Consumer Legal Funding Isn’t Driving “Social Inflation”—Here’s Why That Matters for Injured New Yorkers

In New York City and across the country, insurers have been sounding alarms about a term they call “social inflation.” They claim it explains rising premiums, larger jury awards, and higher settlement values. And more recently, they’ve tried to link Consumer Legal Funding (CLF) to this trend.

As a trial lawyer with more than 30 years of experience, I can tell you this: the argument doesn’t hold water. Consumer Legal Funding has no connection to inflating verdicts or driving up costs. In reality, it serves one purpose—helping injured people survive while their cases wind their way through a slow, often hostile legal system.

What Insurers Mean by “Social Inflation”

“Social inflation” isn’t a recognized economic principle; it’s an industry-created phrase. Broadly, insurers use it to describe claims costs that rise faster than standard inflation. The drivers they point to include usually:

• Expanding liability concepts – Courts allowing recovery for broader categories of damages.
  
  
• Plaintiff-friendly juries – Communities are more willing to hold corporations accountable.
  
  
• Aggressive litigation strategies – Lawyers pushing new theories and higher damage demands.
  
  
• Erosion of tort reform – Courts striking down statutory caps or limits.
  
  

Even if these trends are real, they don’t connect to Consumer Legal Funding. Jury attitudes, judicial doctrine, and litigation tactics develop entirely outside of whether an injured person gets a few thousand dollars to pay rent.

What Consumer Legal Funding Really Is

Consumer Legal Funding is straightforward. It provides small, non-recourse advances—usually $3,000 to $5,000—against the potential recovery in a personal injury case.

• Non-recourse: If the case is lost, the consumer owes nothing.
  
  
• Restricted use: Funds can only be used for living expenses like rent, food, or medical co-pays—not legal fees.
  
  
• Separate from litigation: Attorneys remain in control of strategy. Judges and juries never consider whether a client received funding.
  
  
• Regulated in many states: Statutes make clear these funds cannot be used to finance lawsuits.
  
  

In short, CLF finances survival, not litigation. It exists so that injured people don’t have to choose between justice and keeping the lights on.

Why Insurers Target CLF

So why link CLF to “social inflation”? The answer lies in leverage.

When a client can’t pay rent or put food on the table, insurers know they’re vulnerable. They pressure plaintiffs into taking low-ball settlements—saving billions in claim payouts. Consumer Legal Funding removes that leverage by giving clients the ability to wait for fair value.

This doesn’t increase case value. Settlements are driven by liability facts, damages, and the risk of trial, not whether the injured party could afford groceries last month. What CLF does is prevent forced settlements, which is precisely why insurers dislike it.

Breaking Down the False Link

Insurers often repeat three main claims. Here’s why they don’t stand up to scrutiny:

1. “CLF inflates settlements.”
   Settlements are negotiated based on evidence and trial risk. Desperation should never dictate compensation. CLF simply keeps the injured person from settling too soon.
   
   
2. “CLF drives jury verdicts higher.”
   Verdicts rise when juries see negligence, misconduct, or harm worth punishing. Whether the plaintiff had help paying rent has no bearing on the damages evidence.
   
   
3. “CLF raises premiums.”
   No data backs this up. States that regulate CLF—such as Ohio, Nebraska, and Utah—have not experienced outsized premium growth. If CLF were truly driving costs, we would see measurable differences. We don’t.
   
   

What Actually Drives “Social Inflation”

If we look closely, the factors behind so-called social inflation are cultural and systemic, not consumer-driven:

• Jury attitudes and “nuclear verdicts” – Communities reacting strongly against corporate misconduct.
  
  
• Expanding damages categories – Courts recognizing broader forms of harm, especially non-economic damages.
  
  
• Litigation strategies – Plaintiff lawyers testing creative arguments.
  
  

Each of these may impact insurer costs. None of them involves Consumer Legal Funding.

Evidence From Regulated States

Roughly a dozen states have statutes governing CLF. These laws often require clear contracts, caps on fees, and explicit separation from litigation financing.

Despite regulation, there’s no evidence of inflated verdicts or runaway premiums in those states. Insurers continue to compete, and markets remain stable. If CLF truly caused social inflation, the data would show it. It doesn’t.

The Real Motives Behind the Attacks

So if CLF isn’t driving costs, why do insurers fight so hard against it?

• Deflection: Rising costs often come from internal investment losses, natural disasters, or corporate overhead. It’s easier to blame “social inflation.”
  
  
• Leverage: Forcing financially desperate plaintiffs into low settlements saves insurers billions. CLF disrupts this.
  
  
• Regulatory advantage: By blurring the lines between litigation finance and CLF, insurers advocate for restrictive laws that make it more difficult for consumers to access funding.
  
  

It’s not about economics—it’s about control.

The Human Side of CLF

Behind every case is a person trying to survive.

Take a construction worker injured on the job in Queens. Unable to work, he faces eviction within weeks. A small advance allows him to stay in his home while his attorney negotiates based on medical evidence and lost wages—not financial desperation.

Or consider a single mother in the Bronx, injured in a car accident. With two kids to support, she uses CLF to cover groceries and utilities. Her attorney still argues the case on its merits, but now she doesn’t have to sacrifice justice for survival.

These stories repeat daily. They illustrate that CLF is not a litigation tool—it’s a lifeline.

Reframing CLF as Consumer Protection

Instead of vilifying CLF, policymakers should view it as what it truly is: a consumer protection mechanism.

• Preserves access to justice – Injured people can afford to wait for fair settlements.
  
  
• Protects vulnerable populations – Prevents exploitation by insurers.
  
  
• Operates transparently – In regulated states, statutes ensure fairness.
  
  
• Offers an alternative to predatory lending – Without CLF, many turn to payday loans or high-interest credit cards.
  
  

For New Yorkers, this means not being pushed into financial ruin while waiting for the system to work.

Jason’s Perspective

At the Law Offices of Jason G. Krantz, we witness firsthand the impact of financial pressure on our clients. The insurance companies know that if they can squeeze you economically, they can shortchange you in settlement. CLF removes that unfair advantage.

It doesn’t change case value. It doesn’t rewrite the law. It doesn’t inflate damages. It simply ensures that injured people can stand on equal footing until their case resolves.

The narrative that Consumer Legal Funding contributes to “social inflation” is unsupported, misleading, and unfair to consumers. CLF doesn’t drive jury awards, it doesn’t raise premiums, and it doesn’t change the legal system. What it does is provide a bridge for people whose lives have been turned upside down by injury.

For injured New Yorkers, understanding this distinction is critical. Don’t let insurance industry talking points confuse the issue: Consumer Legal Funding is about survival, not inflation.

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