Are you covered? Insurance is like Laser Hair Removal. No, really, it is!
You've decided to get laser hair removal done. You first visit Spa A. Spa A promises to give you 6 treatments, all for the incredible price of $99 and the offer is only valid if you go have your first treatment done right this moment. You visit Spa Z. Spa Z sets up a consultation visit first, lays out the possible treatment times based on your propensity to burn and heal, advises the effectiveness of the procedure for your skin type, walks through the common after effects, tests an area of your skin for any reaction and then sets up your first appointment to come back in for treatment.
Which spa did you choose to do business with? Spa Z would be the better choice as you would understand how long it could take to achieve results, what to expect when you get home and that they are willing to take the time to make you feel comfortable.
This same concept holds true with insurance companies and insurance agents. Some will offer you a premium, ask for a signature, take your credit card and never say more. Do you know what you just bought? Do you have any idea what happens in the event of a claim?
Insurance is one of the most important parts of being a cosmetic or medical professional and just like laser hair removal there is no “one size fits all” approach. Your needs will depend upon a number of criteria, including where you are located, what services you are offering, if you have any employees, and how much in the way of assets you have to protect. A good insurance broker should discuss these items with you to determine what insurance plan will fit into the puzzle for your business. They should help you understand what you are paying for.
IMPORTANT? FOR SURE…
Many professionals believe that if they are good at what they do, they don’t need to purchase insurance. None of us are perfect; everyone will make a mistake from time to time. Maybe that client really was a skin type IV not III and you needed to be less aggressive in treatments. Or the power surges and the laser gives off a really intense burst that burns someone. Perhaps someone is down on their luck and simply wants to declare an “injury” to try to get some extra money. These are all real examples of claims that insurance deals with on a regular basis. Can you be sure none of these scenarios will ever apply to you and are you prepared to pay for legal fees out of your own pocket?
Some professionals have said that if they don’t have insurance, they can’t be sued. If someone retains an attorney, they ask about insurance after the suit has been filed, not before. Attorneys may be comfortable going after your personal or corporate assets if there is no insurance coverage in place to handle the problem. If nothing is available, they could seek to garnish your future earnings.
Consider this scenario: the coffee shop next door leaves their machines on all night. One overheats and starts a fire. Their building and yours are gone by the time the fire department shows up. You have no equipment, no treatment room, no product to sell, and no income for the next 90-120 days while you wait for the landlord to rebuild. You don’t have insurance, so you decide to pursue reimbursement of damages from the coffee shop. Guess what, they didn’t think insurance was important either and they don’t have the money to pay you.
SIMPLE DEFINITIONS TO START WITH
Now that you’ve decided that insurance may not be such a bad idea, let’s take a look at some basic concepts in the insurance world.
Professional Liability – This covers the one on one services you provide, whether it be massage, waxing, microdermabrasion, or even nutrition counseling. If you are giving advice to someone or touching them in any way, you have a professional liability exposure. Someone could get burned, hyperpigment, or even receive a bad haircut and this type of coverage could be triggered.
Commercial General Liability – This coverage is sometimes referred to as "slip & fall" insurance, as that is a frequent type of claim under this type of policy. There are however a few pieces under this umbrella term.
1. Bodily Injury and Property Damage – Simply put, this is coverage if someone or their property gets hurt/damaged while at your facility or in your care. This could be someone slipping over a cord stretching across the floor or a chemical solution spilling on a client’s new Gucci purse.
2. Personal & Advertising Injury – Think back to your childhood. Your mother’s voice rings in your ears. “If you don’t have something nice to say, then don’t say anything at all.” Still good advice, but something we all tend to forget. This coverage can protect if someone in your facility says or writes comments in poor taste about anyone else or another facility. This coverage also may apply to copyright infringement and using others’ information without permission. The key here is that is must be unintentional. If you go out of your way to break the law, your insurance is not going to protect you.
3. Product Liability – This applies to the sale of take home products. Maybe that face cream caused an allergic reaction or those eyelash growth products glued their eyes shut. Sometimes the client does an improper application by not following instructions, but on occasion this could be a problem with the product itself. In that case, a client may come back to your spa for restitution. This may be a brand name, nationally sold product, but in this case their first thought is to go back to the business or person that sold them the defective goods.
4. Fire Legal/Damage to Premises Rented to You – The final piece to commercial general liability coverage is fire damage liability. Many people believe this is protection for your own equipment against fire. Not so. In reality, it has nothing to do with your property, it is a liability coverage. That means that it protects a third party. Going back to the coffee shop that left their machine on all night, which caused a fire. If they had insurance, this coverage would protect against the building owner coming back to that business owner to pay for the damages they caused through their own negligence.
