war, and the disclosure bills are its artillery.
This article proceeds in ten parts. Part II explains what litigation funding actually is and who actually uses it, because the "hedge funds corrupting justice" framing inverts the real economics. Part III states the insurance industry's case fairly, because parts of it deserve engagement. Part IV examines the evidence and finds a causal case that is asserted far more than proven. Part V documents the industry's own litigation-finance business, from IP enforcement insurance to judgment preservation towers. Part VI takes on the parity argument, the claim that insurance disclosure justifies funding disclosure, and dismantles it on the law's own terms. Part VII shows what overbroad disclosure actually does in practice, with Delaware as the cautionary tale. Part VIII surveys the legislative, regulatory, and rulemaking battlefield as of this writing. Part IX explains why patent litigation is ground zero. Part X describes what honest reform would look like, because the answer to bad disclosure rules is good ones, not silence. Part XI concludes.
II. What Litigation Funding Is, and Who It Actually Serves
A. The Mechanics
Commercial litigation funding is a non-recourse investment. A funder pays some or all of a claimant's litigation costs in exchange for a share of any recovery. If the case loses, the funder loses everything and the claimant owes nothing. That structure matters more than any other fact in this debate. Because the funder eats the entire downside, funders underwrite cases the way carriers underwrite risks: rigorously, professionally, and with a strong bias toward rejection. Omni Bridgeway and its peers report rejecting more than 95 percent of the opportunities presented to them. A funded case is, by definition, a case that survived professional merits screening by people betting their own money on the answer.
The market is specialized and, by the standards of its opponents, small. Westfleet Advisors' 2025 report counted 39 active U.S. commercial funders, $2.8 billion in new commitments across 346 transactions, and roughly $16 billion in assets under management industry-wide. Portfolio transactions represented 64 percent of new commitments, and patent litigation remained one of the largest funded categories at 27 percent. For scale: the property-casualty insurance industry holds trillions of dollars in assets and more than a trillion dollars in policyholder surplus. A single major carrier's shareholder equity exceeds the entire funding industry's assets under management several times over. When the insurance lobby describes this fight as ordinary Americans versus multi-billion-dollar hedge funds, it has the caption exactly backwards.
B. The Access Problem Funding Solves
Patent litigation shows why the industry exists. Enforcing a patent costs from roughly $700,000 for a small dispute to $5 million or more per side when over $25 million is at stake, before accounting for inter partes review proceedings, appeals, and the years of delay a well-resourced defendant can manufacture according to AIPLA. The Government Accountability Office, in its December 2024 report on patent litigation funding (GAO-25-107214), found broad agreement among market participants that some patent cases would never be filed without outside funding, and found funding concentrated precisely where litigation cost would otherwise bar the courthouse door. GAO also noted that fewer law firms are willing to take patent cases on pure contingency because of the unique costs and risks involved. For the independent inventor, the university spinout, or the small operating company facing a trillion-dollar-capitalization infringer, the choice is frequently funding or forfeiture.
Consider the arithmetic the defense side prefers not to discuss. A claimant holds a claim with a risk-adjusted trial value of $100 million and faces a litigation budget of $8 million+ over three years. Without capital, that claimant may accept $5 million or even less, because it cannot finance the path to judgment. With funding, trial becomes credible and the case may settle for $20 million. The legal merits did not change. The claimant's outside option changed. The insurer records a larger paid loss and calls it social inflation. The claimant recovers value that financial distress had been silently transferring to the defense for decades. Both descriptions are accurate. Only one of them describes a problem.
That silent transfer is the historical baseline the disclosure campaign never mentions. Before funding existed, a large corporation could defeat a meritorious claim brought by a poorer party simply by outspending it: stretch the schedule, multiply the motions, exhaust the plaintiff, and buy the claim at a distress price. Litigation funding was built to correct that imbalance. The defense bar's complaint about the new "imbalance" is, at bottom, a grievance about losing a financial advantage it was never entitled to hold. The American civil justice system promises adjudication on the merits. It does not promise defendants an opponent who runs out of money.
Bottom line: funding converts a claim's value from a function of the claimant's treasury into a function of the claim's merits. That is the entire offense.
III. The Insurers' Case Against Funding, Taken Seriously
Any honest treatment must state the other side's case at full strength, and the insurance industry's case is not frivolous. Each ground repays scrutiny.
First, the cost argument. Insurers are economically short the plaintiff's claim. Subject to coverage and limits, a liability carrier pays defense costs and pays again when the claimant succeeds. Funding can remove the settlement discount created by a claimant's lack of cash, keep cases alive through expert discovery and trial and appeal, and raise both defense expense and settlement value under policies the carrier has already priced. Ernst & Young analysis presented at the American Property Casualty Insurance Association's 2025 annual meeting projected that TPLF could add up to $50 billion in costs to the U.S. insurance industry over five years. Swiss Re data cited by carriers shows liability claim severity rising 57 percent over the past decade. Carriers count 135 "nuclear verdicts" (awards above $10 million) in 2024 alone, with the median such verdict climbing from $21 million a decade ago to $51 million. Conning's Alan Dobbins calls funding "the jet fuel funding megaverdicts." APCIA, the National Association of Mutual Insurance Companies, the Reinsurance Association of America, and the Insurance Information Institute have all made TPLF a top legal-reform priority, framing it as a hidden "tort tax" passed through to every policyholder.
Second, the settlement-incentive argument. Some funding agreements entitle the funder to recover its principal plus a multiple, often two to three times invested capital, before the claimant receives meaningful proceeds. GAO documented such waterfall structures in patent funding. Returns that escalate over time, and portfolio arrangements that cross-collateralize several matters, can create real tension among claimant, counsel, and funder over settlement timing and amount. Insurers argue that a claimant who must clear the funder's return before seeing a dollar will rationally hold out for more, prolonging cases that should settle.
