Many companies have cleverly used celebrities in their advertising and others that swear by influencers (although that can be a total waste).

But what do you do when association with that famous (or quasi-famous) person turns into a fiasco? When bad boy/girl behavior, no matter what the person's biological age--or far, far worse--becomes scandalous by its own existence and then amplified through the miracle of social media? Call your broker--insurance broker, that is.

A startup called SpottedRisk is a new entry into the field of "disgrace insurance." They use their data to rank how likely it is for someone to be a problem and how bad an incident might be. Then they set insurance rates accordingly.

Companies have had to find new ways to deal with the outrageous behavior of people they work with but who are uncontrolled and uncontrollable. For example, there's the growing popularity of Weinstein clauses in mergers and acquisitions work. The company will buy yours, but you put money into an escrow fund in case it finds out that one of your executives becomes a poster child for #MeToo, because, wow, is it going to want a discount in that case.

Morals clauses are old in personal service contracts, especially in the media where public exposure--uh, given the nature of many scandals, maybe let's leave it at notoriety--can cost a company. If you're producing a movie and your actor, writer, director, or other important personage is found to have been a close confidant of Jeffrey Epstein, you might quickly want to boot the person. A morals clause lets you fire given the circumstances.

Examples of problems are more frequent than you might think (or maybe not). Like when New York Times reporters Maggie Haberman and Glenn Thrush saw their book deal blow up because of #MeToo allegations against Thrush. The publisher kicked Thrush off the team and ultimately got half the advance back from Haberman, who didn't continue with another co-author, but not Thrush, because the contract let him walk away with his part. Or when Sony Music dropped R Kelly after the release of a controversial documentary and the sexual abuse charges against the rapper. A lot of sales, and resulting revenue, went down the drain.

A morals clause doesn't help with the costs that result. You might scuttle a project completely or just delay it, but the costs in either case can easily run into big bucks.

Or what if you hired someone as the front for a big marketing campaign, the fit hits the shan, and your company has egg, or worse, dripping off its collective face? Reportedly that recently happened when Canon dropped one of its brand ambassadors over a controversial tweet upbraiding Hispanic presidential candidate and former Secretary of HUD Julián Castro for not speaking Spanish fluently. The camera company supposedly didn't want to risk a consumer boycott.

The stakes are high in business. With current moods and the prevailing potential for social media pile-ons that then drive broader coverage, one slip can turn into an avalanche. What happens if your company faces something like this and the boycott occurs?

This is where disgrace insurance kicks in. As with any type of insurance, you spend the money hoping you'll never need to collect. But, like a house insurance policy that covers fire, when a blaze burns the domicile to the ground, you want the money to keep a roof over your head.

That's disgrace insurance. Totally different from reputation repair, where service providers try to make you appear better by engineering a flood of information to push that negative stories far enough down on Google--at least a few pages--that almost no one bothers to look. Until something kicks them up again and you find yourself in a news cycle.

Disgrace insurance is an attempt to make your company whole or at least partly compensated after someone you trusted to promote it turns around and punches through the side of your economic ship.

Here's one money saving idea: Perform due diligence up front to see whom you're dealing with. Information is often out there, and, given that SpottedRisk has this type of ranking, there may be others that do as well. Possibly not in as mathematical a form, but those on the celebrity watch can let you know when your first choice may be a bad one, given history.

Published on: Aug 15, 2019
The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.