Investors have different methods for determining how much money they are willing to advance. In general, investors calculate the amount of the advance as a percentage of their assessment of the total value of the case. A typical investor will advance between 10-15% of the estimated case value.
Investors often have very sophisticated and reliable methods for estimating the value of a lawsuit. Many investors have assembled extensive data about thousands of lawsuits from all over the United States. They use this data to compare the key characteristics of your case with other cases, and this comparison allows them to estimate the probable value of your case.
Investors consider a wide range of information about the cases they consider, but there are three factors that are particularly important: the plaintiff’s damages, the defendant’s liability, and the defendant’s insurance.
Courts use the concept of “damages” to describe the monetary cost of your injuries. If the defendant is liable, it will have to pay the damages caused by your injuries. This will include damages you have already suffered and damages that you will suffer in the future, to the extent that they are caused by your injury. Damages can include all of the following things:
• Income lost as a result of your injury, including both actual lost income and lost earning potential in the future
• Expenses incurred as a result of your injury, including uninsured medical expenses
• Physical and emotional pain and suffering as a result of your injury
When estimating the value of your case, investors want to identify all of the damages that you could conceivably claim in a settlement or verdict.
A defendant is liable to pay for your damages if you prove that he or she violated the law and that the violation caused your injury. Sometimes proving these things is easy. For example, if you were rear-ended by another driver, that other driver is almost always going to be liable. In other cases, proving liability is more difficult because there are more questions about whether the defendant acted wrongfully or about whether his or her wrongful conduct caused your injury. When evaluating your lawsuit, investors assess how difficult it will be to prove your case and your chances of establishing liability.
When you sue for damages, the value of the defendant’s insurance policy generally determines how much you can recover. For example if you have $100,000 in damages from an auto accident and the defendant’s insurance policy limit is only $50,000, the defendant’s insurance company will only pay $50,000. You have a right to the remaining $50,000, but you will have to recover that remaining amount directly from the defendant. If the defendant is not wealthy, it may be difficult to recover any amounts not paid by insurance. When investors have access to information about the defendant’s insurance limits, they consider that in calculating the value of your lawsuit.