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Texas approves 'loser pays' reform for lawsuits

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Texas Governor Rick Perry recently signed his approval for the state's "loser pays" bill, which will require any party that a court case rules against to pay for the other's court fees.

The intention of this reform is to reduce the significant amount of cases being brought to court, many of which are considered low-merit and frivolous.

For small businesses, this reform isn't necessarily a good move, however. According to the National Federation of Independent Businesses, litigation costs totaled more than $105 billion annually for small businesses. Furthermore, one-third of these costs are paid by the small business' owner.

Now, because of the potentially high costs involved with a lawsuit, larger companies can threaten smaller businesses with court cases in an effort to dissuade them. Furthermore, in cases with the law is not entirely clear, small businesses run the chance of having to pay exorbitant amounts, even if they wanted to file the lawsuit in the first place.

Thus, for small businesses, having an increased amount of professional liability insurance might soon become a necessity if they want to both protect themselves from lawsuits in the future. 

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