Third, the control argument. The industry's exhibit A is a single dispute between a commercial funder and the plaintiff, in which the funder, under a $140 million portfolio agreement containing consent rights, allegedly blocked settlements the plaintiff wished to accept in antitrust litigation against protein suppliers and ultimately moved to substitute a new entity as plaintiff. A Minnesota magistrate judge rejected the substitution attempt in a sharply worded order, reasoning that a financer with no interest in the litigation beyond the return on its investment should not override the decisions of the party that actually brought suit. In re Pork Antitrust Litigation, No. 18-cv-1776 (D. Minn. Feb. 9, 2024). The episode is real, it was ugly, and it supports rules against undisclosed settlement vetoes and interference with counsel's professional judgment.
Fourth, the foreign-influence argument. A foreign state or sovereign wealth fund could, in theory, fund U.S. litigation to burden a competitor, seek strategic discovery, or shape precedent. The Institute for Legal Reform points to reporting that subsidiaries of a Russian conglomerate backed suits in New York and London before and after the conglomerate's founders were sanctioned. GAO referenced a case in which an investment entity withdrew a $4 billion infringement suit rather than disclose its foreign funders. Rep. Darrell Issa (R-CA) has claimed the Chinese Communist Party is "waging what they call legal warfare, using the U.S. courts." Courts should know when a foreign government supplies litigation capital or exercises influence. On this narrow point, the critics are right, and the funding industry's own trade association has not seriously resisted foreign-disclosure proposals.
Fifth, the actuarial argument. The core of the insurance business is pricing risk from data. Carriers argue that billions in outside capital flowing invisibly into litigation makes claims harder to model, reserves harder to set, and settlement authority harder to calibrate.
These arguments deserve the hearing they demand. What they do not deserve is a free pass on evidence, on consistency, or on remedy, and on all three the industry's case falls apart.
IV. The Evidence, Examined: Asserted More Than Proven
The empirical foundation of the anti-funding campaign consists almost entirely of industry-commissioned advocacy modeling, and the most rigorous independent research declines to support the causal claim at the campaign's center.
Start with what the neutral sources actually say. The RAND Corporation's 2024 study, the most serious independent examination of "social inflation," found that inflation-adjusted personal-injury and wrongful-death trial awards grew at a 7.6 percent compound annual rate between 2010 and 2019, that plaintiff win rates rose from 53 percent to 64 percent, and that awards of $5 million or more grew to 12 percent of awards by 2019. Real trends, carefully measured. But RAND expressly cautioned that these increases "would be suggestive of social inflation but would not necessarily provide conclusive evidence," and that they could reflect factors external to the civil justice system entirely. RAND did not isolate litigation funding as a causal variable at all. Subsequent peer-reviewed work in the risk and insurance literature confirms the difficulty of separating case mix, jury attitudes, medical costs, and forum effects from any funding effect. GAO reached a similarly restrained conclusion in patents: public information is too limited to measure funding's prevalence nationally, let alone its net effect on case quality, settlements, verdicts, or premiums.
Now compare the numbers the lobby actually campaigns on. The Perryman Group, a repeat contractor for tort-reform clients, attributed $35.8 billion in annual direct losses to TPLF and, with multipliers applied, more than $54 billion in lost annual economic output and roughly 454,450 lost jobs, which Citizens Against Lawsuit Abuse translated into more than $607 per household per year. The Institute for Legal Reform pegs annual tort costs at $529 billion. APCIA cites roughly $6,000 per household in cost-of-living impact. These are modeled advocacy estimates commissioned by parties with a direct financial stake in the conclusion, built on assumptions the sponsors do not fully disclose, and they should be labeled as such every time they appear. They are not observed changes caused by the introduction of funding anywhere, ever.
The industry's story also contradicts itself. The same advocacy materials claim that funding simultaneously fuels frivolous litigation and produces nuclear verdicts. Pick one. A funder that commits millions of non-recourse dollars to a frivolous case loses those millions. That is why funders reject over 95 percent of opportunities, and it is why the limited empirical work we have points the other way: a 2026 matched-case study of disclosed funded federal cases found dismissal rates of roughly 21 percent for funded cases against 46 percent for controls. Funded cases ran longer, which is what surviving early dismissal and resisting lowball settlements looks like. The study is small and its sample disclosure-selected, so it proves association rather than causation. But it is telling that the best available data suggests funded cases are stronger, not weaker, than the average docket entry.
One more point about endurance. Insurers describe longer case duration as waste. For a plaintiff facing a defendant whose explicit strategy is delay, duration is not waste; it is the price of not surrendering. An industry whose own defense playbook includes serial IPR petitions, discovery attrition, and outlasting the other side's budget is poorly positioned to complain that plaintiffs have found a way to stay in the fight.
Bottom line: rising verdicts are real, and their causes are contested. The claim that litigation funding causes them is a lobbying position wearing a lab coat.
V. The Industry's Other Ledger: Insurers as Litigation Financiers
Here is the fact that should end the pretense of principle: the insurance industry is in the litigation funding business, on the plaintiff side, right now, at scale, and profitably. It simply calls the product insurance.
A. IP Enforcement Insurance: Funding a Plaintiff's Lawsuit for a Premium
Intellectual property enforcement insurance, sometimes called abatement insurance, pays a patent or trademark owner's costs to sue an infringer. This is not a fringe product. Intellectual Property Insurance Services Corporation (IPISC), the market pioneer with over 30 years of history, writes enforcement coverage through a Lloyd's of London syndicate and states directly that the coverage pays a plaintiff's legal expenses in a lawsuit, with the insured keeping 100 percent of any damages recovered. Hartford markets abatement enforcement coverage that pays a business's costs to pursue another party using its IP. Arch describes IP rights enforcement coverage paying investigation costs and legal fees to pursue suspected infringement. CFC Underwriting runs one of the largest dedicated IP insurance teams in London. BlueIron writes patent enforcement coverage through Lloyd's. Premiums typically run 1 to 1.5 percent of coverage limits annually. The global IP insurance market, valued at roughly $1 billion to $1.4 billion in recent years, is projected to double or more by the early 2030s.
