April 2012

LeAnne Velona

The Beauty Professional| by Fred Jones


Covering Your Assets: A Salon Insurance Q&A

There are many hungry attorneys out there looking to make a buck off of the mistakes made in salons.

No matter how responsible and efficient a salon is managed, accidents happen. So while proper management is crucial, it is not sufficient in protecting a beauty business.

In this first installment of a two-part series, I have turned to Jeff Pulford, of InsureBeauty.com. Jeff is an experienced, trusted insurance expert who will help explain how salons can better protect their assets.

Question (me): Jeff, before we get started on outlining insurance needs for salons, spas and barbershops, are there some general points you would like to make about insurance?

Answer (Pulford): Insurance, just like the world we live in, is complex. No policy or insurance company covers everything. Those seeking insurance coverage need to understand what events or accidents will be covered, the dollar limits of such coverage, what is excluded, and the premium cost. Insurance companies are businesses, themselves, who want to help a salon owner when there is a claim; they need honest, complete applications so they understand their obligations to the policyholder.

Q: That's a helpful beginning. So let's dive into the insurance needs of a typical salon. What should a typical policy look like?

A: Beauty salons, spas and barbershops are generally small businesses and can take advantage of an "all-in-one" policy called a BOP (Business Owners Policy). These are standardized packages -- which include Property (building and/or personal property), General and Product Liability, and Professional Liability.

Q: Since Property was first on your list, can you briefly explain the scope of such coverage when salon property is damaged?

A: Property has at least four parts: (1) Building coverage; (2) Business Personal Property -- which includes all contents, tools, computers, supplies, and retail sale items; (3) Tenant Improvements – generally those things the salon owns and which are built into the building, like water and light fixtures, partitioned rooms and offices, cabinet, sinks, etc.; and (4) Loss of Income and Extra Expense, including moving expenses.

Q: What kind of accidents or events will typically be covered under a Property claim?

A: Examples are fire, smoke, explosion, collapsed roof (snow), water damage, riots, vehicle damage, theft, etc.

Q: That's funny you mention vehicle damage for a salon … why?

A: Salons are located on busy streets and shopping centers. Autos and trucks somehow end up going through the windows and walls. I know of three that have happened recently in central California.

Q: What losses are excluded?

A: The two most important are earthquake and flood. Also, you cannot burn or damage your salon on purpose. Salon owners need to closely review "exclusions" to their policy.

Q: That was simple enough, but as an attorney, I know liability matters can be a lot more complicated than property claims. Can you put those matters in simple terms?

A: Simply put: People are responsible for their own actions. So if you cause bodily injury, property damage, monetary or emotional loss to someone, a liability claim against you is possible.

Q: Perhaps a couple of actual examples will help frame General Liability and Professional Liability matters.

A: Since all master leases with salon owners will require General Liability coverage, let's begin there. The first category of such coverage has to do with accidents that happen at the salon, like "slip and falls," burning down the shopping center, flooding the ladies dress shop next door, etc. The second category under General Liability insurance covers harm or damage done to customers as the result of retail products (like a hair product that burns the customer's scalp when they use it at home). A word of caution, if you mix products and sell them under your label, you must buy a special policy. Additional offerings of a General Liability policy include non-owned automotive accidents, "host liquor" and direct medical payments for injured individuals at your salon.

Q: And Professional Liability?

A: The services a salon professional performs on the public are expected to be safe. When a stylist cuts a customer or burns their scalp during a coloring, or a manicurist passes an infection to the client's toes during a pedicure, or other professional mishaps, the salon will be held legally responsible. Professional Liability protects the beauty professionals and the salon from such monetary damages.

Q: I hear complaints by salons that some beauty services are not covered by the salon's Professional Policy. Why?

A: Good question. Insurance companies offer professional liability policies that are specific to beauty establishments, but their policies may explicitly exclude certain services they consider beyond the scope of the barbering and cosmetology industry. The policies can be very different from one insurance company to the next. Generally, most insurance companies cover the skills and services taught in beauty college. If unique services are offered, special insurance will be needed. Most "BOP" policies exclude tanning, plastic surgery, chemical facials, massage (below the neck and above the elbow), permanent makeup, tattooing, Botox (or any other) injections, and many other medi-spa treatments.

Q: Lawyers like me are involved in most lawsuits, and we're not cheap. Are the salons covered for their legal costs related to such claims?

A: Yes, all insured liabilities include defense coverage, even if the suit is false or groundless.

Jeff and I have covered a lot in this short interview, but we have really only scratched the surface. In part II (to be published in June), we will cover Workers Comp, employment practices, and cyber liability, and if space permits, buy/sell life insurance, disability -- including SDI, and health insurance.

Fred Jones serves as Legal Counsel to the Professional Beauty Federation of California, a trade association singularly dedicated to raising the professionalism of the beauty industry. To learn more about the PBFC and receive further details about the subjects contained in his column, go to www.beautyfederation.org.