Starting a business takes creativity. Insurance exists to put that creativity into action. That’s what we do as cheerleaders for members of our local business community — we take a chance on dreamers. Unfortunately, New York’s lawsuit-friendly laws have spawned a cottage industry for lawyers and litigation funders, which erodes the integrity of the insurance safety net and makes it increasingly difficult for entrepreneurs to turn their dreams into reality.
New York has long been known as one of the most litigious states in the nation. Rather than simply resolve legitimate disputes, our unique state laws with expansive liability standards create opportunities for speculative lawsuits and oversized settlements.
New York’s liability climate fuels our swirling affordability crisis
This hostile liability climate is a contributing factor to New York’s growing affordability crisis. As household budgets shrink, our Main Street businesses see lower revenues while their own operating costs balloon. If Albany wants to tackle these issues in 2026, it should focus on fixing the drivers of excessive liability — third-party litigation funding chief among them.
Third-party litigation funding allows firms with no stake in a case to provide financing in exchange for a share of any settlement or judgment. It is marketed as a way to help plaintiffs who may need to cover expenses while their case makes its way through the courts, but in reality, without the proper guardrails and transparency, it gives outside funders too much influence over our legal system — encouraging prolonged litigation, discouraging reasonable settlements and inflating damages far beyond actual losses.
All too often these arrangements operate in the dark, undisclosed to defendants and judges, leaving no way to know what financial incentives are driving decisions in a case. The result is longer timelines, higher payouts and more speculative lawsuits, all of which translate directly to higher costs for both businesses and consumers.
Of course, individual suits weigh heavily on the companies they entangl e— especially small businesses. That is often by design. Lawyers frequently target smaller, more vulnerable companies, expecting them to settle rather than incur ruinous legal costs. In fact, firms with revenues under $10 million absorb nearly half of all litigation-related business costs, despite representing a much smaller share of total revenue.
It may be perceived that larger corporations are able to absorb these added costs, but smaller, community-based shops do not have that luxury. Whether it is a large corporation or a small business, companies are forced to pass costs along to their customers. They may need to raise prices on their products, cut employee hours or even close their doors— not because they want to, but because they cannot afford to do otherwise.
The result is predictable: consumers pay more, hiring and wage growth decline, medical bills rise and supply chains strain. Small businesses have a harder time making ends meet, and local economies are worse off.
How can New York fix its lawsuit crisis?
Luckily, this problem is fixable. The Empire State may currently allow lawsuit financiers to operate in the shadows, but it does not have to remain that way. Gov. Kathy Hochul and the Legislature have already taken a critical step forward by enacting the Consumer Litigation Funding Act, which brings some consumer protections and guardrails to the lawsuit-financing industry. The next critical step is mandating disclosure of funding contracts to both judges and defendants.
Requiring disclosure of litigation funding will increase fairness and expose potential conflicts of interest and fraud. Transparency ensures that discovery is conducted on equal terms, that recently enacted regulations can be properly enforced, and that once-hidden financial incentives will no longer secretly warp the legal process.Lawmakers need to ensure that liability is not further expanded. Each year, bills in New York are advanced to create new levers for law firms to profit while doing little for consumers and the public. Albany should put families and small businesses first by pursuing liability reform, not by expanding lawsuits or creating new opportunities for attorney-driven litigation.
Reforming our liability system strikes at the root of the growing cost crisis. It’s time for lawmakers to fix the laws and legal standards that attract questionable and baseless lawsuits, inflate settlements and make everything more expensive. New York needs a legal system where litigation is fair, predictable and transparent, so that the threat of liability doesn’t dictate whether small business owners can realize their dreams and find success in the Empire State.
Siobhan Davey is the chair of the New York Insurance Association and president and CEO of Broome Co-operative Insurance Company, or BCIC. BCIC is a regional property and casualty insurance company located in Vestal, New York, that writes personal and business insurance throughout New York State.
This article originally appeared on Binghamton Press & Sun-Bulletin: NY’s excessive litigation culture crushes small businesses | Opinion
Reporting by Siobhan Davey, Special to the USA TODAY Network / Binghamton Press & Sun-Bulletin
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