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October 21, 2020

New Study Shows Small Businesses Shoulder Disproportionate Amount Of Commercial Tort Costs

ILR’s newest study Tort Liability Costs for Small Businesses shows that the U.S. tort system’s commercial liability costs totaled $343 billion in 2018, and small businesses shouldered $182 billion, or 53 percent, of those costs.  

The cost of our tort system is having a major impact on businesses that are forced to spend hundreds of thousands of dollars fighting lawsuits. Every dollar that goes to pay for legal bills is a dollar that small business owners can’t spend on hiring, expanding, or making new products.  

“This year brought additional challenges for every small business owner, and excessive lawsuits shouldn’t continue to be one of them,” explained Harold Kim, president of the U.S. Chamber Institute for Legal Reform. “Our economic recovery depends on the health and growth of small businesses, and lawmakers must do everything they can to protect against high liability costs.”

Tort Liability Costs for Small Businesses also found that the smaller the business, the higher the liability burden. The smallest businesses—those with under $1 million in annual revenue—bore 39 percent of the liability costs. That’s more than the 37 percent borne by businesses with over $50 million in revenue, and on a per-dollar-of-revenue basis, it’s ten times as high.  

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