Texas “Loser Pays” Law Goes into Effect September 1st

Understanding Texas’ Loser Pays Law and its probable effect is much easier if one important principle is remembered. All of tort reform is designed to sound reasonable while at the same time giving the insurance industry an unfair advantage in litigation and at the court house. The concept of “Loser Pays” certainly sounds reasonable. However, the Loser Pays legislation in its original form provided that only the plaintiff was subject to the Loser Pays penalty. The proposed law would have allowed the defendants to stonewall, assert frivolous defenses, and string the plaintiffs out on the most legitimate of claims while using the remote threat of Loser Pays to force a reduced settlement.

Much to the chagrin of the insurance lobby the Texas Legislature wouldn’t go that far. The Legislature applied the Loser Pays principle to both sides while giving only the defendant the right to invoke the application of Loser Pays. Loser Pays does not apply unless invoked by the defendant but once invoked it applies to both parties. The theory was that the defendant would invoke Loser Pays only in those cases where the plaintiff was asserting frivolous claims. The fallacy to that theory is that there are virtually no jury trials over frivolous claims. Trial lawyers do not get paid unless they win and have no incentive to try frivolous claims. Both plaintiff and defense lawyers know that you simply cannot get twelve jurors to go into a jury room and award money damages for a frivolous claim. Verdicts are often misreported by the insurance lobby around election time in a way that makes them sound frivolous but everybody associated with the litigation industry knows that frivolous verdicts are as rare as hens’ teeth.

Insurance companies and their lawyers will be extremely unlikely to invoke Loser Pays because the likely effect would be to increase the amount of money that they would have to pay when they used the litigation process to try to wear down people making legitimate claims.

For more information contact a Tyler Injury Attorney today.