A small business usually does not have insurance for this, and the cost of making it right comes out of the owner's pocket.

Also while I can't speak to why other people don't tip, the reasons why I (very occasionally) don't are usually under the server's control. Even if the immediate cause of my unhappiness was not under their control, they had the option of acknowledging the problem and offering an apology. It takes a lot to lose my tip.