Lawsuit abuse hits the little guy hardest
Published 12:24 am Friday, October 3, 2008
While enterprising personal injury lawyers may want us to think it is “big business” that shells out billions in lawsuit settlements each year, a new report shows that, in reality, shop owners, merchants and small companies are hit the hardest.
Each year, lawsuits cost our nation $233 billion, with more than half of that paid by firms struggling to compete against foreign companies with a quarter or less of their legal bills.
Now, the U.S. Chamber of Commerce Institute for Legal Reform has found that 68 percent of those business costs ($88 billion) are paid by firms with one employee and revenues of less than $10 million a year. That translates into an average of $150,000 per employer-money that would otherwise be available to hire additional workers, expand operations, develop new products, or improve health coverage for their employees and their families.
The problem is even more acute among tiny entrepreneurs with annual revenues less than $1 million. Litigation costs these folks $33 billion annually, which is an average of $17,000.
The importance of this new study is that it breaks down the legal costs by who pays. For example, Jim Mickelson of Northwest Embroidery, a small business in Fife, has a $14,000 unpaid bill from a manufacturer bankrupted because of asbestos lawsuits. But in addition to this lost income, Mickelson has to pay more each year for his liability insurance, raw materials, and transportation because his vendors are being sued.
It is an endless cycle!
Consumers are feeling the bite as well through higher prices for goods, services and their own insurance policies. In fact, those higher costs work out to $809 per person every year.
Can you imagine what a family of four could do with an extra $3,236 banked each year for their children’s college education? If allowed to accrue interest over a decade, that money would cover a year’s tuition, books, board and room at an Ivy League college for one of their children.
Keep in mind none of these costs include the additional taxes we pay because school districts, parks districts and city, county, or state governments are sued every year for billions as well.
The question is: When will lawmakers stand up and restore balance to our legal system? That’s a great question to ask those running for office this year.
No one, whether they are a small business owner, a school director, hospital administrator or doctor, wants to take away a person’s right to recover legitimate damages and be fairly compensated if they have been injured or treated unfairly, but our legal system is out of whack.
The only way to straighten it out is for Congress and the Washington State Legislature to pass legislation restoring balance and fairness to our courts.
So while the personal injury lawyers, who pocket 40 percent of the settlements, get richer, the small business owners who provide more than three-quarters of the new jobs in our country are going under. That just isn’t fair, and it is not good for our country or for working families.
Don Brunell is the President of the Association of Washington Business
