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“Loser Pays” Means Families Pay

Via Texas WatchPosted May 4, 2011
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Here we go again.  Lobbyists in Austin are once again trying to shield their corporate clients by socializing the cost when they cause needless death, injury, or financial devastation.  This time they are pushing HB 274, an un-American scheme that threatens families and small businesses with having to pay the bloated legal costs of big insurance companies and multi-national corporations.  Act Now to stop this dangerous legislation.

After 20+ years of pro-defendant legal changes, passing legislation that will make it even more difficult for Texans with valid claims to access the legal system is at best detrimental to public accountability and at worst unconstitutional.The bottom line is that their proposals are designed to intimidate families and small business owners into foregoing the legal accountability process, immunizing polluters, insurance companies, and other big corporate defendants from responsibility.

These schemes most acutely impact middle class families who could be financially devastated not only if they lose a valid lawsuit, but even if they just don’t win big enough.  And, the proposal before lawmakers puts small businesses at a particular disadvantage when facing a big corporation in court.

If this bill passes, defendants will be in complete control, leaving the family or business owner at the whim of the accused wrongdoer.  Also, under their gerry-rigged formula, even if you win a verdict, you could still be forced to pay the defendant’s legal costs.  In other words, you can win and still lose.

Despite the lobbyists’ rhetorical misdirections, this issue has nothing to do with penalizing people who file meritless lawsuits.  We already have stiff penalties on the books for that, including the payment of attorneys’ fees.  Their real goal is to erase the notion of corporate responsibility.  They want to erect so many obstacles to justice that we just throw up our hands and let corporate criminals like BP off the hook.

HB 274 would allow insurance companies even more latitude to deny and underpay valid claims.  For instance, a family injured in an auto accident would face an impossible choice if the at-fault driver’s insurance company denied a valid claim.  The family would face the threat of paying the bloated legal costs of the insurance company’s legions of lawyers or accepting whatever low-ball offer the insurer makes.

Florida’s experience with a scheme similar to the one being debated by our legislature was so bad that lawmakers there repealed it just five years later.  As the Duke Law Journal notes, proponents are “diplomatically silent about Florida’s unsuccessful experience.”  A former president of the nation’s oldest association of civil defense lawyers put it bluntly: “They tried it in Florida, and it was a disaster.”

Known as the “British Rule,” this concept was roundly rejected by our nation’s founders more than two centuries ago because it guts individual liberty.  In recent years, however, Britain and other countries have begun to rethink the wisdom of this system.  In fact, the British Ministry of Justice recently commissioned a report that recommends that Britain scrap its current system in favor of the “American Rule” in which both parties are responsible for their own legal costs.  The Economist magazine proclaimed that “every citizen in the land would, at last, have a fair opportunity to have a case heard in the nation’s courts.”

The bottom line is that Texas families already face significant barriers to accessing the constitutional promise of a right to Trial by Jury.  Adopting a scheme that has a dubious history and is designed to force families and small businesses with valid claims to weigh the possibility of paying the legal costs of multi-national corporations is not in the best interests of public safety, public justice, or public policy.

Take action now.  Tell your State Representative to stand up for Texas families and our constitutional liberties by rejecting HB 274.

Research & Reports
Research & Reports

The Texas Watch Foundation, a non-partisan 501(c)(3) organization, conducts research and public education activities on consumer law, consumer protection and civil justice issues. Read More »

Court Watch
Court Watch

Court Watch, a program of the Foundation, documents the role and impact of the Texas civil court system on Texas families and Texas public policy. Read More »