(FORTUNE Small Business) – Fireproof Insurance

These days downsizing isn't just sweeping across corporate America. Small companies are paring their staffs by as much as 15%, according to the National Federation of Independent Business. Unfortunately, the trend has resulted in a nasty backlash: a rise in the number of discrimination lawsuits filed by disgruntled ex-employees, reports the Equal Employment Opportunity Commission. The majority of the lawsuits allege race, sex, and age discrimination.

No company is immune to the wrath of workers who are fired. The only protection is employment-practices liability insurance, offered by such carriers as AIG, Chubb, and Travelers. It covers wrongful termination, harassment, and discrimination. The coverage is expensive--Chubb's ForeFront Portfolio product costs $7,000 to $30,000, depending on a company's industry, location, type of coverage, and number of employees. And it can be tailored. Besides employment-practices liability, companies can buy insurance to cover grievances against senior executives. If you think the tab for employment-practices liability insurance is high, consider this: Punitive-damage awards for such cases average about $200,000.

Venture Capital Meltdown

Venture capitalists reeling from the dot-com collapse are tightening their belts even more in the post-terrorist-attack economy. Third-quarter venture investments ended in September totaled $6.7 billion, down 72% from the same quarter a year earlier, reports VentureWire, an industry newsletter.

The capital crunch is stifling startups, as VCs turn their attention to nurturing existing investments. Companies that are still managing to get VCs to listen to their elevator pitches are in the biotechnology, data storage, and energy and wireless industries.

Short Economic Slide

The depth and breath of America's recession should not be severe. That's the prediction of Economy.com, an economic research firm whose clients include the Federal Reserve Bank. It has come up with its own forecast (see chart), which it adjusted after September's terrorist attack. As one would expect, the firm shaved 1% from its 2002 GDP growth estimates and 1.5% from its consumer-spending projections. Despite those downgrades, Economy.com expects the economic downturn to be short-lived. One reason: President Bush's economic-stimulus initiatives should spur business investment over the next 12 months in such sectors as real estate to a rate of 3%. Of course, there is a caveat: For the economy to rebound, the U.S. must make sure its war on terrorism doesn't wreak even more havoc on key industries and the financial system.

QuickBooks Grows Up

Accounting giant Intuit never wants to hear its small business customers say, "I feel like I've outgrown you. You can't fulfill my needs anymore." This fall it introduced a new version of QuickBooks to serve larger-sized companies with up to 250 employees. It is the first time the software company is targeting midsized firms. The product, QuickBooks Premier ($500), to launch in December, will enhance the general ledger and also provide multi-user capability. In the future, Intuit also plans to offer more industry-specific software products that extend into business management for fast-growing concerns.

The move positions Intuit to compete more directly with Great Plains Software. The rival, owned by Microsoft, offers products tailored for such industries as retailing, but at prices that start at $1,500.

Off The Payroll

Small businesses spend $5,000 per employee on benefits and tax compliance, according to the SBA. To reduce costs and administrative hassles, many firms are outsourcing HR functions to professional employer organizations. Currently, two million employees of small companies are enrolled in PEOs.

Reported by Cora Daniels, Jennifer Keeney, and David Lidsky