Home > Business Disputes > We all pay and lose under “Loser Pays”

We all pay and lose under “Loser Pays”

First I apologize for the length of this blog, but I do not speak in sound bites or catchy phrases which are designed to hide the true nature of the discussion.

What happens when you do such a good of a job that you are no longer needed?  You create an emergency which justifies your existence.  That is what is going on in the Texas legislature right now.

Texans for Lawsuit Reform have done an amazing job in reducing the rights of citizens to bring suits to recover damages. They have done such a good job that there is no further need for reform, but then they will not continue to get all their money and be able to send money to the legislature. Baylor College of Law Review did a survey to the judges of Texas and 86% of the judges said there is no need for additional tort reform.

There are currently sanctions available for stopping frivolous lawsuits, including money sanctions and even the potential to take the attorney’s license away for filing frivolous lawsuits.  So the Texas House passes a law which is a one-way street, if a small business or individual loses to a defendant they could owe them all their attorney fees and expenses, but if the same small business or individual wins the defendant is not responsible for to pay them their attorney fees and expenses.  Is that fair?

Why would our representatives pass such a bill?  Who has contributed to their campaign funds?

If the Senate passes this we will have a one way loser pays law, but it is even stranger than that.  If the same small business or individual wins, but wins less than what the defendant has offered they can still be responsible for paying the defendants’ fees and expenses.

Here is an example of what could happen (thanks to Mark Lanier) a young woman eight months pregnant who is on her way to work when she is hit by a tractor trailer driver who ran a red light, and is in violation of Federal standards regarding hours and medications.  He slams into the young woman’s car injuring her.  She is rushed to the hospital where she is treated for her injuries.  Unfortunately her unborn baby is killed.  She brings a case against the truck driver and his company.  They offer to pay her medical, lost wages and a little something for her pain, but refuse to offer anything for killing her baby.  The Court rules that under Texas law she can not recover for the death of her baby.  This young woman who has suffered the death of her child could now have to pay the very persons who caused the death of her child all their attorney fees and expenses.

The time for Texans for Lawsuit Reform has come and gone.  Their only function now is to continually come up with new “emergencies” to justify their existence and fund raising.  While teachers, police, fire fighters, sanitation workers, etc. are being laid off and our cities and towns are suffering from real emergencies from budgetary issues and wildfires, our legislature is wasting time on an issue which does not exist except in the pocketbooks of those that fund them.  When the same judges who said there was no need for any tort reform were asked if they had even seen a frivolous case, less than half had ever seen even one.

There are always two sides to a case – the company or person brings the claim and the person or company defending it.  Just as there is a potential for a frivolous case being brought there are frivolous defenses which require cases to be filed rather than settled.

Some examples of frivolous defenses include an insurance company which has in-house lawyers getting paid if they are defending cases or not, and implements a policy to deny virtually every case which of course results in lawsuits having to be filed. All of which could have been avoided if the company had simply fairly evaluated the claims for settlement.

Another example is the uninsured coverage you have on your vehicle which you have to use when you are hit by a drunk driver who has no coverage.  You make your claim, but the insurance company denies it because the current status of the law in Texas.  The insurance company does not owe anything until a judgment is entered and even then all they will ever owe is the amount of the policy, no attorney fees, expenses, etc. So there is no downside to denying virtually every claim.  The worst case is that they owe what they should have paid in the beginning, but by raising the cost of litigation through filing fees, depositions, etc. they can essentially blackmail their own insured into taking less because they will end up with less than the policy once they have to pay the litigation costs.

This law would have a chilling effect on the small company who sues to get paid for the work they have done and gets met with an army of defense lawyers who drag the case out and make it as expensive as possible to the point where their only option is to give up rather than continuing to pay legal fees and expenses even though they are right.  Under the House bill they would not only owe their own lawyers, but those of the other side.  It could result in a decision just to take the loss even though the debt is justly owed since to pursue the claim might result in bankruptcy.

Another aspect of the proposed law which is overlooked is what could happen with health insurance cost.  If you are injured in a crash who should pay your medical bills and lost wages?  The person that caused the wreck, of course, but under this law there will be many times where it would be a better course of action not to take the risk and just let your own health insurance and disability coverage pay for your loss.  So what happens — the costs for us all go up because rather than have the person responsible pay we all will be paying.  As the system exists if you recover for your injuries from the other person responsible for the wreck, your health coverage will generally get their money back under a subrogation claim. That allows them to provide coverage at a “reasonable” rate.  What do you think will happen when they do not have the opportunity to recover their money?  Will they just eat the extra cost or pass them on to us the consumer?

So again I come back to where is the emergency here?  Is it just that Texans for Lawsuit Reform (TLR) needs to refill their coffers and justify their existence? It is even more concerning that our representatives and governor have gotten so used to the TLR money that they do not want to let it go even at the expense of all the true issues facing Texas today.

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Categories: Business Disputes
  1. May 18, 2011 at 10:22 am

    This Bill is bad for Texas and Bad for small business and attacks on the Texas justice system will hurt all Texans- unless they own an insurance company. Any Texan with an insurance claim will be forced to take a low ball offer or face financial ruin under this bill.
    When Texas families find out what this bill really does they will be outraged at those who sought to pass it.

  2. Steve FIscher
    June 27, 2011 at 3:17 pm

    If we had an organized and united bar the legislature would pay attention. Our 88,000 attorneys their friends,staff and families would be a force in every district.

    Check out our bar discussion group and the wide variety of opinions.

    https://www.facebook.com/home.php?sk=group_204705479568908

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