NY’s Litigation Funding Act: What Burn Injury Victims Need to Know

Burn injuries can be physically, emotionally, and financially devastating. The road to recovery is often long and expensive, involving extensive medical treatment, rehabilitation, and potential loss of income. In such challenging times, many burn injury victims in New York find themselves struggling to make ends meet while pursuing legal action to seek compensation for their damages. This is where litigation funding can provide a crucial lifeline.

What is Litigation Funding?

Litigation funding, also known as lawsuit funding or third-party funding, is a financial arrangement where a third-party company provides a cash advance to plaintiffs involved in a lawsuit in exchange for a portion of the potential settlement or judgment. This type of funding is typically non-recourse, meaning that the plaintiff is only obligated to repay the advance if they win their case. If they lose, they owe nothing.

For burn injury victims, litigation funding can be a game-changer, providing much-needed financial relief to cover essential living expenses, medical bills, and legal fees while they focus on their recovery and pursue their claim.

The Rise of Litigation Funding in New York

In recent years, litigation funding has gained significant traction in New York, with more and more claimants and their attorneys considering it as a viable option to level the playing field against well-resourced defendants. However, the industry has also faced criticism due to concerns about high interest rates, lack of transparency, and potential for exploitation of vulnerable plaintiffs.

NY’s Consumer Litigation Funding Act: A New Era of Protection

To address these concerns and ensure fair practices, New York has enacted the Consumer Litigation Funding Act (CLFA), which establishes a comprehensive regulatory framework for consumer legal funding transactions in the state. Signed into law on December 22, 2025, by Governor Kathy Hochul, the CLFA aims to protect consumers while preserving access to this vital financial resource. The act takes effect 180 days after becoming law, signaling a mid-2026 operational start for registration, oversight, and disclosure requirements.

Key Provisions of the NY Consumer Litigation Funding Act

The CLFA includes several key provisions designed to safeguard the rights and interests of burn injury victims and other consumers seeking litigation funding:

Clear Contract Disclosures: All terms, charges, and cumulative repayment amounts must be plainly stated in the funding contract and initialed by the consumer to ensure informed consent.
Right to Cancel: Consumers have ten business days to cancel the contract without penalty, allowing them time to review the terms and seek independent advice.
Capped Recovery: The law limits a consumer litigation funding company’s recovery to a maximum of 25% of the gross recovery from the litigation.
Plain Language Contracts: All litigation funding contracts must be written in plain language that is easy for consumers to understand.
Prohibited Practices: Funding companies are prohibited from influencing settlement decisions, misleading consumers through advertising, or referring clients to specific attorneys or medical providers.
Attorney Oversight: Attorneys must acknowledge reviewing mandatory disclosures and are prohibited from accepting referral fees or having a financial interest in funding companies.
Registration and Reporting: All funding companies must register with the State of New York, file annual reports, and meet bonding and disclosure requirements.

How the CLFA Benefits Burn Injury Victims

The NY Consumer Litigation Funding Act offers several significant benefits for burn injury victims in New York:

Increased Transparency: The mandatory disclosure requirements ensure that victims are fully aware of the terms and costs associated with litigation funding, preventing them from entering into unfavorable agreements.
Protection from Predatory Practices: The prohibitions against high interest rates, hidden fees, and undue influence safeguard victims from exploitation by unscrupulous funders.
Preservation of Financial Stability: By capping the funder’s recovery at 25% of the gross recovery, the law helps ensure that victims retain a fair share of their settlement or judgment to cover their medical expenses, lost income, and other damages.
Access to Justice: Litigation funding can empower burn injury victims to pursue their claims against negligent parties, even when faced with financial constraints or well-resourced defendants.

Navigating Litigation Funding as a Burn Injury Victim

If you are a burn injury victim in New York considering litigation funding, it is essential to proceed with caution and seek guidance from a qualified attorney. Here are some steps you can take to protect your interests:

Consult with a Burn Injury Lawyer: An experienced burn injury lawyer can evaluate your case, advise you on your legal options, and help you determine whether litigation funding is the right choice for you.
Shop Around for Funding: Don’t settle for the first funding offer you receive. Compare terms and conditions from multiple funding companies to find the most favorable option.
Read the Contract Carefully: Before signing any agreement, carefully review all the terms and conditions of the funding contract, including the interest rate, fees, repayment terms, and any other obligations.
Seek Independent Advice: Consider having an independent financial advisor or attorney review the contract to ensure that you fully understand your rights and obligations.
Be Wary of High-Pressure Tactics: Avoid funding companies that pressure you to sign a contract or make hasty decisions.

Finding a Burn Injury Lawyer in New York

If you or a loved one has suffered a burn injury in New York due to someone else’s negligence, it is crucial to seek legal representation from a qualified burn injury lawyer. A skilled attorney can help you understand your rights, navigate the legal process, and pursue the compensation you deserve.

Several law firms in New York specialize in representing burn injury victims, including:

Meirowitz & Wasserberg, LLP
Finkelstein & Partners, LLP
Sutton & Smyth LLP
The Platta Law Firm
Law Offices of G. Oliver Koppell & Associates
Jacob D. Fuchsberg Law Firm

The Importance of Legal Representation

Dealing with the aftermath of a burn injury can be overwhelming. In addition to the physical and emotional challenges, you may also face significant financial burdens. A burn injury lawyer can provide invaluable assistance by:

Investigating the cause of your injury
Identifying all responsible parties
Gathering evidence to support your claim
Negotiating with insurance companies
Filing a lawsuit, if necessary
Representing you in court

By entrusting your case to an experienced attorney, you can focus on your recovery while ensuring that your legal rights are protected.

Conclusion

NY’s Litigation Funding Act represents a significant step forward in protecting burn injury victims and other consumers seeking financial assistance to pursue their legal claims. By establishing clear rules and regulations for the litigation funding industry, the law promotes transparency, fairness, and accountability, ensuring that victims can access the resources they need to level the playing field and seek justice. If you are a burn injury victim in New York considering litigation funding, be sure to consult with a qualified attorney to understand your rights and navigate the process effectively.