Unregulated NY lawsuit lending industry is causing ‘crisis’ in real estate world: Building, real estate groups
An unregulated, multi-billion dollar New York industry that encourages questionable lawsuits is causing a “crisis” in the real estate world, two powerful building and construction groups charge.
The Associated Builders and Contractors (ABC-NYS) and Real Estate Board of New York (REBNY) are calling for reforms to “third-party litigation lending,” which promises quick cash advances to potential plaintiffs — money that doesn’t need to be paid back if they lose.
“What it’s created is a general liability crisis,” Brian Sampson, president of ABC-NYS told The Post Wednesday.
ABC-NYS and REBNY are joining forces with a group of organizations – the Consumers for Fair Legal Funding – to combat the litigation lending industry, which they and other critics claim is rife with fraud and abuse.
The coalition wants state lawmakers to reign in dubious and predatory firms that front funding to plaintiffs in frivolous lawsuits in exchange for a portion of the litigation proceeds — often charging exorbitant high interest rates of up to 200%.
They say the firms utilize New York’s stringent workers compensation laws and other statutes to dupe workers, often immigrants, into filing lawsuits meant to pressure corporations and public entities into resolving them quickly through pricey settlements.
Post reporting has revealed lawsuits funded by such lenders may cost Big Apple taxpayers millions of dollars each year, for cases that ultimately never go to court.
“We’ve created a market of fraudulent claims where an allegedly injured worker is laying down on the job, walking off the job, calling 911 and by the time they get to the hospital, they’ve already been met by their attorney,” Sampson said.
“You have a whole group of people who’ve been manipulated and left out to dry and it further exacerbates the problem we have with general liability,” Sampson added.
ABC-NYS and REBNY argue that the onslaught of lawsuits have driven up their insurance costs, ultimately making it more expensive to build.
Sampson said the costs of insuring a project are around 2.5% in New Jersey, but as much as 13% in New York.
“Lawmakers need to pass legislation this session that will prevent bad actors from taking advantage of unsuspecting victims,” REBNY General Counsel and Senior Vice President Carl Hum, said.
“Without reform, insurance costs will continue to rise, making it more difficult than ever to build our way out of the State’s mounting housing supply crisis.”
The coalition is supporting legislation sponsored by state Sen. Leroy Comrie (D-Queens) that would establish regulations on the litigation lending sector.
The groups also noted that under New York’s much-maligned Scaffold Law, developers and contractors are held entirely liable for injuries sustained on work sites, even if a worker is negligent.
Previous attempts to revise the scaffolding law have faced stiff opposition, especially by the powerful Trial Lawyers Association.
Consumers for Fair Legal Funding touts a broad array of other members such as the Alliance for a Quality Education, the Bodega and Small Business Group, the Business Council and the New York Conference of Mayors amongst others.
