We Fund Retainers for Your
Legal Malpractice Clients
control equals strength
Unlike typical lawsuit funding that gives your client money, Covered Bridge Capital puts the funds in your client’s retainer account. You now control the strategic, tactical, and financial levers for a successful outcome.
We can explain the benefits of retainer funding for your firm and your legal malpractice clients.
A legal malpractice case is unique
Meritorious Cases Only
The merit of professional malpractice cases must be validated through an affidavit from a qualified expert (AoM). The AoM must be filed within a maximum of 120 days after the defendant’s answer. A filed AoM is judged according to N.J.S.A. 2A:53A-27 at a mandated Ferreira conference. Since only meritorious cases move forward (46% of all professional malpractice cases are dismissed as of the year ending June 2022), the defendant’s professional liability carrier knows that your client’s case has legal substance.
Meritorious Cases Only
The merit of professional malpractice cases must be validated through an Affidavit of Merit (AoM) from a qualified expert. The AoM must be filed within a maximum of 120 days after the defendant’s answer. A filed AoM is judged according to N.J.S.A. 2A:53A-27 at a mandated Ferreira conference. Since only meritorious cases move forward (46% of all professional malpractice cases are dismissed as of the year ending June 2022), the defendant’s professional liability carrier knows that your client’s case has legal substance.
A Losing Defendant Pays Your Client's Legal Costs
The NJ Supreme Court’s ruling in Saffer v. Willoughby defines consequential damages due the plaintiff for an attorney/defendant’s malpractice. In this one instance, the English rule holds that the losing defendant pays the plaintiff’s legal costs. For a professional liability carrier, as your client’s case gains strength through discovery and expert reports, the added financial exposure of paying trial costs for both sides fuels settlement.
The Actual Opponent is a Deep-Pocketed Insurance Company
Law firms organized as corporations, limited liability companies, or limited partnerships are required by R. 1:21-1(A)/(B)/(C), respectively, to have a current professional liability insurance policy filed with the Clerk of the Supreme Court. While the policy’s terms may dictate the control the attorney defendant has in the settlement, the true financial counterparty on liability is the carrier that underwrote the policy. The carrier also appoints the insured attorney’s defense team.
A Lawyer's Reputation is Essential to Maintain
Have you seen the Gallup studies on lawyers’ relative position to other professions for honesty and ethics? As a group, lawyers are in the bottom third with a drop of 11% in just one year. Unlike doctors, lawyers have a tougher time in front of juries.
Equally important, since a legal mal case judges an attorney’s competence in the precise venue and process his or her business operates (i.e., within the courts and under its rules), a trial has consequences beyond other professional malpractice cases. A confidential settlement is often a practicing attorney’s only viable economic outcome to protect his or her future business. This decision is made easier knowing the payer on the liability will be the policy’s insurance company.
FINANCIAL STRENGTH IN YOUR TOOLKIT
Following the Ferreira Conference, your case has merit, but much work remains to do . . . and to be paid for.
A funded retainer allows you to pursue a full tactical agenda in achieving document, deposition, and expert depth necessary to achieve a settlement amount at or near full value.
How a funded retainer is a game changer
On the other side of the table, you face a carrier with deep pockets, patience, and experience. The carrier’s objective is to sap your client’s resources with costly discovery and motion practice so a settlement below a fair value can be realized. A funded retainer removes this tactic and allows your case’s strength to shift power to you.
NJ court statistics reveal that 99% of legal malpractice cases settle, but active cases take two to three years before a settlement. Pressure on your client increases with ballooning legal bills and many delays before the hoped-for payoff. This pressure can lead to settlements before a case is mature; if this happens, money is left on the table. A funded retainer removes this pressure and keeps your client in the fight.
Experts for the Task
Case law mandates an expert’s report to validate the lack of care as the proximate cause of claimed damages. A strong report form a credible expert brings a higher settlement amount, but these experts cost more. Sometimes a case will strengthen with a specialist in a particular segment of the case. Getting the right experts pays.
Effective Not Just Efficient
When clients face new costs, there’s always pressure: “Is this necessary?” or “Can we do it cheaper?” At the core of a legal malpractice case’s actual settlement value is the quality of the expert and his/her report. This is a classic example of “you get what you pay for”. Especially challenging is the expert’s bill for the report, which must be paid before the it is delivered, comes after costly discovery and depositions.
Lower Case Risk = Lower Costs
We underwrite your case based on its risk. There are three key areas: 1) document strength; 2) the amount of ascertainable damages; 3) the case’s stage. You choose the amount of retainer funding and when to reconnect should you want more as the case progresses. We do not involve ourselves in any of your strategic or tactical decisions; at all times, the case is yours.
OK, BUT How do my clientS benefit?
YOUR LEGAL BILLS are a challenge to your clients
Currently, you begin a client relationship with an engagement agreement that comes with an agreed-upon check for a retainer. Unfortunately, the retainer is often consumed with your initial legal work, and paying the affiant for the AoM. Then, your billings shift to charging for your work in 10-minute increments with monthly invoices. You’ve created an accounts receivable.
Starting with discovery, the bills mount and client payments stretch out causing a balance your firm must carry; this is typically true even for your affluent or business clients. The fact is no one wants to write checks for legal bills, and, with your client’s other pressing cash demands, your bills are deferrable.