From the accused infringer's chair, the economics of an enforcement-insured lawsuit are indistinguishable from a funded one: a claimant who could not otherwise afford suit receives third-party capital after professional merits review, from a capital provider with a financial interest connected to the litigation's cost and outcome. The structural differences (premium versus contingent return, regulated carrier versus private fund) matter for solvency and consumer-protection regulation. They do not change the function. Both products capitalize plaintiff-side litigation that would not otherwise happen. The insurance industry has never publicly reconciled its position that one is legitimate commerce and the other a threat to the republic, and the coalition letters supporting the federal disclosure bills conspicuously decline to propose disclosure of enforcement insurance on equal terms.
B. Contingent Legal Risk: Insuring Verdicts, Judgments, and Funders Themselves
The overlap runs far deeper than IP. The contingent legal risk market, as Liberty Mutual's own specialty unit describes it, comprises adverse judgment insurance, judgment preservation insurance, and specific legal risk insurance, with per-policy limits running from millions to upward of $1 billion. Judgment preservation insurance protects a plaintiff's award against appellate reversal and lets the plaintiff monetize the judgment while the appeal is pending. Patent monetization insurance and portfolio wraps insure the cash-flow value of patent assets and of funders' investment portfolios. Brokers including Aon, Marsh, WTW, and CAC Specialty have built dedicated litigation-risk practices; CAC reports generating more than a billion dollars in liquidity on the plaintiff side of the market and won an innovation award for IP portfolio insurance.
And the two industries do not merely coexist. They transact. Westfleet Advisors began tracking the intersection in its 2024 report and found 19 percent of new funding commitments were insured in some way; the 2025 figure was 21 percent. Insurers are counterparties to litigation funders, wrapping the funders' books, pricing the same merits, duration, collectability, and appellate risks that funders price. As patent finance observer Gaston Kroub put it, insurance widens the investor pool because institutional investors "will dabble in litigation funding if there's insurance involved because it becomes less binary." Aon's Stephen Kyriacou has noted that on already-decided lower-court judgments, funders "have started to kind of cede that ground to us." Some insurers have even begun entering adjacent funding-like products through brokers, which funders reasonably cite as proof that the industry's objection is market positioning, not morality.
The risk in this business is real, and insurers have paid for underestimating it. After BMC Software won a roughly $1.6 billion judgment against IBM in 2022, carriers built a judgment preservation tower approaching $1 billion around it, with Liberty Mutual leading and holding $100 million to $150 million of exposure. The Fifth Circuit reversed. BMC Software, Inc. v. International Business Machines Corp., 100 F.4th 573 (5th Cir. Apr. 30, 2024). The losses triggered a hard-market correction: smaller limits, higher premiums, a tilt toward portfolio deals. Underwriting litigation risk means owning litigation risk, whatever label the contract carries. The industry knows this intimately, because it is in the business.
C. The Seed-Corn Sermon
Against that backdrop, consider the industry's public voice. Chubb CEO Evan Greenberg, at his May 2023 RIMS keynote, asked "What social purpose does litigation funding really serve?" and, on whether insurers should invest in funding, answered: "It sounds sort of like eating your own seed corn. I don't think that's the way to hedge – to start an arms race." In a July 7, 2025 Wall Street Journal op-ed with Marsh McLennan CEO John Doyle, the two executives compared funding's opacity to the subprime mortgage crisis, urged Congress to tax funders, and disclosed their own conduct: Chubb "looking carefully at our relationships to make sure that the people and companies with whom we do business aren't helping to fuel the problem," and Marsh having "refused for several years to work on litigation insurance with these litigation funders." Burford's Christopher Bogart called Chubb's use of market power to deny access to a legal market "inappropriate" and potentially "anti-competitive." He has a point. When the dominant sellers of commercial insurance coordinate public refusals to deal with a young competing capital source while lobbying the government to burden it, antitrust lawyers take notes.
The seed-corn line, read carefully, is a confession. Greenberg's argument is not that litigation risk should not be financed; his industry finances it daily, on both sides. His argument is that capital which strengthens claimants against carriers is bad for carriers. True. Also not a policy argument.
Bottom line: the insurance industry has no objection to litigation finance; it underwrites the product daily and insures the funders themselves. Its objection is to competition. Some insurers insure the very funding the rest of the industry is trying to kill, and the companies attacking it loudest are protecting a loss ledger, not a principle.
VI. The Parity Argument, and Why It Fails
A. The Argument Insurers Make
The centerpiece of the disclosure campaign is an appeal to symmetry, and it deserves quotation in the form its proponents use. Under Rule 26, the argument runs, defendants are already legally required to disclose their insurance policies to the plaintiff at the outset of a lawsuit; it is therefore a gross imbalance that plaintiffs can see exactly how much money the defense has while the defense is barred from knowing whether a multi-billion-dollar hedge fund is secretly bankrolling the plaintiff. If insurance must be disclosed, everything about funding should be disclosed too: the funder's identity, the agreement, the terms, all of it, automatically, in every case.
The argument sounds like simple fair play, which is why it is the industry's lead. It is also wrong at every joint: wrong about why insurance is disclosed, wrong about what insurance disclosure reveals, wrong about what funding disclosure would reveal, and wrong about who is actually hiding litigation finance. Take the failures in order.
