Does the second party have to tell

the first party who’s behind the third party?

 Agents, brokers, and liability insurers don’t see eye-to-eye

on a lot of things, but they may share the hyena view of litigation

financing—the practice of investors providing funding to plaintiffs in return for a share of an award.

By Joseph S. Harrington, CPCU

So how do you regard third-party litigation financiers? Like lionesses pursuing a quarry on behalf of the pride? Or like hyenas copping a share of another creature’s quarry?

Agents, brokers, and liability insurers don’t see eye-to-eye on a lot of things, but they may share the hyena view of litigation financing—the practice of investors providing funding to plaintiffs in return for a share of an award. When it comes to outside litigation financing, producers detect an increased propensity to sue their clients and insurers see plaintiffs holding out for higher settlements.

To date, litigation financing has been a factor in claims handling, with little direct effect on agents and brokers. It could start to pop up in policy issuance, however, now that a new standardized endorsement calls for disclosure of “third-party litigation finance (TPLF)” arrangements.

ISO action

The optional endorsement, developed by the Insurance Services Office (ISO), is called “Condition—Litigation Funding Mutual Disclosure” (form CG 99 11 01 26), and is available under all ISO programs that provide commercial liability coverage. The endorsement amends policy conditions for triggering coverage but makes no change in the coverage itself.

This one-page form opens with the following statement: “If we (the insurer) and an insured do not agree whether or to what extent a claim or suit is covered by this Policy, either party may make a written demand for mutual disclosure of any “third-party litigation funding agreement(s)” regarding that claim or suit.”

“Third-party litigation funding agreement” is then defined in the endorsement as: “any agreement for funding provided to a party . . . for a specified legal matter, or portfolio of specified legal matters, in exchange for an agreement . . . to repay the funding or pay any applicable consideration, contingent upon the outcome … .”

If either the issuer or holder of the policy requests a TPLF disclosure, the option requires each party to provide the other with a copy of any applicable TPLF agreement within 30 days. That disclosure must include identities of the parties to the agreement, a description of the financial interests of anyone providing litigation funding, and a description of the funder’s role in litigation and settlement negotiations. Any changes to the information must be disclosed within 30 days.

So, what’s going on?

Insurance professionals look to ISO to establish clarity in policy provisions, but what CG 99 11 seeks to accomplish is unclear.

First off, the endorsement states that the disclosure requirements take effect only if the insured and the insurer (the parties to the insurance agreement) disagree whether a claim is covered, or to what extent. Presumably, then, the disclosure requirements would apply only in cases where (1) a liability insurer was defending a claim under a reservation of rights, or (2) an insured was challenging a denial of coverage.

But what happens if the insured and insurer agree on coverage, although perhaps not on litigation strategy? Apparently, there’s no need in that case for disclosure of any TPLF arrangements.

But what would be there to disclose? The endorsement’s definition of a TPLF arrangement and ISO’s explanation of the filing clearly target the type of arrangements that have made big business out of outside funding for plaintiffs. But liability policies only address defense costs and indemnity for third-party liability.

No return on defense

Now, it’s possible for a defendant to tap outside resources to sustain its defense and maintain operations and thereby resist its insurer’s recommendations to settle. That hardly presents a business opportunity for investors, however.

The best “return” a defendant can hope for is recovery of defense costs and possibly some compensation for abuse of process. It’s virtually impossible to envision largescale funding of defendants. In the words of Fiona Chaney, “We don’t invest in defense side cases because, typically, there is no upside.”[1] Chaney is senior investment manager at the commercial litigation finance company Omni Bridgeway. She views her business as neither predator nor scavenger, but as support for victims that might otherwise be prey to wrongdoing.

Disclose any agreement?

So, is the endorsement intended to require a defendant insured to disclose the plaintiff’s funders to the insurer? Recall that the opening line of the endorsement, cited above, calls for disclosure of “any third-party litigation funding agreement(s) regarding that claim or suit.” (emphasis added). Interpreted strictly, that would mean any TPLF that in any way impacts claim proceedings would be subject to disclosure.

Why would that be a condition? Presumably the defendant would want its defense insurer to know what it was up against, if the defendant itself knew. If a defendant withheld such information, it would be a dysfunctional if not fraudulent legal defense. Kickbacks, anyone? As for an insurance policy creating disclosure obligations for a claimant that is not a party to the policy, forget it.

According to Chaney, the only logical application of the ISO TPLF disclosure condition would be in a coverage dispute between an insured and an insurer. Even in that case, she claims the condition would effectively be waived if the insurer has denied coverage. “I absolutely cannot see any court enforcing that,” she says.[2]

Given her line of work, one would not expect Chaney to have high praise for the endorsement. What matters here is that she is not afraid of it. Several states and legal jurisdictions have implemented disclosure requirements for TPLF; many more are considering them. Look there, not to policy conditions, to make it happen.

[1] Interview with the author, Feb. 23, 2026.

[2] Ibid. For more, see Chaney’s article, “ISO’s ‘Litigation Funding Mutual Disclosure’ Is Unenforceable,” Law360, Jan. 22, 2026; accessed at https://www.law360.com/insurance/articles/2431337/iso-s-litigation-funding-mutual-disclosure-is-unenforceable-

The author

Joseph S. Harrington, CPCU, is an independent business writer specializing in property and casualty insurance coverages and operations. For 21 years, Joe was the communications director for the American Association of Insurance Services (AAIS), a P&C advisory organization. Prior to that, Joe worked in journalism and as a reporter and editor in financial services.