Insurers’ Fight With Litigation Funders Hits Liability Policies

Commercial liability insurers will soon have the option to make policyholders disclose third-party funding agreements, part of an escalating fight between carriers and litigation funders over underlying mass tort cases.

Following insurance industry outcry over third-party litigation funding, the Insurance Services Office—a unit of Verisk Analytics Inc. that issues widely used standard policy forms—released optional liability insurance language that would require policyholders to disclose funding agreements involving them or their attorneys in claims disputes with their carriers.

Insurance giants so far haven’t announced plans to adopt the provision, which could hit policies as soon as January. But it’s already drawing ...