B. Insurance Is Disclosed Because It Pays the Judgment; Funding Pays No Judgment
Rule 26(a)(1)(A)(iv) requires disclosure of "any insurance agreement under which an insurance business may be liable to satisfy all or part of a possible judgment." That clause is the entire rationale. The 1970 Advisory Committee explained that insurance is unique among a party's financial information because the policy is the asset the plaintiff will collect against, and disclosure enables realistic appraisal of the case so that settlement decisions rest on knowledge rather than speculation. If a defendant carries a $1 million policy and holds no other reachable assets, a plaintiff who knows that will not spend three years chasing a $10 million verdict. The rule exists to price judgments, and it works.
A funding agreement can satisfy no judgment. Under the American Rule, a prevailing defendant takes nothing from the losing plaintiff, and even a fee award under 35 U.S.C. § 285 runs against the party, not the funder. Funding is operating capital for prosecuting a claim, legally indistinguishable from the plaintiff's bank account, its credit line, or its law firm's willingness to carry costs, none of which has ever been disclosable for either side. The parity argument works only by swapping the rule's actual rationale, judgment satisfaction, for an invented one, war-chest surveillance, that the Rules have always rejected for both sides. The District of Delaware said exactly this in MHL Custom, Inc. v. Waydoo USA, Inc., No. 21-91-RGA-MPT, D.I. 120 (D. Del. Dec. 1, 2022), holding that even an insurance policy funding a plaintiff's case fell outside Rule 26(a)(1)(A)(iv)'s automatic disclosure because the insurer would not satisfy a judgment. The dividing line is not insurance versus funding. It is money that pays judgments versus money that pays lawyers, and the rule has only ever reached the former.
C. Insurance Disclosure Follows Control; Funders Are Forbidden to Control
The 1970 Committee also understood that a duty-to-defend insurer selects counsel, directs strategy, and holds settlement authority. The carrier is functionally the real defendant, so it is disclosed. Commercial funders have none of those rights, by industry norm and now by statute. The state laws the insurance lobby itself championed, Georgia's SB 69 among them, along with Montana, Louisiana, West Virginia, and Indiana, codify prohibitions on funder control of strategy and settlement. The Grassley-Tillis Senate bill would bar funders from exerting "influence, control, or discretion" over strategy or settlement in covered actions. The insurers cannot legislate that funders may not control litigation and then demand blanket disclosure on the theory that they do. And where control actually appears, the Minnesota case being the lobby's one recurring example, existing tools already reach it: targeted discovery on a showing, real-party-in-interest doctrine, Rule 17, standing challenges, and the inherent authority Chief Judge Colm Connolly deployed in Delaware. An exception that is rare, remediable, and now illegal justifies targeted doctrine. It does not justify universal financial discovery.
D. The Rule Is Already Symmetric, and the Claimed Asymmetry Is Invented
The insurance-disclosure rule is party-neutral. Any party facing a claim for money must disclose insurance that would satisfy a judgment against it, and when a patent defendant counterclaims, the plaintiff discloses its applicable insurance the same way. The rule operates more often against defendants because defendants more often face money judgments. Complaining that a judgment-satisfaction rule burdens the parties against whom judgments are sought is complaining about the definition of a lawsuit.
The factual premise fares no better. Plaintiffs do not "see exactly how much money the defense has." They see policy limits, typically a small fraction of a corporate defendant's litigation capacity. They see nothing of the defense budget, counsel arrangements and rates, case reserves, joint-defense and cost-sharing agreements, indemnification rights running from suppliers and customers, captive arrangements, or the balance sheet that funds a scorched-earth defense above limits. No rule requires any of that, and no defendant would tolerate one that did. The defense is demanding a level of financial transparency from plaintiffs that it is entirely protected from providing about itself. If the defense bar truly wants symmetry in litigation finance, the correct analogue to a funding agreement is the defendant's litigation budget and the sources that pay it. No one discloses that. No one should.
E. A Policy Is a Commodity; a Funding Agreement Is the Case File
The two documents are not remotely comparable. A commercial general liability policy is a standard form, priced actuarially, purchased years before any dispute, on a class of risks. It reveals a carrier, limits, and exclusions, and nothing about the case. A funding agreement is executed after the claim arises and is priced on a confidential assessment of that specific claim's merits, damages, and duration risk. Its terms, the advance rate, the return waterfall, the budget and drawdown schedule, the termination triggers, are functionally a merits appraisal built from counsel's own analysis. That is why Miller UK Ltd. v. Caterpillar, Inc., 17 F. Supp. 3d 711 (N.D. Ill. 2014), held that counsel's mental impressions and case analyses keep their work-product protection even when shared with prospective funders, and held the funding deal documents themselves irrelevant because champerty could support no defense. The overwhelming weight of authority likewise denies funding discovery absent a particularized showing. Compelled production of the agreement is compelled production of the plaintiff's evaluation of its own case, handed to the adversary on day one. There is no insurance analogue, because the policy predates the case and embodies no opinion about it.
Equal production duties applied to unequal documents produce radically unequal information. The defendant learns the plaintiff's capital ceiling, budget assumptions, and the recovery level at which the claimant nets little after the funder and counsel are paid, and can time its expense and frame its offers accordingly. The plaintiff learns a coverage limit. That is not parity. That is a strategy transfer running in one direction.
F. The Contingency Fee Proves the Principle
The original secret third party bankrolling plaintiffs is the contingency-fee lawyer, who fronts the costs, owns 33 to 40 percent of the recovery, and exerts more day-to-day influence over the litigation than any funder ever could. No rule has ever required disclosure of contingency-fee economics, because the system regulates the conduct, through ethics rules, fiduciary duties, and the client's non-delegable settlement authority, rather than exposing the economics to the adversary. Funders sit behind the same architecture: control prohibitions, the new state conduct statutes, and the client's final word on settlement. A regime that treats the lawyer's 40 percent as sacrosanct and the funder's 20 percent as sinister is not drawing a principled line. It is drawing a line around whichever capital helps plaintiffs least. The common law reached the same conclusion when it dismantled champerty: Saladini v. Righellis, 426 Mass. 231 (1997), and Osprey, Inc. v. Cabana Ltd. P'ship, 340 S.C. 367 (2000), abolished the doctrine on the ground that ordinary contract defenses, not bans on outside capital, are the right tools for policing funding agreements.
