Ohio ranks 7^th in the nation by population and 5^th in the nation as home to big corporations. It’s a business-friendly state with geographically convenient access among its major population centers, the “3 C’s” (Cleveland, Columbus, Cincinnati). Solid job and consumer markets position it well for upward momentum. While opportunity knocks at Ohio’s door, with it comes the arrival of new challenges.

One consequential arrival in Ohio is bad for business - - the nuclear verdict. A nuclear verdict is a civil jury award that equals or exceeds $10 million. The jury awards are termed “nuclear”, because the amounts are extremely disproportionate to actual out-of-pocket economic losses suffered by plaintiffs.

Currently, Ohio ranks in the top 10 nationwide for nuclear verdicts. Importantly, these verdicts are not limited to deep-pocket, big business; they have made their way down to mid-sized Ohio businesses. A much less understood effect though, is “nuclear trickle-down”, which has already begun to hit the pockets of small and Main Street Ohio businesses.

What does “nuclear trickle-down” mean for your small or Main Street business?

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         Routine slip-and-fall claims may no longer be capped at real-time or reasonable medical expenses. Juries are becoming more sympathetic to alleged long-term, lifestyle deficits of the injured person and rendering awards accordingly.

         Public-facing businesses, such as restaurants and storefronts, are most susceptible to this shifting trend in Ohio. Professional offices, such as accountants, doctors, and dentists are also at increased risk.

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         Product liability exposure as participant in manufacturing chain. Ohio has a robust manufacturing economy of small machine shops, tool-and-die makers, and parts fabricators. A massive product liability defect lawsuit is likely to pull in every link connected to the product, right down to the maker and/or designer of its nuts and bolts. Defense costs alone could financially crush a small supplier.

         A similar dynamic applies to equipment installers and service providers. For example, if a piece of industrial equipment fails and causes catastrophic injury, plaintiff attorneys will bring in any local service business or repair contractor who had “contact”. At a minimum would be defense costs, perhaps due to alleged failure to properly inspect or replace a safety part during routine maintenance.

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         Product liability exposure involving anyone in the supply chain. For example, your business may have nothing to do with product design or manufacturing, but you sell or distribute a product that becomes the focus of a product liability lawsuit. Actual circumstances, such as the product manufacturer went bankrupt, or is inadequately insured, or is an untraceable foreign company, could draw your steady wholesale or retail operation into a nightmare of unsustainable legal expenses.

While nuclear trickle-down is scary, there are immediate and cost-effective measures all small businesses should consider. Examples include:

• • • Contractual agreements. Contact a qualified law office to review or amend. Contractually offload as much liability as is reasonably possible.
    • Policy additions to the manufacturer’s liability policy. If you are a supplier, consider the pros and cons of being added to the manufacturer’s policy as an Additional Named Insured vs. Additional Insured. The addition of a Vendors Endorsement to the manufacturer’s policy should provide limited protection to a supplier.
    • Higher limits on your BOP (Business Owner Policy) or Commercial General Liability insurance policy. The standard limit of $1,000,000 may be inadequate. Consider raising the limit and/or purchasing extra limits through an Umbrella Liability policy.
    • Beef up risk management. Require regular, documented training and appropriate oversight of employees. Ensure that product specifications meet industry-standard safety protocols.
    • Regularly inspect and maintain business premises.

The good news is there has never been a shortage of commercial lines insurance companies wanting to write business in Ohio, a clear indication that Ohio is a relatively “safe” state in terms of the insurance market.

Richey-Barrett Insurance is a Trusted Choice Independent Insurance Agency with years of experience serving small and Main Street Ohio businesses.