Private Firm Execs Fear Lawsuit Potential

May 25, 2004 ( - A quarter of all privately held companies have been slapped by an employee lawsuit over the last few years, a new survey found.

Executives at as many as half the firms surveyed by the Chubb Group of Insurance Companies say it is likely that an employee may sue them, their board members, and their companies and/or lodge a discrimination complaint with federal or state authorities this year, according to a news release. Nearly a third believe that an allegation or actual case of wrongful termination, discrimination or harassment could hurt them financially or do other kinds of serious damage to their company.

According to The Chubb 2004 Private Company Risk Survey, just over a quarter (26%) of executives at privately held firms reported that their company had been sued by an employee or former employee, and 22% reported having an employee file a discrimination or harassment complaint with the Equal Employment Opportunity Commission (EEOC) or state agency during the past 24 months.

“Executives at many private companies realize that they are vulnerable to lawsuits from employees and former employees,” said Lisa McGee, a vice president at Chubb & Son and Private Company Customer Group manager, in the announcement. “They are concerned – and rightly so – about the cost to defend against these lawsuits and the potential losses.”

More than half the executives surveyed estimated it would cost more than $100,000 to settle an employment discrimination or harassment lawsuit while 10% said it could cost as much as $1 million. Private company executives surveyed said they are also concerned about lawsuits from retired employees. Nearly one-fourth of the executives surveyed report that it is likely a retiree will sue the company, its directors and officers, and/or its benefits plan administrators and fiduciaries in 2004.

Impulse Research Corp., a market research firm in Los Angeles, conducted the survey. The firm interviewed the CEO, CFO, and other top officers at 300 privately held companies.