G. Apply the Principle Evenhandedly and Watch the Proponents Run
If the rule really were that each side should know who holds a financial stake in the other side's litigation, discovery would reach joint-defense agreements, indemnity networks, defense cost-sharing arrangements, reverse-contingency and success-fee structures, RPX memberships, and the member rolls of Unified Patents, which files IPR petitions in its own name while litigating that its fee-paying beneficiaries are not real parties in interest. The Federal Circuit has had to confront exactly that structure, vacating a Board decision that read the real-party-in-interest inquiry impermissibly narrowly; see Applications in Internet Time, LLC v. RPX Corp., 897 F.3d 1336 (Fed. Cir. 2018). The technology industry operates a mature, anonymous, pooled, outcome-interested litigation-funding system on the defense side, and its operators support disclosure bills whose definitions exempt them.
The insurers' own hidden financiers make the point twice. Reinsurers share the loss on major verdicts, and their consent can shape settlement above retentions; no one proposes producing reinsurance treaties. And as Part V showed, insurers themselves are counterparties to plaintiff-side litigation finance, writing judgment preservation policies and portfolio wraps that are disclosed to no one. When ISO, the Verisk unit that drafts industry-standard policy language, rolled out its 2025 "Litigation Funding Mutual Disclosure" condition, the mutuality was fake by design: funders almost never finance defense-side claims, so the insurer's reciprocal obligation is empty while the policyholder's operates as a coverage trap enforceable by forfeiture. Omni Bridgeway has explained why the endorsement is likely unenforceable in the common denial-of-coverage posture. But its design is the confession: when the industry drafted its own "mutual" disclosure, it made sure the obligation ran one way.
MLex reporting completes the picture: APCIA and the Chamber have sought no comparable disclosure for bank loans, equity financing, insurance, or donor-backed litigation, the forms of capital most available to large companies. The operative principle is narrower than advertised: disclose the litigation finance that helps plaintiffs.
H. What the Retreats Concede
The campaign's own legislative retreats concede the core of this analysis. Rep. Issa's second bill, H.R. 7015, narrowed disclosure to funders who are "effectively the plaintiff," sharing profits and settlement influence, and added in camera judicial review before anything reaches the defense. Those concessions, written into legislative text by the disclosure movement's own sponsor, admit that passive capital never belonged in the net and that the tribunal, not the adversary, is the proper audience. Once both points are conceded, nothing remains of the parity argument, because the "effectively the plaintiff" funder is already reachable today under real-party-in-interest doctrine and ordinary discovery, case by case, on a showing. Defendants who can articulate actual relevance can obtain funding discovery in any courtroom in America under Rule 26(b)(1). Roughly a quarter of federal district courts have local disclosure rules, six circuits require appellate disclosure, and district judges grant funding-disclosure motions in about 40 percent of reported instances, which is what a functioning relevance standard looks like. What the bills demand is an exemption from that standard: automatic, suspicionless production of an adversary's finances, available to no litigant for any other category of information.
Bottom line: insurance is disclosed because the policy pays the judgment and the carrier runs the defense. Funding pays no judgment, and funders are forbidden to run anything. The analogy fails on the rule's text, its rationale, its neutrality, and its history, and the people making it have carefully drafted their own litigation finance out of every bill they support.
VII. Disclosure as a Weapon: What the Bills Would Actually Do
A. The Attrition Playbook
Judge a disclosure rule by what the disclosure is for. Insurance disclosure promotes settlement at the value of the claim by revealing the indemnity available to pay it. Funding disclosure promotes settlement below the value of the claim by revealing the plaintiff's financial endurance. Hand a deep-pocketed defendant the plaintiff's funding agreement and the playbook writes itself: read the budget, count the tranches, note the termination triggers and the funder's fund-life and return pressure, then litigate to the plaintiff's capital ceiling rather than to the merits. File the extra motions. Demand the extra discovery. Price the offer to the funder's breakpoint instead of the claim's worth. Every foreseeable defense use of the agreement's terms is a merits-avoidance strategy. Keeping the terms private forces defendants to litigate the case they were sued on.
The rule would injure unfunded plaintiffs worst of all. Universal disclosure means a day-one certification in every federal case, several hundred thousand filings a year, and the overwhelming majority of those certifications would read "no funding." Each one would tell a repeat defendant that this plaintiff has limited staying power and can be outspent. A rule marketed as exposing Goliaths would function, in practice, as a registry of Davids. And the compliance machinery, satellite litigation, privilege fights, and supplementation duties would burden the entire docket to police an arrangement present in a small fraction of cases. The Rules Enabling Act process exists precisely to prevent that kind of untested, economy-wide discovery mandate, which is one reason the Advisory Committee has studied the question for years without adopting one.
B. Delaware Is the Warning Label
We do not need to speculate about what disclosure regimes do, because one has been running since April 2022, when Chief Judge Connolly issued standing orders in the District of Delaware requiring disclosure of third-party funding and of ownership up the chain. A University of Utah study found that patent filings in Delaware fell 41 percent over the following two years, against a 15 percent national decline, and that exactly one new funded patent case was filed in Delaware in 2024. Professor Jonas Anderson's conclusion was direct: "from the evidence we've amassed, there's a pretty good argument here that what's going on is litigation funders don't like disclosure." An MIT study similarly found that mandatory funding disclosure reduced case volume and shortened settlement times for financially constrained plaintiffs, the polite way of saying those plaintiffs took less money faster. GAO recorded an investment entity withdrawing a $4 billion infringement suit rather than expose its funders.