Commercial Property - Business Personal Property coverage would apply to your equipment, stock on hand, or furniture in the case of damage from fire, theft, or vandalism to name a few. The types of events covered for under the insurance may vary from policy to policy but most policies cover those basics. The simplest concept for determining what falls under business personal property is if you can pick it up and walk out of the building with it.
If it is bolted in and permanently attached, then it usually falls under Tenant Improvements & Betterments, another coverage within a property policy. These are items that if you chose to move locations would not be taken with you and for which you paid to have done.
A very important and frequently overlooked part of property coverage is Loss of Business Income. This is meant to provide assistance in the case of a fire, theft, or other covered loss for ongoing expenses and lost profit. This could be used to pay rent, employee salaries, and utilities.
While those are the basic coverage items, there are many specialized coverages that could apply to your business as well. The cosmetic industry has many exposures that say a realtor office or retail store do not. When looking for an insurance policy, talk to your broker to see if these options may benefit your facility and if they are available under the program being offered to you. Try to find an insurance broker that has either written this type of business before or is willing to take the time to sit down and really understand what it is you do.
Sexual Abuse – This is protection against allegations of inappropriate behavior in your facility. Most of the time this comes down to “he said/she said” arguments and can be very costly to defend against. This is highly recommended for massage businesses.
Communicable Disease – Staph infections are running rampant throughout the country. The bacteria can be picked up in a wide variety of places. A person is likely to accuse the last place that opened up their skin. Many aesthetic procedures do just that. Your spa may be cleaner than your mother’s kitchen, but you still will have to defend the allegation and prove that no such bacteria can be found within your facility. Again, this can be costly to pay for. This coverage is highly recommended for nail salons, and people breaking the skin such as offering permanent makeup or tattooing.
HIPAA – If you collect personal health information, the information must be treated carefully according to the national HIPAA rules. If you violate this, there can be steep penalties. A simple and innocent mistake provides a good example of how this could turn into a claim: A receptionist emailed their client an appointment confirmation with very personal information in regards to the treatment being performed. The problem? The email was sent to the wrong client. When told, the client whose information was released was very upset. She was something of a high profile figure in her own town and did not necessarily want that information shared with the public.
License Action Reimbursement – This can help pay penalties that are handed down by the licensing board governing your services in your state or defense costs to protect your license status. In the aesthetic industry, rules and legislation are changing constantly. The rules can be vague and sometimes confusing to interpret. This coverage protects you if you are unknowingly operating outside of the scope of your license. The coverage is usually a set limit such as $25,000.
INSURANCE IS IMPORTANT, BUT SELF-HELP IS THE BEST OFFENSE
While insurance can help when there is a problem, the best advice is to start with good operating procedures, guidelines for all to follow and a little common sense. A smoothly run, organized business can handle most situations that arise without panic.
Keep medical history forms and consent forms neatly filed in date order in the client file. Be sure the technician performing the procedure is signing off, as well as the patient. Keep up to date treatment notes, jot down notes as you go, mention any discomfort the client feels or anything that might trigger future problems.
Sit the client down and be sure they feel comfortable with the procedure steps and risks before starting. Don’t feed into false expectations about results and under NO circumstances make guarantees.
Keep an inventory list of equipment in your facility and all assets that belong to the business. Include serial numbers and receipts for expensive items. Make a back-up of this information and keep a copy offsite in a secure location.
Train your staff to treat your clients the same way you would. Make it clear that the whole facility is to act according to set down rules.
Perform periodic but regular inspections of your facilities. Do you notice anything broken or loose? Spot check client files for thoroughness. Have regular staff meetings to review client reactions and keep everyone informed. Be sure that ongoing training is encouraged and desired.
Have written, clear instructions for your staff how to handle a problem should it arise. What is your facilities policy on refunds? Who do you call if a client is burned? This will reduce panic in your employees and in turn from your clients.
Above all, protect yourself with insurance for those times where you experience bad luck or an off day.
Susan Etter joined the Underwriting Team of Professional Program Insurance Brokerage in Spring of 2010. She has a 16 year background in insurance. During this time at PPIB she has developed a strong knowledge of the issues that face MediSpa, Beauty, and Body Art businesses. From this expertise, she is becoming a well-known speaker and writer within these industries, advising ways to develop a successful business and implement procedures to increase loss control and prevention.
Prior to working for PPIB, Susan managed a number of independent retail insurance agencies focusing on personal and commercial lines, juggling 10+ companies’ appetites and underwriting guidelines. When she’s not in the office, she’s spending time with her 3 boys running them around to baseball and soccer games.