THE BLOG

Small Businesses' Infinitesimal 'Tort' Problem

02/11/2015 01:09 pm ET | Updated Apr 13, 2015

For years, Big Business lobby groups like the U.S. Chamber of Commerce have been advancing a legislative agenda to limit the liability of corporations that cause injuries (also known as "tort reform.") One of their principal arguments is that tort restrictions are needed to save jobs, and to allow small businesses, "the engines of job growth," to survive.

Yet internal business surveys have consistently shown this view to be utterly groundless. For years, liability issues have hardly appeared on lists of actual business concerns (as opposed to views expressed by paid lobbyists and other hired staff.) Small businesses virtually always put issues like "lawsuits" "liability" "tort reform" or the cost of "liability insurance" at the bottom of any list of concerns -- that is, if they mention them at all. They usually don't.

Perhaps the most striking example of this was the most recent survey of small business priorities conducted by the National Federation of Independent Businesses (NFIB), a major lobbying and political money force in Washington, D.C. and in states around the country. The NFIB's tag line is "protecting the future of small businesses." It lobbies heavily for tort restrictions and opposes laws that establish legal rights, like the 2009 Lilly Ledbetter equal pay law.

Yet in its 2012 survey, NFIB small business members ranked "Costs and Frequency of Lawsuits/Threatened Lawsuits" at number 71 out of a possible 75 issues, a lower rank than how to use Twitter. NFIB writes:

The 71st ranking belongs to "Cost and Frequency of Lawsuits/Threatened Lawsuits" down six positions from 2008. ... It appears this problem has not developed into something more as the ranking remains low.

In looking only at "costs" as a problem cluster, the NFIB category "Costs and Frequency of Lawsuits/Threatened Lawsuits" ranked last among cost issues. In fact, NFIB called this issue one of the 10 least severe problems for small-business owners of the 75 business problems assessed.

These results are not anomalies.

The National Small Business Association's 2013 Year End Economic Report lists the results of a survey of 1395 small business owners. They were asked: "Which of the following issues do you believe Congress and President Obama's Administration Should Address First?" Seventeen issues were listed. Tort reform was checked by a mere 1 percent of respondents. When asked about the "three most significant challenges to the future growth and survival of your business," 15 issues were listed. Neither lawsuits nor liability costs were mentioned. That means they fell below in importance the last listed category: "No Major Challenges" (which came in at 2 percent).

The National Association of Manufacturers fourth quarter 2014 survey asked businesses, "What are the top five policies manufacturers want the Administration and Congress to pursue" and what are their "Primary Current Business Challenges." None listed lawsuits, litigation, tort reform, liability costs or anything like that. Nor are these issues listed in the January 2015 Endurance International Group Survey of 850 small business owners about prospects for 2015. Same results for the Wells Fargo/Gallup Small Business Index which asked 603 small business owners about the biggest challenges they face. Nor were they mentioned in CAN Capital Small Business Health Index when businesses were asked: "What do you view as the biggest challenge when it comes to competing with big businesses? Nor were they listed when Business News Daily "asked the experts" what top 20 challenges CEOs would face this year.

The Economic Policy Institute looked at the "jobs" issue several years ago and found "[S]ignificant tort law change would be more likely to slow employment growth than to promote it. Endlessly repeating that so-called 'tort reform' will create jobs does not make it true."

Yet paid lobbyists and "spokespeople" from organizations like NFIB and the U.S. Chamber of Commerce keeping trying to make it true, despite overwhelming evidence to the contrary. I guess as Mark Twain put it, "never let the truth get in the way of a good story."