The disclosure lobby cites these numbers as vindication, on the theory that cases which flee disclosure must have been illegitimate. That theory assumes its conclusion. Capital is mobile and rational; it goes where the rules do not hand its adversaries a targeting package. When funded cases leave a venue, meritorious claims leave with the rest, and the defendants who happen to be sued elsewhere gain nothing except the ones who are never sued at all. Which is, of course, the point. The honest lesson of Delaware is that disclosure rules change filing behavior and bargaining power, not merits.
To be clear, Judge Connolly's orders also exposed genuine abuses: a network of shell LLCs whose nominal owners did not understand the litigation filed in their names deserved the scrutiny it drew, and the Federal Circuit properly declined to shut the inquiry down. Courts policing the parties before them is the system working. That is disclosure to the tribunal, on the tribunal's initiative, addressed to real indicia of abuse. It is not a national rule handing every defendant every plaintiff's financing file.
C. The Constitutional History the Lobby Ignores
Compelled disclosure of who finances litigation has a constitutional record, and it is ugly. In NAACP v. Alabama ex rel. Patterson, 357 U.S. 449 (1958), and Bates v. City of Little Rock, 361 U.S. 516 (1960), the Supreme Court struck down compelled disclosure of the NAACP's membership and supporter lists, and NAACP v. Button, 371 U.S. 415 (1963), held that organized litigation activity is itself protected expression and association. The civil rights movement was third-party-funded litigation. So is much of today's conservative public-interest docket, which is why the opposition to the Issa bills did not come from where the sponsors expected. Alliance Defending Freedom, with more than a dozen Supreme Court wins since 2011, lobbied the Speaker against the bill in a January 12, 2026 letter; ADF founder Alan Sears warned that "conservatives should also be wary of endorsing legislative efforts that create disclosure mechanisms that can one day be used against them." More than a dozen conservative organizations, including America First Legal and the Heartland Institute, signed opposition letters citing threats to privacy and freedom of association. Rep. Thomas Massie (R-KY) called the sponsors' bluff with an amendment narrowing the bill to foreign influence, the stated rationale, and the proponents' refusal to accept it told everyone what the bill was actually for. Rep. Jamie Raskin (D-MD) called it "the giant corporation bill of the year," and Rep. Becca Balint (D-VT) invoked Bates during the markup. When the NAACP's heirs and Alliance Defending Freedom tell Congress the same thing about the same bill, the objection is not partisan. It is structural.
D. Transparency, Demanded by the Opaque
One last measure of the campaign's good faith: the transparency champions will not say who pays them. The U.S. Chamber of Commerce, whose Institute for Legal Reform leads the disclosure push, is a 501(c)(6) that redacts its donors. Its own filings show roughly 92 percent of revenue from contributions and only about $4 million of $197 million from membership dues in 2022. Public Citizen's analysis of the Chamber's tax filings found 97 percent of nearly $198 million in 2021 contributions came from donors giving at least $5,000, with nearly half from just 46 donors giving $1 million or more. Issue One traced $1.3 billion the Chamber raised from 2010 to 2016 and could identify the source of about 7 percent of it. The identifiable large funders include Dow, Chevron, Merck, Aetna, Microsoft, and Qualcomm, a self-selected roster of very large payers with acute interests in patent law, not the three million small businesses of the marketing copy. An organization funded by hidden seven-figure corporate checks, demanding that a widowed inventor disclose her funding agreement to the corporation she is suing, is not a transparency movement. It is a client list with a slogan.
Bottom line: overbroad disclosure is not a neutral good-government reform that happens to help defendants. Attrition is its mechanism, unfunded plaintiffs are its collateral damage, and its sponsors exempt themselves from every principle they invoke.
VIII. The Battlefield as of August 2026
The campaign is running on five tracks simultaneously, and a practitioner needs the whole map.
Table 2. The disclosure campaign at a glance, August 2026.
Track | Vehicle | Status |
Federal disclosure bills | H.R. 1109; H.R. 7015 | Both pulled in House Judiciary markups (Nov. 2025; Jan. 2026) without a vote |
Foreign-funding bill | H.R. 2675 | Approved in committee 15 to 11; reported and placed on the Union Calendar (June 2026) |
Senate vehicle | S. 3826 (Grassley, Tillis, Kennedy, Cornyn) | Introduced Feb. 11, 2026; pending in Senate Judiciary |
Funding excise tax | S. 1821 (40.8 percent, cut to 31.8 percent) | Stripped under the Byrd Rule before the July 2025 budget signing |
State statutes | Roughly ten states, incl. Ga. S.B. 69 | Registration, control prohibitions, disclosure; New York 25 percent recovery cap |
Outright ban | N.C. H.B. 315 | Signed June 22, 2026; first in the nation; $50,000 penalties, void contracts, treble damages |
Federal rulemaking | Advisory Committee TPLF subcommittee | Studying since Oct. 2024; LCJ and ILR Rule 26 proposal filed Mar. 10, 2026 |
Agency rulemaking | ITC proposed Section 337 rules | Proposed Apr. 30, 2026; comments filed summer 2026 |
Private ordering | ISO endorsement CP 99 14 06 26 | Optional "mutual disclosure" liability policy condition, available since 2025 |
Federal legislation has stalled, twice, in dramatic fashion. Rep. Issa's Litigation Transparency Act (H.R. 9922 in 2024, reintroduced as H.R. 1109 on February 7, 2025) would have required disclosure of any person with a contingent right to payment in any federal civil action, plus production of the funding agreements themselves, within ten days of execution. It reached a House Judiciary markup on November 18 and 19, 2025, and was pulled without a vote. Its negotiated successor, H.R. 7015, the Protecting Third Party Litigation Funding From Abuse Act, introduced January 12, 2026, retreated to a court-first model with in camera review and a "reasonable need to know" standard, limited to funders who are "effectively the plaintiff." It was pulled the next day, after a truncated markup. The bills were not killed by the trial bar alone. They were killed by a left-right coalition almost never seen in Judiciary: progressive Democrats, MAGA populists, and conservative religious-liberty litigators, all of whom recognized a donor-exposure machine when they saw one. What survives is narrower: H.R. 2675, the Protecting Our Courts from Foreign Manipulation Act, which bans foreign-state and sovereign-wealth funding outright and requires foreign-funding disclosure, was approved in committee 15 to 11 in November 2025 and formally reported and placed on the Union Calendar in June 2026. In the Senate, S. 3826, the Litigation Funding Transparency Act of 2026 (Grassley, Tillis, Kennedy, Cornyn, introduced February 11, 2026), targets class and mass actions and sits in Judiciary. The tax track already failed: Sen. Thom Tillis's proposed 40.8 percent excise on funding proceeds, trimmed to 31.8 percent in negotiation, was stripped from the 2025 budget bill by the Senate Parliamentarian under the Byrd Rule.