The essential expert report after discovery hits with big charges that must be paid or the report is not delivered. With this large check written, your client defers payments to you again. Chasing payments is now an ongoing task for you.
If a mediation is agreed to, the mediator must be paid.
Should the settlement negotiations not reach fair value, you shift to trial preparation and dispositive motions; more charges for your client to pay.
A Covered Bridge Capital retainer funding changes this dynamic. And, your client’s cost-benefit analysis has a surprisingly attractive financial outcome.
HOW CLIENTS PAY YOUR BILLS TODAY
COMPARED TO A COVERED BRIDGE CAPITAL-FUNDED RETAINER
AVAILABLE CLIENT RESOURCES TO PAY CASE BILLINGS
- Excess cash
- Liquidated investments
- Personal or asset-backed loans
- Credit cards
INDIRECT COSTS OF A CLIENT’S RESOURCES
- Lost investment return
- Lost investment return + gains taxes
- Interest costs + lower debt capacity
- Interest costs + consumed credit limits
COVERED BRIDGE CAPITAL RETAINER FUNDING STRUCTURE
- No payback if the case is lost; if the settlement amount is lower than the funding, then no additional money is paid.
- Underwriting using a risk-based model
- Asset-backed loan secured by a settlement amount or jury award
BENEFITS OF A COVERED BRIDGE CAPITAL FUNDED RETAINER
- No payback if the case is lost or the proceeds are less than total funding
- Higher settlements from staying power across litigation stages
- Trial win: Principal covered by Saffer v. Willoughby
- Trial win: Interest costs covered by prejudgment interest
what’s the retainer funding process?
We work on a risk-based funding model. The lower our risk of a loss, the lower are our funding costs to your client. We make this assessment through a case profile along with our proprietary diagnostic that utilizes a risk-scoring algorithm.
- Case Profile 20% 20%
- Complete diagnostic
- Upload key documents
- Case Underwriting 60% 60%
- Initial risk scoring
- Scoring review
- Case Confirmations 70% 70%
- Final scoring
- Commitment summary
- Letter of intent
- Funding Contract 90% 90%
- Funding agreement
- Disbursement 100% 100%
Electronic funds transfer to your client’s retainer account at your firm
Target Elapsed Time: 2 Weeks
I have some more questions.
How do I stage retainer funding?
For your first funding, we underwrite based on the case’s stage: discovery; depositions; expert reports; trial prep. You can fund all or a portion of any stage. For example, your client may have the means to fund 50% of discovery with the remainder from Covered Bridge Capital. We underwrite a case based on the risk. Earlier stages are riskier than later ones; high ascertainable damages to the funding level are less risky. As each stage nears, you can contact Covered Bridge Capital to replenish the retainer account. We will underwrite the next phase according to what has been learned and produced and the associated risk adjustments.
What is Covered Bridge Capital's P&L Model?
Covered Bridge Capital works off a spread to its cost of capital (CoC). As a non-recourse lender, our risk model accounts for losses should the amount we receive be below our funded amount plus interest (i.e., your client does not pay if the case is a total loss or the settlement amount or jury award comes in lower than the amount Covered Bridge Capital funded). The lower our risk, the less risk-based spread buffer we need to price.
Why is this funding considered asset-based?
Your client’s case must have ascertainable damages with proving documents. (Like any legal malpractice case, the damages cannot be speculative.) These damages are treated like an asset. Covered Bridge Capital funds to the likelihood of damages and at a discounted amount. As long as this amount is greater than Covered Bridge Capital’s funding commitment (principal plus interest), then this asset covers our exposure. Either at a negotiated settlement or jury award, our funding commitment is netted against the gross proceeds.
Is Covered Bridge Capital involved in my case?
Covered Bridge Capital funds your client’s retainer account but has no involvement with your strategy or tactics. The case is yours to fight.
How is the funding agreement structured?
Our funding agreement is with your firm, but this includes a required acknowledgment from your client following receipt of your signature. In the agreement, the funding terms are specified along with Covered Bridge Capital’s priority claim on settlement proceeds or a jury award. If the retainer account is to be replenished, this will be a separate agreement because the loan’s terms may have changed based on a new risk assessment. The funded amount, the time-based interest costs, and a back-end processing fee is secured by either the settlement proceeds or a jury award; this is a binding commitment.
What's the minimum and maximum funding?
Our underwriting costs are essentially the same regardless of the funding amount. Therefore, we set a $10,000 minimum that is deposited into the retainer account. (Note: this does not include the time-based interest costs and a back-end processing fee; these amounts plus the principal are netted against the settlement proceeds or jury award).
A maximum retainer funding amount is set by the ratio of ascertainable damages to total funding (i.e., retainer plus costs). As long as the ratio is 2X, Covered Bridge Capital is able to fund. Our underwriting may include additional inputs from our team of case experts, but any additional costs are borne by Covered Bridge Capital.
How many retainer accounts can I fund ?
Each legal malpractice case is a separate entity. It has its own issues, evidence, and ascertainable damages. Therefore, we underwrite only to the case and not to the total funding amount under your supervision or your firm’s.