Lawsuits Target Small Business
U.S. Chamber Shares New Data With Congress
Small business owners bear the brunt of the nation's tort costs, and the mere threat of lawsuits is a factor in their decisions to lay off workers and raise prices, according to research released by the U.S. Chamber's Institute for Legal Reform (ILR).
Businesses with $10 million or less in annual revenue pay $98 billion in tort liability costs per year, a study by ILR and NERA Economic Consulting points out. The study also found that businesses with $1 million or less in annual revenue pay $31 billion, and two-thirds of those costs are covered out of pocket, not through insurance.
During testimony before the House Small Business Committee on May 17, ILR President Lisa Rickard said, "America's small businesses are paying a high price for our broken lawsuit system in the form of lost opportunities to expand their businesses." Rickard called on Congress to pass legislation to limit punitive damages in liability cases against small businesses and protect innocent product sellers from liability when the manufacturer is directly responsible for harm.
A separate survey commissioned by ILR and conducted by Harris Interactive® shows that 8 in 10 small and midsize business owners believe that lawsuits or the threat of them have increased.
The Harris survey also shows that more than three-quarters of small business owners are concerned about the threat of unfair lawsuits, and nearly half say frivolous or unfair lawsuits are a major or somewhat of a major problem.
Sixty-two percent said that the threat of lawsuits factors into their decisions to raise prices, reduce employee benefits, or lay off employees.
Fact Sheet
Litigation and Small Businesses
- Small and midsize businesses pay $98 billion annually in tort liability costs. Those with $1 million or less in annual revenue pay $31 billion a year.
- More than three-quarters of small business owners say they are concerned about the threat of unfair lawsuits.
- Eight out of 10 say that lawsuits or the threat of them have increased.
- Sixty-two percent say that the threat of lawsuits factors into their business decisions.
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