The states are the live front. Roughly ten states now regulate funding in some form: an earlier base of Indiana, Kansas, Louisiana, Montana, Oklahoma, West Virginia, and Wisconsin, joined in 2025 by Georgia, Arizona, Colorado, and Tennessee. Georgia's SB 69 is the aggressive model, with funder registration through the Department of Banking and Finance and codified prohibitions on funder control. New York capped funder recovery at 25 percent of gross proceeds. And on June 22, 2026, Gov. Josh Stein signed North Carolina's House Bill 315, the first outright ban on commercial litigation investment in the nation, passed 112 to 0 in the House and 45 to 1 in the Senate, with civil penalties to $50,000 per violation, void contracts, and a treble-damages private right of action. The Insurance Information Institute's Mark Friedlander celebrated it as sending "a clear message that the civil justice system is not an investment vehicle." Note what the ban actually protects: in North Carolina, a corporate defendant's ability to outspend an unfunded claimant is now guaranteed by statute. Carriers calling that consumer protection should be made to say it slowly.
The rulemaking track is the long game. The Advisory Committee on Civil Rules created a TPLF subcommittee on October 10, 2024, following a letter from more than 120 companies; Lawyers for Civil Justice and the Institute for Legal Reform filed a joint proposal on March 10, 2026 to amend Rule 26(a)(1)(A) to mandate disclosure of any funder's identity and agreement; ILFA and a group of twelve former funding-industry lawyers filed oppositions. The Committee has, so far, kept studying, which is what the Committee should do; the analogous MDL rule took seven years. Meanwhile roughly 24 of 94 district courts and six circuits already have local or appellate disclosure rules, and the ITC's April 30, 2026 proposed Section 337 rule would bring financial-interest disclosure into every investigation before the agency most important to patent enforcement against imports.
The private-ordering track may be the most cynical. ISO's 2025 endorsement adds a policy condition letting either side of a coverage dispute demand "mutual disclosure" of funding agreements on 30 days' notice, a condition whose reciprocity is empty because funders do not finance defense-side claims, and whose real function is to manufacture coverage defenses against policyholders. Chubb and Marsh, per their CEOs' own op-ed, screen business relationships for funding ties and refuse funder-related work. The industry did not wait for Congress. It is building disclosure and exclusion into the plumbing of commercial insurance itself.
Bottom line: the Issa bills are dead, the parity argument lost in a Republican-controlled committee, and the action has moved to the states, the Rules Committee, the ITC, and the fine print. Anyone who thinks this fight ended in January 2026 has not been watching.
IX. Patent Litigation Is Ground Zero
None of this is abstract for patent owners, because patent litigation is where the money, the disclosure rules, and the lobbying all concentrate. Patent matters drew 27 percent of new funding commitments in 2025, around 32 percent in 2024, the largest single category tracked by Westfleet. GAO's report, requested by Sen. Tillis, found that of seven technology companies interviewed, four estimated that half to three-quarters of the patent suits against them involved outside funding. The same report explains why: patent enforcement costs run into the millions per case, damages expertise and survey evidence are expensive, IPR proceedings must be defended in parallel, and the defendants control the core technical evidence. Commercial funders deploy an average of $8.6 million per transaction. Nobody spends $8.6 million pressing a claim that professional diligence graded as junk.
The venue geography tells the disclosure story in miniature. The Eastern and Western Districts of Texas together drew 40 percent of all patent filings and nearly two-thirds of NPE filings in the first half of 2025, while Delaware, the traditional second home of patent litigation, absorbed the Connolly disclosure experiment and watched funded filings collapse. Patent filings nationwide hit 4,547 in 2025, the highest in a decade; six of the ten largest patent verdicts of 2025 came from East Texas juries; national patent damages passed $4.3 billion in 2024. A uniform federal disclosure mandate would end the venue arbitrage overnight and, on the Delaware evidence, would not redistribute funded cases so much as reduce them, meaning fewer meritorious patent claims enforced, less accountability for efficient infringement, and cheaper infringement for the largest companies on earth. The tech-defendant coalition backing the bills, the High Tech Inventors Alliance, the Consumer Technology Association, Google, and Unified Patents among them, understands this arithmetic perfectly. That is why they are in the coalition.
It is worth being precise about who loses. The recurring defense framing, echoed by Rep. Issa, is that funding is "the big guy funding this against little guys." The data runs the other way. Funding concentrates where claimants cannot otherwise reach the courthouse: individual inventors, universities, startups, and small operating companies holding valid patents against trillion-dollar infringers running serial IPR campaigns and decade-long delay strategies. The insurance industry's own products acknowledge the same reality; carriers sell enforcement coverage precisely because infringers count on small patent owners being unable to afford suit. When the industry sells the little guy capital, the access problem is a market opportunity. When a funder does, it is a national emergency.
