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In Loser Pays, All Tennesseans Lose

In almost all personal injury cases – from motor vehicle accidents to medical malpractice – the plaintiff’s attorney works on what is called a contingency basis. This means that the injured plaintiff only pays the attorney if and when compensation is recovered either through a settlement or award from a judge or jury – usually, this is a set percentage established at the outset of the case. But this also means that the attorney will not get paid if the case is lost or very little is recovered.

For the most part this is a good system. It allows those who are injured, regardless of economic status, to seek justice. But it also tends to discourage attorneys from taking or filing frivolous lawsuits (cases without merit). In the event a judge deems a case to be frivolous, the judge has the option to order the plaintiff to cover the defense’s costs incurred as a result.

New legislation in Tennessee, however, threatens to turn the current system on its head. The legislature is considering reforming the current system into what is often called a “loser pays” system. Loser pays is exactly what it sounds like, the loser of the lawsuit pays the attorneys’ fees, court costs, and other associated costs of the winning party.

A loser pays system tips the scales of justice in favor of the economically advantaged. Big companies, insurance companies and others with financial clout will get an edge over an injured plaintiff. Many companies have entire legal departments, as well as the means to pay for outside defense counsel. The potential of paying for the cost of defense lawyers may discourage an injured plaintiff from filing a case or may otherwise feel forced into accepting a less than satisfactory settlement offer. After all, the outcome of trial is never a sure thing – why would a plaintiff want to take the huge risk of actually losing and having to pay the other side’s legal costs, even if he or she has a decent case?

In what appears to be a cure in search of a problem, the ramifications of this legislation will most adversely affect those that need financial compensation the most: injured poor and middle class. This legislation would shift the monetary risk from big firms and insurance companies to the backs of those that can least afford it, which essentially denies injured people access to the legal system.