Voluntary Compensation Plans in Texas

As you may know, several Texas congressmen and congresswomen have proposed bills in an effort to promote more tort reform.  A couple of these bills involve "voluntary compensation plans."  In a nutshell, these plans would be offered by individuals and corporations that, for one reason or another, are concerned they could be liable in court.  Consequently, they would create a voluntary compensation plan to allow those who were injured by the plan creators to receive some sort of financial compensation under the plan rather than duke it out in court.  If you are confused, consider the Deepwater Horizon oil spill last year.  As a result of that spill, a compensation plan was created to aid victims of the Gulf Coast disaster.  Similarly, Texas House Bill 2031 and Senate Bill 21 would effectively encourage those who are injured to settle instead of resorting to litigation.

From our perspective, there is nothing inherently wrong with the idea.  But there are some significant problems with the way these bills are laid out.  First, they are fuzzy on what kind of compensation these negligent corporations would have to offer.  Advocates of these plans would say that the plan inherently has to be reasonable because there are certain cost-shifting mechanisms involved in the legislation.  However, these mechanisms appear to disproportionately benefit the plan creators.  And in cases where the plan offers a grossly inadequate amount, claimants could be forced to wait before litigation could ensue if the defendant elects to abate or suspend the lawsuit.

We are also concerned that the bills would discourage victims from seeking legal advice from qualified attorneys.  Under the proposed law, attorneys who represent injured individuals would have to inform their clients that, "if the claimant or potential claimant seeks compensation from the plan without the assistance of the attorney, the claimant or potential claimant will not owe the attorney any fee for services in connection with that claim for compensation." Our concern here is that needy clients who are desperate for immediate results would be encouraged to forgo their legal rights and settle for less without the assistance of an attorney.

We think HB 2031 and SB 21 make for bad law.  But we encourage Texans to come to their own decisions and read the bills for themselves.  You can access the text of HB 2031 here and SB 21 here.