A recent comprehensive analysis conducted by the National Insurance Crime Bureau (NICB) and 4WARN has unveiled a significant nexus between third-party litigation funding (TPLF) and the proliferation of excessive litigation fueled by fraudulent online tactics.
Findings suggest that external funders have strategically targeted U.S. insurers, engaging in excessive and opportunistic litigation on a notably large scale.
The investigation revealed that nearly 600 insurance companies fell victim to these practices, with one funder steering 13 law firms that unscrupulously aimed at 66 distinct insurers to generate claims litigation and enhance investor returns.
A staggering 75 percent—specifically 585 out of 783 evaluated insurance entities—were directly ensnared by marketing campaigns linked to opportunistic litigation, many of which were underwritten by external financiers.
Over a period spanning June to August 2025, the non-profit crime-fighting organization and the digital risk intelligence firm scrutinized 783 insurers and found that three-quarters were specifically targeted by marketing campaigns promoting opportunistic litigation, heavily supported by TPLF.
The assessment elucidated the mechanisms through which TPLF can either facilitate or exacerbate fraudulent insurance claims and surreptitiously inflate litigation volumes.
In some instances, external investors may exert influence over case selection, litigation strategies, and settlement approaches to optimize their financial returns, as indicated by the NICB.
The most egregious instances of TPLF-enabled fraud involve outside investors covertly funding litigation predicated upon exaggerated, fraudulent, and occasionally entirely fictitious insurance claims.
NICB’s involvement in the investigation of United States v. Constantine, a $31 million trip-and-fall insurance fraud scheme propelled by TPLF that targeted vulnerable populations, substantiated the detrimental role of outside funding in exacerbating claims and litigation.
Fraud schemes are perpetuated by coordinated networks of unscrupulous attorneys, medical practitioners, and runners—individuals who coach, recruit, and organize plaintiffs, law firms, complicit medical providers, and digital marketing agencies—often augmented by digital marketing strategies aimed at amplifying mass litigation.
These strategies encompass search engine diversion, brand impersonation via cloned websites and misleading domains, and AI-generated content designed to inflate insurance litigation or capitalize on inflated claims.
The analysis also uncovered a direct correlation between legitimate legal firm advertising and search engine optimization (SEO) efforts, yet it also identified a distinct category of fraudulent digital initiatives exploiting the same avenues to spur mass litigation.
David J. Glawe, president and CEO of the NICB, noted, The extensive scope and ramifications of external funding in catalyzing insurance claims litigation far exceed prior estimations.
Excessive litigation and fraud schemes, driven by third-party litigation funding, continue to evolve with increased financial backing and further aggressive targeting of unsuspecting consumers.
The joint report advocates for legislative bodies to implement pro-transparency reforms that would illuminate funding sources and inhibit the incentives beckoning fraudulent activities.
Todd Kozikowski, Chief Executive Officer of 4WARN, remarked, Our findings further underscore the targeting of insurers by funders initiating dubious lawsuits within the digital realm.
Fraudulent third-party litigation engenders a perilous environment wherein digital opportunists deploy sophisticated online tools, automation, and extensive targeting campaigns to mislead plaintiffs and lend an air of legitimacy to their actions.
While some state legislatures have started to enact reforms aimed at enhancing TPLF transparency and accountability, the NICB and 4WARN emphasize that additional actions are essential at both the state and federal levels to illuminate funders and their repercussions on the insurance sector and consumers.
“Our preliminary findings highlight the peril posed by TPLF-facilitated fraud within the industry; however, this picture will further crystallize as legislators implement TPLF disclosure mandates and insurance providers diligently flag ambiguous claims showing TPLF indicators,” noted Glawe.
“Reliable data will enable us to keep our ecosystem one step ahead of potential threats.”
Insurers can bolster their defenses against excessive litigation and TPLF-facilitated fraud by:
- Augmenting the surveillance of digital campaigns, counterfeit websites, and brand mimicry
- Monitoring suspicious activities associated with mass litigation strategies
- Investigating known opportunists and tracking suspicious activities to identify patterns
- Advocating for TPLF transparency and reform initiatives
- Sharing insights with NICB
Source link: Carriermanagement.com.
