Office of the Governor Rick Perry

Tort Reform

Summary of Achievement

Frivolous lawsuits are not only one the top job killers in America, but were also hurting the quality and availability of healthcare across the state. Under Governor Perry’s leadership, Texas enacted several key legal reforms that are protecting the state’s economy and improving the availability of medical care.
These reforms freed doctors from excessive medical liability insurance premiums that had been driven many doctors out of Texas and some out of medicine altogether, depriving Texans of needed medical care. They also stemmed a tide of frivolous and excessive litigation by ending class action abuse, protecting innocent parties from expensive product liability suits, reining in excessive punitive damages claims and cracking down on phony asbestos suits. Ultimately, the reforms imposed reasonable limitations on lawsuits while still allowing Texans with valid claims their day in court.

The Challenge

Abuse of the state’s legal system, including frivolous lawsuits and excessive settlement demands, had transformed Texas courthouses from places where neighbors could peacefully resolve disputes into forums for a seemingly endless flow of questionable claims. They also significantly decreased the number of physicians practicing in the state due to skyrocketing malpractice insurance premiums.

Over several decades, Texas had developed a well-deserved but unfortunate reputation for big jury verdicts in frivolous lawsuits against the businesses that provided jobs and created prosperity for Texans. As a result, businesses were leaving Texas while those that stayed were reluctant to expand or invest in their operations. These constraints cost Texas jobs and diminished our economy’s ability to grow and benefit Texas citizens.

Economists estimated that as a result of frivolous lawsuits the average family was paying $2,600 per year in higher prices embedded into the costs of the goods and services. This “tort tax” siphoned money out of the economy that was needed to create jobs and fuel economic growth. Eliminating part of that tort tax would essentially be like giving every Texan a pay raise.

Action / Initiative

In 2003, Gov. Perry led the effort to pass sweeping lawsuit reforms so that innocent employers could put their money into job growth rather than damage awards. In 2005, Gov. Perry signed a law cracking down on junk asbestos claims that were forcing innocent employers into bankruptcy and putting thousands of people out of work. He also signed a law to prevent trial lawyers from suing restaurants on the charge of obesity-related health problems, and another to stop venue-shopping which had allowed lawyers to sue dredging companies in hostile forums hundreds of miles away from the site of their operations. A leading economist projected that 240,000 new jobs would eventually be created as a result of these reforms.

Key provisions of the 2003 reforms include:

  • Defendants can appeal class certification directly to the Texas Supreme Court to decide up front, not after years of costly litigation, if the plaintiff has a class action.
  • Law ensures that lawyers are paid in coupons if clients in a class-action suit get paid in coupons.
  • A new standard to ensure sued parties pay only their proportionate responsibility.
  • Reformed product liability laws so retailers are not liable for a manufacturer’s mistake.
  • Enacted liability limits for good Samaritans, volunteer firefighters, charity volunteers and teachers.
  • Closed loopholes that allowed trial lawyers to venue shop.

The Outcome

As a direct result of Texas’ tort reform efforts, filings of frivolous lawsuits have been vastly reduced, allowing employers to put their money into economic growth and creating jobs rather than litigation.

Tort reform has improved access to medical care in Texas, particularly in underserved areas, and has removed a large threat to job creation and economic growth that had been created by excessive litigation.

The Texas reforms, combined with Governor Perry’s emphasis on economic development, have helped foster an environment of job growth, economic opportunity and prosperity for the people of Texas. In fact, last year Texas created more jobs than any other state in the nation, and is consistently ranked the best place in the country to do business.