Montana Implements New Law to Regulate Third-Party Litigation Financing

Montana has enacted a new law aimed at imposing restrictions on third-party groups involved in financing civil litigation. The measure was signed by Governor Greg Gianforte on May 5.

Senate Bill 269 aims to introduce consumer protections and ensure transparency in litigation financing. Although the legislation does not outrightly prohibit litigation financing, it promotes transparency by mandating that third parties register with the Montana Secretary of State.

The law further prohibits usury fees and requires full disclosure of agreement terms, including information regarding litigation financing and the right to cancellation. It also enables opposing parties in a lawsuit to access contracts without resorting to legal discovery motions.

The Montana House of Representatives unanimously approved the bill. Third-party litigation financing involves investors providing loans to plaintiffs at excessive interest rates or taking a share of the lawsuit proceeds. This practice is often carried out by foreign investors and can disincentivize reasonable civil litigation settlements. The legislation seeks to address these concerns by limiting investors’ share of a plaintiff’s recovery and restricting the interest charged to plaintiffs.

The American Property Casualty Insurance Association (APCIA) has also expressed support for the new law. The association, which represents the insurance industry, has endorsed two additional insurance reform laws recently passed by the Montana Legislature.

One of these laws establishes a duty to cooperate when handling claims and the recovery of benefits under an insurance policy. The other requires time-limited settlement demand letters to provide a reasonable description of the claim, include relevant records, and allow insurance carriers 60 days for acceptance to facilitate settlements.

According to the APCIA, time-limited settlement demand letters have often been misused by trial lawyers, who withhold crucial information necessary for insurance carriers to fairly and promptly settle claims. By addressing this issue, the law aims to ensure that insurance carriers have access to complete and relevant information during the settlement process.

The new law on third-party litigation financing, together with the two insurance reform laws, represents a significant step towards enhancing consumer protection and promoting fair and efficient resolution of legal disputes in Montana. The regulations are expected to have a positive impact on the litigation landscape and encourage more equitable settlements in civil cases.