Published: August 17, 2008 10:31 pm      

INSURANCE: Small business owners try to manage higher premiums.

Turns out, New York is really a red state.

That's according to the Pacific Research Institute for Public Policy, a San Francisco-based non-profit organization that characterizes each state's litigation climate by designating one of three colors to it — red, yellow or green.

Red isn't good.

“New York's liability climate will continue to remain one of the worst in the nation,” the business magazine Directorship noted recently in its annual “Boardroom Guide to State Litigation Climates,” which is based partly on PRI’s research.

That climate is hitting some local small business owners hard, and most are already dealing with skyrocketing health insurance costs.

Not surprisingly, those added costs wind up getting passed on to consumers, who themselves are trying to make ends meet in the face of higher gasoline and home heating prices, plus bigger bills at the grocery store.

New York’s litigation climate might explain why City of Tonawanda entrepreneur Tom Will got an unwelcome surprise two months ago when he found out that his business insurance had gone up 300 percent compared to what it had been for the past four years.

Will, who owns Buffalo Choppers on Peuquet Parkway, said he had been paying approximately $125 a month. It’s now about $500 each month, and that’s despite the fact that Will hasn’t even filed any claims, whether for his business property or liability insurance.

“But you can’t operate without insurance,” Will said. “So you pay the dollar and then it gets to the point where you’ve got to start raising the cost of doing business, and the consumers end up having to absorb it. And they can’t afford it either. It’s not fair to them.”

The insurance hikes aren’t just limited to a motorcycle repair shop. St. Angelo’s Pizza in the Town of Tonawanda just saw its business insurance go up a few thousand dollars as well.

And it’s not just business insurance that’s going up, either. Most small business owners also are getting slapped with higher health insurance costs, something that Wheatfield Business Association President Tom Stevenson has been trying to raise awareness of.

His members’ health insurance premiums have increased 56 percent since January. Stevenson says it’s because New York State is an “absolute liability” state, meaning that if a worker gets hurt on a job site, the business owner is responsible for it, even if the employee was drunk or on drugs at the time of the accident.

Walter Pacholczak, government affairs director for the New York State Business Council, said liability reform is one of the top insurance issues in the state. “The biggest problem that we have in this state in terms of insurance is obviously health, workers’ compensation — those are big issues — but liability reform is right there in the top three,” he said.

“We pay for other people’s stupidity,” Stevenson added. “If they’re losing money somewhere, they’re making it up somewhere else. New York state seems to be the place they’re making it up right now.”

Rising insurance costs don’t just eat into small business owners’ profits. Stevenson’s concerned the trend is causing entrepreneurs to be lax in some of their operations. “More and more people are going without insurance,” he said.

“We’ve gotten to the point where we’re forcing people to do illegal things because we’ve raised the cost of business to the point where it’s impossible to operate legally, unless you’re a huge corporation, and even they’re struggling. Until the system is changed, there’s not much you can do about it, other than pass it on to the consumer.”

All told, the higher premiums are taking their toll on Will’s business, forcing him to install parts at a higher price than his customers are used to. It also bites into his ability to promote the business, which he does through the weekly Blues, Bikes & Barbecue event at the Lafayette Tap Room in Buffalo.

“It just hurts all the way around,” he said. “The cost of insurance in New York state is ridiculous. It sure makes it a lot harder to stay on a budget and pay bills.”