Today’s post has nothing to do directly with information security but the article so caught my eye that I had to share it. Feel free to skip today’s post if it doesn’t interest you.

The U.S. Chamber Institute for Legal Reform recently released a report on the disproportionate share of U.S. litigation cost borne by small businesses. The full report is about 25 pages and well worth reading. The short version is:

  • Small businesses generate 64 percent of all new jobs and over half of non-farm GDP
  • Small businesses bore 81 percent of business litigation cost, yet represented only 22 percent of US business revenue
  • Small businesses pay more of their tort costs out-of-pocket rather than through insurance
  • More than one-third of surveyed small businesses had been sued – To put that number in perspective, think of any three local small businesses that you use, maybe your barber, hardware store and local laundry. Do you really think that one of every three is so evil that the only way to resolve the complaint was to go to court?
  • 62% reported making business decisions in order to avoid lawsuits and that these decisions made their products and services more expensive. 45% pulled a product or service off the market just out of fear of lawsuits and 11% have had to lay off employees as a result of lawsuits
  • For medical businesses, it’s even worse. Tort liability is 94 percent of all medical malpractice litigation for small medical practices and small medical labs. This is driving the medical profession away from small practices and toward large hospital-based and health system-based groups. In just three years, from 2005-2008, small groups dropped from two-thirds of all practices to less than half.
  • 66% of the general public agreed with this statement: “The fear of being sued is changing American society for the worse because it’s often having the effect of discouraging people from doing the right things.”

Statistically, some few of those small businesses are bad apples who should be sued, maybe even into bankruptcy. Sometimes, that is your only recourse. But I do not believe that all businesses are inherently evil and am deeply suspicious of the way the legal profession has morphed into a legal industry over the past few decades. The more I read, the more convinced I become that tort reform is desperately needed. Some form of “loser pays” like they have in Europe would be a good first step.

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