America’s small businesses are vital employers, and they’re essential to the character and health of communities of all sizes. Unfortunately, they are also uniquely exposed to the costs of the litigation system. According to research commissioned by ILR and performed by the Brattle Group, businesses making $10 million or less annually account for just 20 percent of commercial revenues, but they bear 48 percent of the commercial tort costs—amounting to an estimated $160 billion in 2021.
The disparity is even more glaring when comparing the smallest and largest businesses. For every thousand dollars of revenue earned, businesses making $1 million or less can expect to face about $35 in tort costs. By contrast, businesses making $50 million or more incur less than five dollars in tort costs for every thousand dollars earned. In other words, the smallest businesses face seven times the tort costs of the largest in proportion to revenue.
Policymakers recognize the importance of empowering small businesses, and they have a stake in protecting them from excessive tort costs that fall disproportionately on their shoulders.
