Diary

What should the free markets allow you to sell without government intervention? An ownership in a legal claim?

When does the government need to step in and restrict prices that personal property can be bought and sold for?  If the U.S. Constitution provides protection for economic liberty, should the government ever be involved?  What would the U.S. Chamber of Commerce, the organization that holds itself up as the bastion of the free markets and innovation think? A relevant question when they offer up themselves as the definitive source of how to regulate the pre-settlement funding (aka lawsuit loan, aka legal funding world)

Most people would agree you should be able to sell your used furniture on craigslist for some discount to whatever you bought it for when it was new.  Discounts as high as 80% to 90% would appear normal.  If you own a couch that you bought new 10 years ago for $1000, you may feel lucky if you can obtain $200 for it now.  Everyone knows that a car that you bought new loses value as soon as you drive it off the lot.  Put a couple of years on it and some miles, and most Americans would not expect to get 50% of the original purchase price back.

So what happens if you were innocently driving your car, abiding by the rules of the road, and suddenly your life changes because a driver without insurance runs a red light and slams into the side of your car?  You have a broken leg, loss of your vehicle, and lost wages from the time you will miss from work.  The way the system works in our country gives you a legal claim against that driver.  And because there is an unlikelihood that he can afford to compensate you for your economic losses, the insurance company you have faithfully been paying your premiums to over the years is now liable for these damages.  That would be your uninsured motorist coverage.

Even though you are a faithful policyholder, your insurance company does not say “hey, I know you need money now so here’s your check and good luck on your recovery.”  First they may say “are you sure you want to file a claim, you know it will increase your rates.”  Then they will say, “you know if you hire an attorney to represent you, you are going to have to hand over 1/3rd of your settlement offer to that attorney”.  And this is based on their knowing (as internal documents at Allstate made public have shown) that consumers represented by attorneys recover twice as much as consumers that do not seek representation.

So even though you would prefer to invest your personal efforts in your physical recovery and return to the work force, you find yourself in litigation – a process you have little control over that you now learn may take months to years to resolve.
The value of your injury is not hard to determine.  Insurance companies and attorneys see thousands of these a year, and have decades of verdict data on how a jury will assess damages.  But they will make you wait…the insurance companies really have no incentive to settle your claim promptly.  Especially in the states where the insurance lobbying cartel has watered down bad faith insurance claim statutes.

Which gets back to the question of what restrictions should the government have on what you can sell your property for.  If your attorney advices you that your claim is worth $30,000 but it could take two years for you to see a dime, shouldn’t you have a right to sell say $1,000 of those proceeds to a party that is willing to take the risk as to when and if that claim will be paid?  And if the government sets a price restriction as to what that claim can be bought for, won’t that restrict the market of bidders for that claim?

This puts the U.S. Chamber in an odd place with respect to its policy positions related to the fortune 100 bank and insurance companies it fronts for.  Don’t mess with bank overdraft fees – infinite APRs (that are poorly disclosed) should be permissible according to the U.S. Chamber of Commerce.   Don’t mess with insurance rates.  The free market should determine those rates, even if that means mark ups of over 400%.  But a consumer’s right to sell a fraction of his or her legal claim?  By all means, please create a restrictive bar there to choke off the market for bidders, as recently done by U.S. Chamber of Commerce and Insurance Industry lobbyists in Tennessee.

If your couch ever has a reason to sue the U.S. Chamber of Commerce or its fortune 100 insurance company members, be sure that they will find a reason to restrict what you can sell that couch for.

For some additional context, here are clips from the debate over an insurance industry sponsored bill to regulate legal funding in Tennessee – which succeeded in driving the industry out of Tennessee and leaving Tennessee consumers with fewer choices in their confrontations with insurance companies representing defendants:

Tennessee State Senator Mark Green (R) speaks:  <iframe width=”640″ height=”360″ src=”//www.youtube.com/embed/GySicfaOBRg?feature=player_detailpage” frameborder=”0″ allowfullscreen></iframe>

Tennessee State Senator Todd Gardenhire (R) speaks:  <iframe width=”640″ height=”360″ src=”//www.youtube.com/embed/ti_8uFGzKIs?feature=player_detailpage” frameborder=”0″ allowfullscreen></iframe>