New Insurance Helps You Put Up A Fight

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Until recently, if a small businessman was faced with a lawsuit not covered by traditional liability insurance, he had two options: He could settle out of court, or he could spend a small fortune on litigation. Now, however, ISU Companies, a California-based franchiser of independent insurance agents and brokers, has introduced a third option, which it calls defense and judgment (D&J) insurance.

D&J insurance is aimed specifically at small companies with fewer than 100 employees. Underwritten by Lloyd's of London, it provides coverage for legal problems or in legal areas such as discrimination and sexual harassment charges, tax audits, and regulatory disputes.

The insurance "has a universal and broad appeal," says ISU chairman and president Thomas J. Ryan. "It will give small businessmen the opportunity to resist the bullying of the plaintiffs," he notes.

Traditional liability insurance usually covers personal injury or property damage. "Businesses have a lot of risks that don't fall under either category," says Hatti Hamlin, assistant vice-president of communications at ISU. The insurance companies' view has been "that's the price one pays for being in business," she adds.

D&J insurance, however, gives a company the choice of fighting a lawsuit in court without worrying about financial ruin. Premiums start at $450 per year for $5,000 worth of defense coverage. The defense policy covers up to $100,000 of the cost of defending a lawsuit. The judgment policy (which can't be purchased without the defense) will pay up to $50,000 of the judgment cost. Unlike other liability insurance policies, ISU's coverage allows the client to pick its own attorney.

ISU began offering the coverage last August. In the first two months of sales, it sold $350,000 worth of premiums -- approximately 200 policies -- to such customers as manufacturing firms, investment companies, and retail stores.

The insurance is currently available only in California, but Hamlin predicts that the coverage will be a "classic of the industry." After all, she says, "small businessmen are extremely independent. They hate to walk away from a fight if they think they're right. D&J gives them the option of being right and proving it."