Small businesses face rising risk of litigation from Canadians

Canadians are getting more litigious, and that means small business owners face a heightened risk of legal disputes, according to a recent survey by Zensurance. 

The majority (69.3%) of Canadian consumers say they’d sue a small business if they were injured in a slip-and-fall accident, and 84.7% would sue for damages if involved in an auto accident with a business’ vehicle, per survey responses from 1,000 Canadian consumers.  

Other data confirms the risk is real. Seventy per cent of Canadian small businesses reported dealing with at least one legal dispute in the last three years when surveyed in 2023 — an increase of 230% over a 2015 survey, according to research from ARAG Legal Solutions, previously reported in Canadian Underwriter.  

If they didn’t have to pay a lawyer unless they won the lawsuit, Canadians tell the Zensurance survey they would be most likely to sue a small business for the following reasons: 

• An injury after an auto accident with a business vehicle (14.86%) 
• An injury or property damage from a product they bought (14.67%) 
• If a small business or contractor made a mistake that damaged their property (13.68%) 
• Suffering an injury after a slip and fall on a business’ premises (13.07%) 
• If a health and wellness practitioner’s advice or treatment caused them pain or cost them money (10.70%). 

Those results come in tandem with one-third (33%) of respondents saying it’s ‘un-Canadian’ to sue a small business owner. That said, 66.9% of respondents believe Canadians are less likely to launch a civil lawsuit compared to their U.S. neighbours.  

Yet, legal observers note, litigation trends in Canada tend to closely  follow those seen in the U.S. That’s been substantiated by experts reporting on cyber tracking litigation, ESG action, and PFAS litigation trends, to name a few. 

As for which provincial residents are most likely to launch a lawsuit against small businesses, surveyed Canadians say Ontario (51.2%) takes the lead, followed by Quebec (15.5%), Alberta (11%) and British Columbia (10.3%). 

Insurance implications 

Facing a lawsuit can lead to financial and reputational impacts for small businesses. This differs from large commercial operations, which generally are better able able to weather an individual lawsuit or class action.  

To that point, 69.8% of respondents say they wouldn’t consider a small business owner’s financial stability in their decision to sue. 

Nearly half (48%) of business owners in a 2023 Zensurance Small Business survey said they didn’t have insurance because they didn’t believe there was potential for costly losses or damages to their businesses. 

“A single lawsuit — even a frivolous one without merit — can cost a self-employed professional, side hustler, or business owner thousands of dollars to defend themselves,” a Zensurance blog post reads.  

“A comprehensive commercial insurance policy can help protect business owners from a broad range of expensive damages, including the threat of legal action against them.” 

Feature image by iStock.com/RapidEye