Litigation Funding Disclosure Reaches Seven States in 2026

Seven states brought third-party litigation funding disclosure into force for 2026: Arizona and Georgia with the most comprehensive frameworks enacted anywhere in the US, followed by Colorado, Kansas, Montana, Oklahoma and Tennessee. Together they cover roughly 22% of US tort claim volume.

The consequence for casualty work is narrower than the legislative story. For the first time a funding indicator can exist in a claim file, and the clean accident-year cohort starts January 1, 2026.

Key Takeaways

• 22% of US tort claim volume sits in the seven disclosure states, enough to support credible funded-versus-unfunded severity comparisons in commercial auto, general liability and trucking within three to five development years.
• 20% to 40% annual funder returns set a floor under settlement: a claim that would resolve at $75,000 unfunded may need $180,000 for the plaintiff to net the same amount.
• $25,000 or more of funding makes a funder jointly and severally liable for sanctions and costs under Georgia's SB 69, with felony penalties for non-registration.
• 43 states have no indicator, so the uplift can be calibrated where disclosure exists and only applied elsewhere through a penetration assumption.
• $18 billion to $25 billion is the estimated global funding market, against roughly $2 billion of deployed capital a decade ago.

What the Seven States Require

The common core is the same everywhere: plaintiffs and counsel must identify any funding arrangement at or near the outset of civil litigation. Scope, penalties and regulatory architecture then diverge sharply.

State	Mechanism	Disclosure Trigger	Key Provision
Arizona	Supreme Court Rule 8 amendment	Filed with complaint; or within 7 days of funding	Standardized certificate: funder identity, financial stake, approval rights, portfolio vs. single-case scope; SB 1215 bars foreign-adversary-affiliated funders entirely
Georgia	SB 69, Courts Access and Consumer Protection Act	Automatic; agreements of $25,000+ subject to discovery	Funder registration with Dept. of Banking and Finance; criminal history and ownership disclosure; non-compliance is a felony (up to 5 years, $10,000 fine); funders providing $25,000+ become jointly and severally liable for sanctions and costs
Colorado	Statutory disclosure requirement	At commencement of litigation	Identity and financial interest of funder; prohibits funder direction over legal strategy
Kansas	Statutory disclosure requirement	Discovery phase	Limits funder authority over case prosecution and settlement; funding agreement subject to disclosure upon request
Montana	Statutory automatic disclosure	Automatic upon funding	Restricts funder from providing legal advice; caps percentage of recovery funder may receive; prohibits funder control of strategy or resolution
Oklahoma	Statutory transparency requirement	At commencement of civil action	Funder identity and terms of funding agreement; prohibits assignments of legal claims to funders
Tennessee	Statutory disclosure requirement	Upon litigation commencement	Disclosure of funder identity and financial stake; bars funders from directing or controlling legal strategy

Georgia's SB 69 goes furthest because it builds registration infrastructure rather than a disclosure obligation alone. Funders operating in the state must register with the Department of Banking and Finance, disclosing ownership structure and criminal history, and any funder providing $25,000 or more becomes jointly and severally liable for sanctions or costs awarded in the case. Non-compliance carries up to five years imprisonment and a $10,000 fine per violation.

Arizona's approach is procedural. A Rule 8 amendment requires a standardized certificate filed with the complaint covering funder identity, the financial stake, whether the funder holds settlement approval rights, and whether the funding covers a single case or a portfolio. That last field carries information the others do not: a funder with cross-case exposure against the same insured has different incentives from a single-case funder, and the certificate makes the distinction observable.

Pennsylvania's Supreme Court took comments on a proposed rule through April 22, 2026 with a decision pending, which would add a high nuclear-verdict-frequency jurisdiction to the set.

The Uplift Is Arithmetic, and It Has Been Inside the Triangle

The severity premium on funded claims follows from the funder's return requirement rather than from litigation strategy, which is why it is estimable in advance.

A funder charging 20% to 40% annual returns needs the plaintiff's net recovery after repayment to still justify the case. That sets a floor below which a funded plaintiff cannot economically settle: a claim resolving at $75,000 unfunded may require $180,000 or more to leave the plaintiff comparably placed. Swiss Re counted $31.3 billion of nuclear verdicts across 135 cases in 2024, up 52% on 2023, and while not all were funded, the overlap with high-value funded cases is large enough to matter for apportioning social inflation.

Reserving has absorbed all of this without seeing it. Chain ladder, Bornhuetter-Ferguson and frequency-severity methods all take funded-claim severity into the aggregate trend line, so commercial auto and general liability severity selections carry an unmeasured funding component that has grown as deployed capital went from roughly $2 billion a decade ago to $18 billion to $25 billion globally.

The tail moves too, in a way that compounds the severity effect. A funder can sustain litigation an unfunded plaintiff could not, so funded cases run two to three years longer and pay out in development years 3 through 7 rather than 1 through 3. Development factors fitted to history that never separated the populations understate the tail for any book whose funded share is rising, and the understatement grows with penetration rather than staying constant.

The Data Comes From the States That Changed the Behaviour

The segmentation is now possible in seven states, and that is also the problem with generalizing from it.

Georgia's joint-and-several provision gives a funder direct exposure to sanctions and costs, which is an incentive to avoid weaker cases. If that selection effect shows up over the 2026 and 2027 baseline, Georgia's funded claims will look better than funded claims in a state with no such provision, and the measured severity premium there will understate the premium elsewhere. The jurisdictions producing the cleanest data are the ones that have altered the behaviour being measured, which is a calibration problem rather than a data quality one.

The other 43 states supply the volume and none of the indicator. A national commercial auto carrier therefore has two populations developing at once, one flagged and one not, and no way to reconcile them except through an assumed penetration rate applied to a severity uplift calibrated somewhere else. With funded claims plausibly 20% to 40% more severe and penetration in commercial auto running at perhaps 5% to 15% of high-value claims, the aggregate effect on a trend selection is real and moderate. The uncertainty sits in the penetration assumption, which nothing observable constrains.

Reconstruction after the fact is not available either. Disclosure certificates are litigation filings, not insurance records, and current practice does not carry them into loss runs. A carrier that does not capture the flag while the 2026 and 2027 accident years are open has no route back to it, which makes the observation window a one-time event rather than a standing capability, against a backdrop of $15.8 billion in annual casualty adverse prior-year development.