Small Businesses Paying the Price for Tort Liability

If you are a small business owner, are you finding your contributions to the country's tort liability costs seemingly increasing all the time?

According to a new study from the U.S. Chamber of Commerce, small businesses take on a sizable portion of the nation's tort liability expenses, having paid just over $105 billion in 2008, a third of it out of their own wallets.

The report goes on to note that small businesses took on 81 percent of business tort liability costs for 2008, however only brought in 22 percent of revenue.

The study, Tort Liability Costs for Small Businesses, also notes that small businesses ($10 million or less in annual revenue) paid, collectively, nearly $36 billion of these costs out-of-pocket as opposed to through insurance. The report was conducted for the Chamber's Institute for Legal Reform (ILR) via NERA Economic Consulting.

Pointing out that small businesses have been behind nearly 65 percent of all net new jobs in the country over the last 15 years, ILR'S president noted that the tort system is resulting in a loss of jobs. According to her, "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.'

In its study, NERA also examined the expenses of the medical liability system for doctors in small groups and small medical labs.

When it comes to those small businesses, the liability price tag added up to $28 billion for 2008. That figure was 94 percent of total costs of medical malpractice ($29.8 billion). When medical malpractice costs are added to all remaining tort liability expenses, the final figure for small businesses hits $133.4 billion.

The report goes on to note that litigation liability expenses for small businesses are likely going to keep on growing.

NERA forecasts that by next year (2011), small businesses, including small medical businesses, will be shelling out $152 billion in tort costs.

According to ILR's president, "Our lawsuit system is increasingly burdening owners, workers and our entire economy. 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.'

If you are a small business owner and looking for the right insurance solution be sure to shop around and get several quotes.

Working with an independent agent will also enhance your opportunities to receive different prices and coverage options; hopefully one that fits your needs.