Michigan lawmakers are weighing House Bill 5281, a move that would put real rules around third party litigation funding. The proposal hits disclosure, registration, and cost controls all at once, and the politics around it already feel charged.
According to our analysts, the state’s litigation climate made this kind of bill inevitable.
HB 5281, introduced Nov. 12, says consumer litigation funding deals must be disclosed within 30 days after a written request.
Commercial agreements don’t get that cushion; they need to be disclosed automatically. Everyone involved becomes open to discovery. No hiding behind intermediaries or shell players.
Financing companies would also need to register with the Michigan Department of Insurance and Financial Services. The price tag sits at $10,000, and renewals every two years cost the same.
Straightforward, though the fee will annoy smaller outfits trying to buy a slice of the litigation funding market.
The bill caps annual charges at 36%. That ceiling covers admin, underwriting, originating, and every other fee companies love to bury in the fine print, interest included.
And financing players can’t steer legal strategy or influence the direction of a case. In plain English, they provide money, not tactics.
Mark Friedlander from the Insurance Information Institute said the bill creates accountability in a state swamped by billboard law firms and aggressive claim tactics.
He argued it could help Michigan consumers and businesses by creating a fairer legal environment and tamping down insurance costs in property, personal auto, and commercial lines. Maybe he’s optimistic, but the industry has pushed for this guardrail for years.
By creating clear accountability guidelines, the proposed Michigan legislation will help curtail one of the many factors driving legal system abuse in the state by billboard attorneys and further the goal of providing Michigan consumers and businesses with a fair legal environment
Mark Friedlander, senior director of media relations for the Insurance Information Institute
“It will also help control the costs of property, personal auto and commercial insurance for all Michiganders,” said Mark Friedlander.
Friedlander also said the secrecy around these agreements makes claims drag on, raises expenses, and hits insurers, policyholders, and the wider U.S. economy. Triple I numbers back that up.
Over the past decade, third party litigation funding and related trends added somewhere between $231.6 bn and $281.2 bn to liability insurance losses. That spike can’t be pinned on economic inflation alone.
At the same time, Michigan lawmakers are juggling a wider package of workers’ compensation bills.
Those proposals touch intentional tort exceptions, death benefit rules, phantom wage disputes, and even a test for determining whether a worker counts as an independent contractor.
Honestly, it feels like the legislature decided to tackle every pressure point in the liability ecosystem at once. Maybe that’s overdue.