Patent policy should turn on validity, infringement, damages, and remedies. The size of the patent owner's treasury is not on that list. Funding is what keeps it off.
X. What Honest Reform Would Look Like
The pro-funding position is not a pro-secrecy position, and it never has been. Funders themselves told GAO they see upsides to some disclosure. The question was never whether courts may know who stands behind litigation. The question is what gets disclosed, to whom, and what the recipient may do with it. Honest reform follows function and control, and it fits in five rules.
First, identity to the court, in every case, sealed: any nonparty with a material contingent economic interest, with beneficial ownership traced, foreign-state and sanctioned interests flagged, and any right affecting counsel, discovery, settlement, or appeal described. This handles recusal, conflicts, and foreign influence completely, and H.R. 7015's own in camera mechanism concedes it is enough.
Second, identity and actual control rights to the parties in the ordinary case, with donor identities and passive investors protected. Knowing that a well-capitalized, court-vetted funder stands behind a claim is information that promotes realistic settlement. It signals that attrition will fail.
Third, the agreement's economic terms only on a showing and only to the Court. Budgets, waterfalls, termination triggers, and merits diligence stay behind Rule 26(b)(1), produced in camera when a defendant articulates a concrete issue, standing, control, privilege, adequacy, and a court finds relevance and proportionality, with in camera review and protective orders doing their normal work. This is not an innovation. It is the rule every other category of financial information already lives under, for both sides.
Fourth, symmetry that is actually symmetric. Whatever disclosure reaches claimant-side capital reaches functionally identical defense-side capital: indemnity networks, joint-defense funding, member-funded IPR entities, contingent-risk policies, and reinsurance arrangements with settlement influence. If that sentence makes the reform coalition flinch, the coalition has told you what it was doing.
Fifth, regulate conduct, not adversary access. The mature funding jurisdictions, England and Australia, converged on capital adequacy, control prohibitions, and court oversight of collective proceedings, not on handing defendants their opponents' financing files. The state control statutes, whatever their sponsors intended, point the same direction: police what funders may do, and the case for exposing what plaintiffs can spend evaporates.
Congress could pass the foreign-funding bill tomorrow with broad support, and the Advisory Committee could draft a court-first identity rule that protects every legitimate interest the insurers claim to care about. The reason neither satisfies the campaign is the tell. The campaign does not want oversight of funders. It wants a targeting package on plaintiffs.
XI. Conclusion
Stand at the crossroads and look both ways. In one direction: an industry holding trillions in assets, selling litigation-risk products on both sides of the "v.," insuring the portfolios of litigation funders at a healthy premium, running defense strategies built on cost and delay, and financed, at its lobbying arm, by anonymous seven-figure corporate contributions. In the other: a $16 billion industry that pays for the little guy's lawyers, loses everything when the case loses, is barred by statute from controlling the litigation it finances, and asks only that disputes be decided on their merits rather than on the parties' bank balances.
One of these industries is demanding total financial transparency from the other, as a condition of access to the courts, while disclosing nothing itself. The demand rides on a single analogy: we disclose our insurance, so you must disclose everything. The analogy is false. Insurance is disclosed because it pays judgments and controls defenses. Funding does neither. What the parity argument actually seeks is something no litigant in the history of the Federal Rules has ever possessed: automatic access to the adversary's resources, budget, and staying power, on suspicion of nothing, for use in a war of attrition. Congress looked at that demand twice in the past year and refused it both times, with conservatives and progressives objecting in the same voice.
The insurers will keep coming, through the states, the Rules Committee, the ITC, and the policy forms, because the return on killing funding is measured in their loss ratios. Those of us who represent inventors and plaintiffs are not defending secrecy, and we should refuse that framing every time it is offered. We are defending the line the law has always drawn: courts get the truth, adversaries get what is relevant, and nobody gets to price their opponent's surrender. Capital should not decide who reaches judgment. That principle either binds the companies with the trillions or it binds no one.
Sources and Authorities
This article draws on, among other sources, the following authorities. Each is linked where a public version is available on the web.
• Federal Rule of Civil Procedure 26(a)(1)(A)(iv) and the 1970 Advisory Committee Note.
• MHL Custom, Inc. v. Waydoo USA, Inc., No. 21-91-RGA-MPT, D.I. 120 (D. Del. Dec. 1, 2022) (order of Magistrate Judge Thynge, verified on the district court docket).
• NAACP v. Alabama ex rel. Patterson, 357 U.S. 449 (1958); Bates v. City of Little Rock, 361 U.S. 516 (1960); NAACP v. Button, 371 U.S. 415 (1963).
• Saladini v. Righellis, 426 Mass. 231 (1997); Osprey, Inc. v. Cabana Ltd. P'ship, 340 S.C. 367 (2000).
• The July 7, 2025 Wall Street Journal op-ed by Evan Greenberg and John Doyle, as reported by Insurance Business and other trade press.
• Public Citizen's analysis of U.S. Chamber of Commerce funding and Issue One's dark-money donor research.
• ISO form CP 99 14 06 26, Condition: Litigation Funding Mutual Disclosure (2025) (proprietary; not publicly posted).
• The March 10, 2026 Lawyers for Civil Justice and Institute for Legal Reform rules suggestion to the Advisory Committee on Civil Rules, and the International Legal Finance Association's opposing rules suggestion.
• Publications of APCIA, NAMIC, the Insurance Information Institute, the U.S. Chamber Institute for Legal Reform, and the Perryman Group, together with Ernst & Young and Swiss Re analyses (cited here as advocacy sources).
• Rebuttal materials from Omni Bridgeway and Burford Capital.
Figures attributed to industry-commissioned studies are identified as advocacy estimates in the text and should be treated accordingly. None of this is legal advice and is provided for general information only. No attorney-client relationship is created via this publication.
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