A federal appeals court ruling last week could potentially help insurers find out who is truly behind litigation
financing and medical clinics that are said to participate in auto accidents and insurance fraud. But more legislatio
n is needed in many states to help fight growing problems, insurance litigation experts said.
“This is a very beneficial and very important decision. But it’s not enough,” said William Large, president of the
Florida Justice Reform Institute, which has advocated for more limits on third-party financing of lawsuits.
Large was speaking about the U.S. 11th Circuit Court of Appeals’ opinion in National Small Business United
vs. the Treasury Department, handed down Dec. 16. A three-judge panel overturned a lower court and found that the
federal Corporate Transparency Act (CTA), passed in 2020, is not unconstitutional and can continue to require c
ertain corporations to report the actual people who exercise control over the firms.
“The district court concluded that the CTA did not regulate economic activity and, on that basis, granted the plain
tiffs summary judgment. We disagree,” Judge Andrew Brasher wrote for the 11th Circuit panel in the opinion. “We believe that, by effectively pro
hibiting anonymous business dealings, the CTA facially regulates economic activities having a substantial aggregate impact on interstate commerce. Moreov
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er, as a uniform and limited reporting requirement, the CTA does not facially violate the Fourth Amendment. Accordingly, we reverse.”
The 11th Circuit is the last stop before the U.S. Supreme Court.
If the ruling is not appealed and is not reversed by the high court, it would remain U.S. case law, giving at least some support for efforts that aim to discover corporate ownership.
How that information makes its way to the public or to litigants may not be so simple, though. The Transparency A
ct requires some, but not all, corporations to report ownership information only to the U.S. Treasury. And the Tr
easury does not have to make it publicly available, according to the department’s Financial Crimes Enforcement Network. The department can release information
to state and local agencies engaged in “investigation or enforcement of civil or criminal violations of law,” but only if authorized by a court, FinCen.gov noted.
The Transparency Act also contains multiple exceptions for ownership reporting: Insurance companies, bank
s, investment companies and nonprofits do not have to report, nor do some larger companies, the court opinion explained.
More state-level disclosure rules are needed, insurance legal insiders said.
Critics of litigation financing for years have argued that the identities and motivations of lawsuit funding g
not placed rules on behind-the-scenes financiers. Georgia lawmakers early in 2025 included significant litigation-funding rules as part of a major tort-reform p
ackage. Arizona, Colorado, Wisconsin, Kansas, Montana, Indiana, West Virginia, Oklahoma and Louisiana have done likewise, to one degree or another.
But Florida, long considered a hotbed for litigation and auto fraud, has not taken that step. Two litigation funding disclosure bills in the 2024 legislative session died in committee.
Auto insurance defense attorneys have said in New York, Florida and other states that some medical clinics—which have been accused of playing a big ro
le in staged accidents and unnecessary medical treatments billed to insurers—appear to be owned by some of the same plaintiffs’ law firms driving unnecessary bodily injury claims litigation. Some clinics may have ties to unlicensed physician practices, defense lawyers said.
Some clinics have gone so far as to create fake collection agencies and marketing companies to launder settlement money and disguise kickbacks, according to a newsletter circulated by two auto insurance defense law firms in south Florida. Much of the auto fraud in the United States involves some type of litigation funding, attorneys said.