Loser Pays; Would it Work in Car Accident Claims?

At least once a year I get into a lengthy debate with friends about the merits of various tort reform measures including these repeated calls for a “loser pays” system in Georgia. Having just returned from London, I became interested in how the English Rule, “loser pays”, is working for them specifically with regard to car accident injury cases.

First, lets discuss the English Rule. In England, the losing party or the party who dismisses their case and gives up has to pay the other side’s legal fees. This is true in personal injury law as well as all other types. Imagine that a business has been wronged by

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For example in the recent Rubert Murdoch scandal which was well documented in this excellent Vanity Fair article, it was noted that the head of F1 racing succeeded in his suit for invasion of privacy after the tabloids correctly accused him of having orgies with 5 women but falsely claimed that he did so under a “Nazi” fetish. The damages award was approximately $120,000.00 but because the newspaper lost, they had to pay his $900,000 in legal expenses. Think about that for a second. Who won there? He took a huge risk and if he lost he would have had to not only pay his $900,000 in fees, but also the newpapers. He won, and he pockets $120,000.00. For most normal people, the risk far outweighs the reward so they won’t sue.

“Great” cries the Chamber of Commerce, “we all win!” Such a sentiment is naive at best. Our Founding Fathers understood that without checks and balances, power gets consolidated eventually and imbalances result.

If everyone is afraid of filing suit, the only check on private corporations misbehaving is the government prosecutors. If conservatives generally agree that the government is inefficient and ineffective at best then how frightening a prospect is it to rely on them to police our drug companies, car manufacturers, etc.

Picture this scenario. With the exploding Ford Pinto cases from the seventies or the pickup truck deaths resulting from the side-saddle fuel tanks in the 80s. If there was a loser pays system, those cases never get brought because of the risk of intimidation. Hundreds more die and safety improvements come much slower in the free market without a financial incentive.

Well, the government would have gotten around to it, the Chamber might argue. Sure, the Attorney General’s Office which serves under the general direction of the Presidential Administration would not be disinclined to investigate an auto manufacturer that also happened to be a large ticket donor to the in-power presidential party. Not to mention the fact that the consumer protection divisions really are not charged with these tasks anyway.

For a complete discussion of the various issues involved in tort reform, be sure to read the Wikipedia article here.