WASHINGTON, D.C. — A new economic study, Tort Costs for Small Businesses, released today by the U.S. Chamber of Commerce Institute for Legal Reform (ILR), shows that the U.S. tort system’s commercial liability costs totaled $347 billion in 2021 and that small businesses shouldered $160 billion of those costs.
The price tag of the U.S. tort system keeps skyrocketing for businesses. Tort Costs for Small Businesses also found that commercial liability costs increased 19 percent in just one year, from $291 billion in 2020 to $347 billion in 2021. Despite small businesses accounting for 20 percent of revenue earned in 2021, they bore 48 percent of commercial tort costs.
The smaller the business, the higher the liability burden. In proportion to revenue earned, the costs of the tort system are seven times greater for businesses making $1 million or less in annual revenue compared to businesses that make $50 million or more.
“The U.S. lawsuit system is disproportionately stacked against small businesses that already have enough to worry about,” said Institute for Legal Reform President Harold Kim. “Every dollar that small businesses pay into the tort system is a dollar that doesn’t go to hiring, expanding, or making new products. Lawmakers should do everything they can to protect against high liability costs.”
A new national poll conducted for ILR by Echelon Insights shows 72 percent of likely voters believe policymakers should enact legal reforms to ensure small businesses can focus on growing their business and not worry about spending time and money on litigation.
The Brattle Group conducted the economic analysis of Tort Costs for Small Businesses on behalf of ILR. The study can be downloaded and viewed here.