News From the
Committee on Small Business
Nydia M. Velázquez, Chairwoman

For Immediate Release
May 17, 2007

CONTACT: Kate Gilman/ Austin Bonner,  (202) 225-4038

Small Businesses Need Balance in Civil Liability System

WASHINGTON – Today, trade associations and reform advocates discussed the factors that are driving up liability insurance costs for small businesses, including company practices and litigation expenses. The House Small Business Committee examined the challenges small businesses are facing in navigating the current liability system and looked at possible improvements that will reduce costs, while protecting small firms and consumers.

“Because any changes to liability protections impact small businesses, they must have a seat at the table as reform is debated,” said Chairwoman Nydia M. Velázquez. “Small business owners want a civil liability system that weeds out bad actors and unsafe products so they can compete fairly. Today’s discussion looked at what changes would be helpful in ensuring that safeguards for small businesses are maintained.”

Although small firms do not place liability reform among their top issues—cost and frequency of law suits ranked 64 out of 75 small business problems in a National Federation of Independent Business (NFIB) survey—it does present a broad range of considerations.  Small businesses have interests on both sides of civil liability litigation. Attempts to limit costs by barring some claims may have the unintended consequence of creating further negative impacts for entrepreneurs that have been legitimately harmed.   For these reasons, it is clear that small businesses must be protected under any reforms.

“Instead of taking a heavy-handed approach to this issue, we should create a balanced, equitable system that will account for all the needs of small businesses,” said Chairwoman Velázquez. “Entrepreneurs need an open and predictable tort system that they can rely on.”

During the hearing, testimony focused on the need to look at the broad range of factors contributing to unnecessary civil liability costs. In the NFIB survey mentioned above, small business owners reported serious concerns about the cost of insurance. The experiences of states such as Texas have demonstrated that caps and other damage limits alone will not control litigation costs; instead, liability changes must be coupled with insurance reform that protects small businesses.  At the same time, the ability of civil courts to incentivize manufacturers to produce the safest products possible and deter negligent producers must be preserved in order to provide assurance to consumers, including small firms.  

“With so many factors driving costs, we cannot take a piecemeal approach to reform,” said Nydia M. Velázquez. “We will consider all of these factors as we work to create a fair, accessible system that considers small business needs and does not create additional burdens.”

The committee continues to look at the unique impacts that tax and regulatory burdens, as well as compliance costs throughout the government are having on small business.

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