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26% of companies target of employee lawsuit: Chubb


May 25, 2004   by Canadian Underwriter


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One-in-four privately held companies has been the target of an employee lawsuit in the past few years, according to a new study by New Jersey-based Chubb Group.
In fact, 44% of the companies surveyed said they expect to be the target of such a suit this year, suggests data from the Chubb 2004 Private Company Risk Survey.
While 26% of companies had been sued by a current or former employee, 22% had faced a complaint of discrimination filed against them. Another 50% say they expect to be on the receiving end of such a complaint in 2004.
Companies are putting a significant price tag on these suits, as well, judging it would cost more than US$100,000 to settle a discrimination or harassment suit. A full 10% said settlement could run as high as US$1 million.
Employee benefits-based suits by retired employees are also on the minds of corporations, with about 25% saying such a suit is likely to be filed against the company, its directors and officers, benefits plan administrators and/or fiduciaries.
To stem the tide of these lawsuits, companies are looking to insurance for fiduciary liability and employment practices liability. Companies are also writing formal policies banning discrimination and harassment in the workplace. Just over half of companies surveyed also offer training on discrimination and harassment in the workplace.
“Companies that do not prudently manage these risks leave themselves and their directors and officers vulnerable,” says Lisa McGhee, vice president of Chubb & Son. She says this is particularly true for small companies who may not be prepared for the financial shock of such a lawsuit.