Liability

1. 1

   Sixteen (16) percent of small-business owners are “very” concerned and another 31 percent are “somewhat” concerned that they will be defendants in a liability suit in the next few years. The primary reasons for their fear are the vulnerability of their industry to suits, they can be dragged into suits in which they have little or no responsibility, and suits occur frequently. However, 36 percent are “not too” concerned and 17 percent are “not at all” concerned. Those not concerned cite steps they have taken to minimize a suit and the belief that a suit is only a remote possibility.

2. 2

   Eleven (11) percent of small-business owners were defendants in a liability suit during the past five years. The incidence is virtually identical to that reported by a similar sample of owners in 1995. There effectively has been no change in the frequency of liability suits filed against small businesses, at least in the last decade.

3. 3

   The most common types of liability suits filed against small businesses are product or professional liability and personal injury, i.e., premise liability. A customer is the most likely person to bring the suit.

4. 4

   Most cases do not go to court. By a 9 to 1 margin, they are settled before trial. However, many small-business owners are disappointed. About half feel that they are pushed into settlement by their insurer when they would prefer to fight.

5. 5

   Fourteen (14) percent of those not sued have received a credible threat of a liability suit over the last five years. The nature of the case threatened and the position of people threatening them are similar to those filing suit. The exception is premise liability where suits are filed with much greater frequency than are threats made. In total, nearly one-quarter of small employers in the last five years have either been sued or credibility threatened with a liability suit.

6. 6

   Over 20 percent report that they spend more time on liability problems and potential liability problems than such vital business activities as introducing new technologies or processes, evaluating changes in employee wages and benefits, obtaining or repaying business loans, evaluating the competition or looking for ways to cut costs.

7. 7

   Most small businessmen and women take multiple steps to protect themselves against the consequences of a liability suit. Among the most common are educating employees about ways to prevent a suit, checking with insurance agents or brokers about the adequacy of insurance, and seeking legal advice. Less common are changing products, services or operations to limit exposure or to withhold them for fear of a suit.

8. 8

   Just 3 percent of small-business owners have filed a liability suit against someone else in the last five years, practically the same percentage who said they did so in a 1995 poll. Small businessmen and women are about four times as likely to be defendants in a liability suit as a plaintiff.

9. 9

   Small employers believe that liability law tilts in favor of plaintiffs. Fifty-eight (58) percent claim that the law leans toward those suing others; 5 percent claim it leans toward those being sued – an 11 to 1 ratio. Just 21 percent believe the law is balanced between the interests of plaintiffs and defendants. Sixteen (16) percent don’t know.
   
   • Small-business owners located in states having a more positive climate for conduct of liability suits experience fewer suits both as a defendant and as a plaintiff.

Volume 2, Issue 2, 2002
ISSN 1534-8326

William J. Dennis, Jr.
NFIB Research Foundation

• 4Within the last five years, has the business or you as the responsible person for the business been sued in a LIABILITY case? Top 100
• 5Within the last five years, has anyone made a credible threat to bring a LIABILITY suit against the business or you as the person responsible for the business? Top 100
• 6Within the last five years, have you as the person responsible for the business or the business filed a LIABILITY suit against another party? Top 100
• 1How concerned are you that in the next few years, your business or you as the responsible person for the business might be sued in a liability case? Are you very concerned, somewhat concerned, not too concerned or not at all concerned?
• 1aWhich BEST describes the reason you are concerned about the possibility of a liability suit?
• 1bWhich BEST describes the reason you are not concerned about the possibility of a liability suit?
• 2Do you believe that the liability laws properly balance the interest of those who sue others and those who defend themselves in a liability suit?
• 2aWhich side does the law favor? Do you feel that way strongly or not strongly?
• 3A(time allocation compared to liability) Introducing new technologies or processes into your business
• 3B(time allocation compared to liability) Evaluating possible changes in employee wages or benefits
• 3C(time allocation compared to liability) Obtaining or repaying business loans
• 3D(time allocation compared to liability) Evaluating competitors
• 3E(time allocation compared to liability) Looking for ways to cut costs
• 4aHow many times in the last five years?
• 4bWho sued you? Was it a:?
• 4cWhat kind of liability suit was it?
• 4dWas it a so-called “class action” suit, i.e., a suit brought by several people together against you?
• 4eWere you the only business sued or were there other businesses also sued in the case?
• 4fDid the case go to court? Was it settled out of court? Or, is it still pending?
• 4f1Did you want to settle or did the insurance company push you into settling?
• 4gWere you very satisfied, somewhat satisfied, not too satisfied, or not at all satisfied with the outcome?
• 4hDid you have insurance to help cover the cost of the suit?
• 4h1Excluding any amount your insurance paid, what (was/has been) the total cost of the suit to you?
• 5aHow many times?
• 5bWho threatened you? Was it a:?
• 5cWhat kind of liability suit was threatened?
• 5dHow much has the threatened suit cost you out-of-pocket to this point?
• 7A(liability-related actions) Sought legal advice on how to protect yourself or your business from a liability suit
• 7B(liability-related actions) Changed operations, products, or services to limit your exposure to liability suits
• 7C(liability-related actions) Educated or talked to your employees about ways to avoid liability suits
• 7D(liability-related actions) Sought legal advice on how to bring a liability suit against a party
• 7E(liability-related actions) Withheld or failed to develop or market products or services to limit your exposure to liability suits
• 7F(liability-related actions) Talked to an insurance agent or broker about the adequacy of your liability coverage
• 8Within the last two years, has an insurance company providing you liability coverage of any kind stopped selling liability insurance?