Lawsuits Cost Small Businesses Big Bucks

WASHINGTON — A new study released by the U.S. Chamber Institute for Legal Reform (ILR) shows that small businesses shoulder a tremendous burden of the nation’s tort liability costs, having paid $105.4 billion in 2008.  

Noting that small businesses have created 64% of all net new jobs in the United States over the past 15 years, ILR President Lisa Rickard said, “As America struggles out of this current economic downturn, this study shows that our lawsuit system continues to be a drag on job-creating small businesses.”
 
The study, Tort Liability Costs for Small Businesses, conducted for ILR by NERA Economic Consulting, also found that small businesses (those with $10 million or less in annual revenue) paid, collectively, $35.6 billion out-of-pocket rather than through insurance.

Additionally, the NERA study examined the enormous costs of the medical liability system for doctors in small groups and small medical labs. For these small businesses, the liability price tag totaled $28 billion in 2008. When medical malpractice costs were added to all other tort liability costs, the total for small businesses was $133.4 billion.

Unfortunately for U.S. small businesses, their litigation liability costs are expected to continue to grow. NERA forecasts that by 2011, small businesses, including small medical businesses, will be paying $152 billion in tort costs. “Our lawsuit system is increasingly burdening owners, workers and our entire economy,”  Rickard continued. “Regrettably, next year’s escalating lawsuit costs will be arriving at the worst possible time for small businesses operating on razor thin margins and straining to keep their workers employed.”

Tort Liability Costs for Small Businesses is available athttp://www.instituteforlegalreform.com/images/stories/documents/pdf/research/ilr_small_business_2010.pdf.

ILR seeks to promote civil justice reform through legislative, political, judicial, and educational activities at the national, state, and local levels.

The U.S. Chamber of Commerce is the world’s largest business federation representing the interests of more than 3 million businesses of all sizes, sectors, and regions, as well as state and local chambers and industry associations.