Demotech, Inc.'s Perspective on Lawyer International - Legal 100 2026 Award

COLUMBUS, Ohio, Aug. 31, 2026 /PRNewswire/ -- Lawyer International – Legal 100 2026 recently announced that Demotech, Inc. had secured "Niche Financial Analysis Provider [Insurance] – US."  Joseph Petrelli, president and co-founder, Demotech, Inc. opines on why Lawyer International selected a financial analysis firm for an award.

"In 2022, our postmortem of failed carriers revealed that new, annual litigated claims accelerated at industrial scale over the four years prior to their destruction. Despite a consistent market share of 4% of Homeowners' insurance premium, they wound up with an 18% market share of new, annual litigated claims. This occurred despite unqualified independent audits and determinations of reasonable opinion as regards loss and loss adjustment expense reserves, issued by qualified actuaries. Based upon our postmortem, we launched a research project.

"All but immediately after undertaking our research project, Todd Kozikowski identified the previously covert online business model, we dubbed 'tech-enabled litigation instigation.' The business model uses artificial intelligence platforms, online advertising, and litigation marketing firms. Third-party litigation funding (TPLF) may be utilized to finance these activities. 

"Todd utilized his technological expertise and recent experience with this threat to form 4WARN, Inc., a digital risk analysis firm, to assist entities being targeted online remediate targeting and return litigation frequency to historical levels. Demotech's subsequent research infers that the business model came into existence about 2015 – 2017 and remained covert until our research and Todd's findings in the Spring of 2022. We immediately initiated an effort to educate all stakeholders and encourage them to develop public policy responses to this previously covert online business model.

"Given the brute force and efficacy of the business model in conjunction with often tax-exempt profitability from federal income taxes, it has been a magnet for private equity and other investors. Almost concurrently, some investors viewed the legal profession as a catalyst to leverage the business model's efficacy. However, American Bar Association (ABA) Model Rule 5.4 precludes non-lawyers from ownership or direct participation in the operations of law firms.

"Some jurisdictions have experimented with amending or deleting Rule 5.4. As of this date, Arizona, Utah, the District of Columbia, and the Commonwealth of Puerto Rico have done so. As such, under certain circumstances, non-lawyers can directly invest, and/or, be involved in the operations of law firms in Arizona, Utah, the District of Columbia, and the Commonwealth of Puerto Rico.

"As third-party litigation funding disclosure was introduced countrywide, and passed in several jurisdictions, managed services organizations, MSOs, emerged as an option to ABS involvement in law firm operations. MSOs are a separate legal entity designed and structured to perform all administrative and operational aspects of law firm activity other than legal work. Legal work and the practice of law remain the sole province of lawyers. However, the MSOs administering operations at a law firm may elect to utilize TPLF to fund marketing efforts.  As the law firm did not access TPLF, there may be no need to disclose the use of, or access to, TPLF.

"On this recognition, it is my opinion that our pioneering work leading to the unearthing of tech-enabled litigation instigation, and our efforts to educate all on the mutations taking place within the legal profession, all of which contributes to the industrial scale growth in litigation that has been experienced, convinced the large majority of plaintiff firms that do not use the previously covert business model and support ABA Rule 5.4 as written, saw us as a defender of consumers and the traditional claims process. The traditional claims process being one that gives the insurer a chance to settle before you sue."

About Demotech, Inc. 
Incorporated on September 9, 1985, Demotech, Inc. is a financial analysis firm located in Columbus, Ohio. Demotech serves the insurance industry by providing objective and independent Financial Stability Ratings^® (FSRs) for Property & Casualty insurance companies, Life & Health insurance companies, and Title underwriters, among others. FSRs assist independent, regional and specialty insurers by leveling the insurer ratings playing field. Over thirty-five years ago, Demotech was the first to have its rating process reviewed and accepted by Fannie Mae, Freddie Mac, and HUD. Since that time, Demotech's FSRs have been leveling the playing field for financially stable insurers of all sizes. Since July 11, 2022, Demotech is registered with the U.S. Securities and Exchange Commission (SEC) as a nationally recognized statistical rating organization (NRSRO) in the class of ratings for Insurance Companies. Visit www.demotech.com for additional information, sign up or view The Demotech Difference. You can sign up to receive a quarterly hard copy of The Demotech Difference by mail at https://www.demotech.com/contact-demotech-2/. Alternatively, you can access current and past issues of TDD online at https://www.demotech.com/research/the-demotech-difference/.

SOURCE Demotech, Inc.