Sure-Grip International Corp., an $8-million manufacturer of roller skates and skateboards in South Gate, Calif., got some depressing news this year from its insurance broker. The company's annual premiums for product-liability insurance would jump almost 250% in 1986 -- from $12,000 to more than $40,000. In response, Sure-Grip's president, Harry Ball, got rid of product-liability insurance altogether. Now, any successful claim against a Sure-Grip product must be paid from the company's own coffers.
In insurance lingo, this is called "going bare," and it can be a dangerous way to do business. But by Ball's way of thinking, it's the only rational response to an absurd situation.
"I refuse to pay that kind of money for insurance," says Ball, 67, brushing a hand over his tidy silver widow's peak. "I remember, in the early 1970s, when I paid about $3,000 a year for product-liability insurance. Now I can't get a sensible rate, and the cost eats into my profits. I don't have the option to raise prices, because roller skates shipped over here by the Taiwanese are giving me serious competition. We'll keep the rest of our insurance, like fire, because it has remained reasonable. But I'm not spending another dime for product liability."
Ball is betting that, if potential plaintiffs realize that Sure-Grip has no liability insurance, they will be hesitant to sue. He subscribes to the "deep pockets" theory, which holds that lawyers in liability cases zero in on the party with the most ability to pay.
Ball bitterly recounts one such case recently brought against his company. "A woman was skating on our roller skates down a sidewalk in Beverly Hills, when she hit an upheaval and broke her ankle," he says. "She sued the city for not maintaining the side-walk properly. The city, in turn, got a couple of sharp lawyers who sued us because the woman had been skating on one of our low-top skates, and we had failed to issue some sort of warning that people should use high-top skates for better protection. Part of the lawsuit was her contention that she had been caused sexual anguish. The case dragged on for five years, and it was a horror show. Finally, last year, the whole thing was settled out of court. Our insurance company ended up having to pay her $45,000. Now, I ask you, has product liability gotten out of hand, or what?"
Product liability may, indeed, have gotten out of hand, and Ball knows it would take only one major lawsuit to destroy his business. Therefore, like most companies that go without product-liability insurance, Sure-Grip has placed a renewed emphasis on quality control. "We're going to start making more checks on every unit before it's shipped out," says Harry's son James Ball, head of production. He gestures toward boxes of gaily colored roller skate wheels and components that sit ready for assembly on the company's production line. "And I'm holding weekly meetings with all of our workers," he continues, "to discuss issues that relate to quality. I've got to stress to everybody here that quality is now the key to our company's survival."
Harry underscores his son's words. "We'll have more hours of testing," he says. "We'll hire more local hot shots to test our equipment on the streets and in the rinks. We'll have closer scrutiny on the production line. Instead of checking something twice, we'll check it three times, four times. We'll live through it, I suppose. But now that I'm bare, I'm thinking about it all the time. I just can't relax. If Sure-Grip ever gets slapped with a massive lawsuit, it would mean going Chapter 11."