Friends,
For more than three decades, Texans for Lawsuit Reform has fought for responsible guardrails that keep our civil justice system fair and predictable. Those efforts have helped build the Texas Economic Miracle, which has become the world’s 8th-largest economy. A new bombshell report from The New York Times, however, highlights one area where businesses in Texas and across the country remain exposed: lawsuit abuse.
As the Times’ report highlights, lawsuit abuse is no longer limited to frivolous cases. An entire industry—from attorneys to medical providers to third-party funders—is taking home an ever larger slice of the verdict meant for legitimate plaintiffs. As lawmakers meet in Austin, the conversation about lawsuit abuse is growing around the state. More business leaders are speaking out about fraud and how lawsuit abuse is hurting affordability for Texas families and the customers they serve.
This week, we break down the Times’ report and highlight the key policy areas where lawsuit abuse is thriving. Medical billing fraud and profit-driven incentives are fueling the problem, often leaving plaintiffs with pennies on the dollar for verdicts meant to right a legal wrong.
For the future of Texas,
Ryan Patrick
CEO | TLR
In June, the Senate Business & Commerce Committee held a hearing on the rising costs of insurance. Lars Powell, Executive Director at the Center for Risk and Insurance Research at the University of Alabama, testified that the number of severe crashes (automobile accidents with serious or deadly injuries) has steadily decreased while the number of lawsuits continues to increase. The report published Wednesday in The New York Times points to one reason these lawsuits may be increasing: rising cases of insurance fraud and staged accidents.
Operation Sideswipe, the Louisiana-based case that is still making national headlines, is one example of an assembly-line fraud orchestrated by two lawyers and a group of paid slammers and witnesses. The case, which led to the conviction of the attorneys and their law firms, highlighted elements included throughout The New York Times’ sweeping report:
Medical Damages Fraud: Coercing plaintiffs into unnecessary surgeries to drive up verdicts or settlement figures.
Third-Party Funding: Predatory lending practices by litigation funders who provide plaintiffs with upfront cash in exchange for up to 50% of the final settlement award, not including attorney fees or interest on the loan.
Staged Accidents or Insurance Fraud: Employing a mix of the aforementioned tactics after orchestrating an accident or targeting a business or employer.
While these lawsuits are meant to help plaintiffs recover legitimately needed funds for medical care or debt incurred as a result of an injury, there are many cases where the final amount they receive is far less than what the jury awards.
It’s also troubling to see an increasing number of plaintiffs accusing attorneys, funders, and other entities of promoting unnecessary surgeries to boost the medical damages recovery. Completed procedures or testimony that drastic surgeries will be needed in the future inflate medical expenses resulting in greater compensation for “pain and suffering,” also known as non-economic damages. For plaintiffs pursuing high-profile verdicts of $1 million or more, it becomes increasingly difficult for juries to disregard these medical suggestions. This is part of what lawyers call the Reptile Brain Strategy or Reptile Tactics…this could be a whole newsletter on its own.
In one case, a plaintiff agreed to serious neck and spinal surgeries after a slip-and-fall outside a building in New York. The woman claimed to have received surgery on her tailbone, but then testified in court that she fell forward instead of backward, which would not have caused an injury to her tailbone. The New York Times reports this woman’s expected debt to a lawsuit funder will be $1 million in November, potentially for treatment that was unnecessary due to the circumstances of her injury.
The report includes statements from industry insiders who actively recruited plaintiffs to accept money from lawsuit lending companies. One former sales rep was fired for failing to bring in $500,000 in payments each month. Daniel Laskowski, a former USClaims employee who recruited plaintiffs for the funding agency, made it clear that the additional surgeries were used as an incentive for plaintiffs seeking additional payouts before the case was settled.
So, what is the solution to stop lawsuit abuse that is driving up the costs for insurance and basic goods and services? For starters: a lot more transparency.
The New York Times repeatedly highlights that there is no required disclosure for the funders, the attorneys who have relationships with them, nor accountability for the financial relationships between the medical providers and the attorneys who refer clients to their clinics. Florida, New York, North Carolina, and other states are starting to either ban third-party funders or, at the very least, mandate transparency and accountability within the courts. Closer to home, our usury lending laws in Texas do not cover litigation funding.
The report makes one thing abundantly clear: As long as we maintain the incentives fueling lawsuit abuse (medical damages fraud, staged accidents, and foreign third-party funding), expenses for insurance, healthcare, groceries, and other essentials will keep rising. States like Florida, Georgia, and New York have already taken steps. Now, it’s time for Texas to step up and lead the way in lawsuit reform.
