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The Insurance Industry has a friend in both Tennessee State Rep Curtis Johnson and Tennessee State Senator Jack Johnson.  The Insurance Industry, and their front group led by the U.S. Chamber of Commerce and NFIB, whipped their friends out when they wanted to put a hit on an industry they found threatening.  The Johnsons delivered for their friends and earned their scorecard points during the waning days of this legislative session for the Tennessee General Assembly.  The insurance companies, which are the named defendants in the lawsuits of the consumers who will be impacted, got their bill to drive the legal funding industry out of Tennessee through both houses of the Tennessee General Assembly after 2 hours of heated debate in the House over a bill that used regulation to remove an economic option for Tennessee consumers that do not have the same financial stamina as the insurance companies they are litigating against.  

Curtis Johnson is the House Speaker Pro Tempore, and a Republican from Clarksville Tennessee (District 68 in Montgomery County).  Senator Jack Johnson is a Republican from Franklin (District 23 in Williamson County).  Both rejected tea party principles of free markets and less government to favor one business over another.

The Johnsons decided to accept the Insurance Company premise (and bill language) that Tennessee should be the first state in the country to impose price caps on the legal funding industry, along with two other insurance company proposed poison pill provisions on the legal funding industry that appear to serve no consumer protection purposes.

The first provision in the bill prohibits assignment of legal funding contracts.  This provides no consumer protection, but in fact significantly raises the cost of capital for legal funding companies since this denies them access to bank financing for any transactions they enter into in Tennessee.  From his Senate Floor comments, Senator Jack Johnson either did not understand this or did not care.  He came up with some argument that because Legal Funding transactions are "non-recourse" to consumers, the companies providing them do not need to assign the transactions.  

So because these transactions do not make consumers personally liable (and therefore less safe than more traditional consumer debt), legal funding companies do not need to access debt financing?

The second provision gives Any lien on a legal claim priority to the legal funding company's lien, so any personal lien after the transaction would trump the legal funding company's claim.  Again, a provision with no consumer protection attributes that only serves as a poison pill to conducting legal funding in Tennessee.  And again, the Johnsons either did not understand this, or did not care.

Lastly, the 46% annual cap had no basis and stood in stark contrast to the recently approved 276% annual cap provided to payday companies operating in Tennessee.  Payday requires bi-weekly or monthly payments.  Payday is debt.  Payday loans never go away until paid off or via a discharge in bankruptcy.  Payday, however, has not drawn the ire of Big Insurance.

Legal funding, on the other hand, has no payments until and unless the underlying legal claim settles.  And nothing is owed personally - the legal funding companies only collect out of the legal claim proceeds - if there are any.

State Representative Curtis Johnson and State Senator Jack Johnson pushed the bill sponsored by the U.S. Chamber of Commerce, and its Tort Reform, the Institute for Legal Reform, for the benefit of the Insurance Company members of the U.S. Chamber of Commerce.  Lobbyists for State Farm, Allstate, USAA and others swarmed the hallways of the Tennessee General Assembly.  And in a two hour long contentious debates on the House Floor, legislators argued about whether the insurance industry or the legal funding industry were trying to exploit desperate and vulnerable citizens for profit.

Legal funding, also known as "lawsuit lending," provides money to injured people seeking damages from insurance companies, typically for living expenses during a long wait for a case to come to trial or be otherwise resolved. They are repaid only if the lawsuit is successful.

During the heated floor debate, Representative Vance Dennis, a Republican from Savannah, stated that "The intent of this bill is not to help poor people. The intent is to hurt poor people.  I despise it."

The bill aims to "put an industry out of business" because it gives people money to keep going while a lawsuit is pending. Without an advance of money, the "poor desperate people" will agree with an insurance company or business to settle the lawsuit for less money, he said.

"This will keep more money in the pockets of the insurance companies," Dennis said.

Added State Representative Steve McManus, a Republican from Cordova, "the intent is pretty malicious" in that the goal of the legislation is to stop advances to litigants -- or make them more difficult to obtain - and thus allow insurance companies to "low ball" their payments for injuries.

Ultimately, in a game of politics that had very little to do with the end consumer, the Johnsons championed the Insurance Company and NFIB's cause and consumers now will have fewer choices in Tennessee when forced to litigate with an insurance company that provides coverage to the party that injured them.

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