The tort system takes down a 149-year-old ladder manufacturer
- Since its founding in 1855 the family-owned John S. Tilley Ladders Co. has churned out ladders
- in Watervliet, N.Y.
- It was profitable until a few years ago, when
--- competition from bigger companies using foreign labor, like Werner Co., became unbearable.
- But that wasn’t the only problem:
--- The last straw was the tort legal system
- The nation’s oldest ladder manufacturer filed for Chapter 11 bankruptcy protection last April
--- sold off most of its assets at a public auction last December and
--- will soon close on its factory complex
--- one of the buildings was built by the Tilley family before the Civil War.
A decade ago Tilley’s cost to buy liability insurance was 6% of sales
- At the end it had topped 29.4% of sales
- The stiff competition prevented the company from raising prices to make up the difference.
- The irony here is that Tilley wasn’t even sued all that much.
- Claims asserting defects in construction averaged only 1/a year and
- were usually settled by exchanging a customer’s ladder for a new one,
- according to Robert G. Howland, whose great-great-grandfather John Tilley founded the company.
- And Howland says the company never lost any of the few cases that went to trial over the years
- “We could see the handwriting on the wall and just want to end this whole thing,” says Howland.
Tilley was bearing the burden for the national jump in jury awards
- in all product-liability cases
- from an average of $1.7 million in 1994 to $6 million in 2002.
- “Unfortunately, even insureds with perfect loss records are impacted”
- says Craig D. Simon, managing director of insurance brokerage firm Willis Group Holdings.
- “This affects virtually every manufacturer of consumer goods”
- Or as Sean McBride of the U.S. Chamber of Commerce’s Institute for Legal Reform puts it:
- “The problem for small, family-owned businesses, like Tilley Ladders, is that
- if the death tax does not get you, the unscrupulous trial lawyers will”
The company’s bankruptcy filing shows:
--- $810,000 in assets and
--- $182,000 in liabilities.
- The assets will be held in a trust fund for future liability claims.
- Robert J. Rock, Tilley’s bankruptcy attorney, doubts any future claimant could win a case because of the ladders’ quality.
- But, he says, that won’t stop people from suing
- meaning the funds in the trust will likely end up paying the lawyers