Insurance Primer

Insurance Primer

Welcome to the first in a series of Seminar In Print pieces that address specific issues critical to the daily operation of a tanning salon. These print seminars take specific topics and the education process right to where the salon owner lives and works and allows you to learn on your own time. In a perfect world, all salon owners would have the time and money to attend trade shows and regional seminars. In the real world that isn’t the case, and that is why LOOKING FIT® is the first to bring this education to you.

This premiere piece focuses on one of the most important issues regarding your business and livelihood—Salon Insurance. LOOKING FIT recently sat down with Paula Whitenight of IMC, Chris Beshore of Insurtec and Joan McHenry of Universal Insurance, to discuss the complexities of insurance and ways to heighten customer awareness, promote safe business practices and take the mystery out of the associated costs and the complexity of insurance. We hope you enjoy this new service and use it to your advantage.

Most tanning salon owners probably would agree that securing insurance is one of the basic costs of doing business and one of the most confusing. As responsible business owners, you’ve budgeted for the appropriate coverages as a precautionary measure in the event of a loss.

However, there are a few owners in the market who think of business insurance as an option. These risk-takers appear perfectly content to operate salons with little or no coverage in place. Unfortunately, most financial experts agree that this is a very dangerous practice, as those who gamble and lose usually pay a much higher price in the long run.

The bottom line is, while none of us ever expects to get sued, we’ve all got to accept that even the most adept salon operator may face litigation for any number of reasons. While there are a wide variety of insurance coverages available for protecting yourself and your business, one of the most essential is liability. Liability is an especially important issue for those in the tanning industry, whose business is providing customers a service which may pose some risk of injury to them. Liability risks come in many more forms than might be expected. In addition to liability arising specifically from the use of tanning equipment, salon owners also may be held accountable for a variety of other kinds of business liabilities such as a customer slipping and falling.

Our panel discusses both professional and business liability, as well as recommended coverages, key mistakes to avoid when choosing insurance, specialized coverages, claims and premiums, and many other important business insurance coverages.

At A Glance
IMC (Insurance Marketing Center)
14500 Burnhaven Drive, Suite 135
Burnsville, MN 55206
(800) 245-0023
www.imcgroup.com
E-mail: atoa@imcgroup.com
Number of employees: 16
Years in business: 40. The company was purchased by Empire/Zurich North America in 1997.
Vice president: Paula Whitenight
Policy underwriter: Empire Indemnity Insurance Company, a Zurich North America Company. This program has been offered since 1987. The IMC program can be accessed directly or through your agent or GLS Underwriters.

At A Glance
Universal Insurance Facilities, Inc.
P.O. Box 33409
Phoenix, AZ 85067-3409
(800) 844-2101
E-mail: info@univins.com 
www.universalinsuranceltd.com
Number of employees: 18
Years in business: 12
Vice President: Randy Tipton
Tanning Insurance Program Manager: Joan McHenry
Policy underwriter: American International Group (AIG).

At A Glance
Insurtec, Inc.
P.O. Box 25
Rich Hill, MO 64779
(800) 606-0621
E-mail: info@insurtecinc.com
www.insurtecinc.com
Number of employees: 11
Years in business: 10 years
Owner and president: Terry Hoeper
Vice president: Chris Beshore
Policy underwriter: USF Insurance Company, rated A-(Excellent) with a ‘stable’ outlook by AM Best.

Insurance policies are designed for specific coverages and it is very important that the policy you purchase provides the coverage needed for all services you offer to the community. Tanning salons specifically need to have premises liability coverage for their location and specific professional liability that will protect them from losses generated from the tanning bed process. In addition, you need to include any incidental exposures, such as massage, exercise, etc., in the policy so the coverage encompasses all exposures within your salon.

—Paula Whitenight, IMC

All tanning salons must insist on having general and professional liability coverage. General liability includes personal injury, products and premises and covers everything from “slip and falls” to advertising liability. Professional liability is the coverage specific to the professional services that you provide, such as tanning or massage. Salons also should carry property coverage in the event of theft, fire and other damage.

—Chris Beshore, Insurtec

A salon should have a professional liability policy ideally based on an occurrence basis vs. a claims-made basis. The policy should include cancer coverage and not have any exclusion that relates to cancer. Property coverage is also important to protect equipment and your tenant improvements in the salon. Most salons are leasing space from a strip center or mall and oftentimes are responsible for the electrical work, walls, carpeting and air-conditioning units on their individual suites. It’s important to have coverage that includes theft for the total amount of your contents, plus business income and business liability.

Of equal importance is to review the lease you signed with the landlord to see which party is responsible for certain items and conditions. Some salon owners are responsible for glass and all improvements; others are not. While an insurance agent can make some recommendations, salon owners must review their leases to adequately insure themselves.

—Joan McHenry, Universal Insurance

Professional liability is specific coverage protecting you from the result of your service. This coverage protects you against a client’s lawsuit for a burn, skin damage, eye damage, etc. The loss would have to be directly related to the services provided. Other professional coverages can include beauty, nails, massage and other services your offer within your business. Be certain that all services offered on your premises are included and listed in your policy.

If you are a salon owner and have control of a premises or business, it is your duty to your customers to carry liability insurance. This protects your customer from accidental injury, personal injury and professional loss that occurred in your business. When a customer comes into your shop, you need to make sure they are protected in case of accidental injury. You also need to protect them against an accident caused by the services they purchase from you. Without insurance, a small accident could put you into bankruptcy in a very short amount of time.

—Paula Whitenight, IMC

Not taking time to understand the key aspects of the insurance such as shopping around for quotes and getting professional salon certification, which can earn them a discount. Another costly mistake is buying the cheapest insurance. For example, we might quote $1 million general liability and $1 million professional liability and a competitor quotes $1 million general and only $300,000 professional (commonly called a “split” limit). Salon owners must understand that it is not the same coverage and must compare both policies carefully.

—Chris Beshore, Insurtec

The biggest mistake is not getting insurance. Many salon owners lease equipment, which enables them to open a salon without a huge investment, however, they don’t understand that one small loss can cause bankruptcy. Some only get insurance because it is required by the landlord or leasing company—even then they take lower limits that they don’t cover their contents adequately. Many salons don’t understand how important insurance is and how inexpensive it is compared to their risk.

—Joan McHenry, Universal Insurance

The Terrorism Risk Insurance Act of 2002 mandated the offering of terrorism coverage after Sept. 11. If you feel you are in a high-risk area, you should seriously consider purchasing this coverage.

—Chris Beshore, Insurtec

Flood and earthquake insurance normally are excluded from a standard business personal property form. If you are located in an area where this can be a threat to your business you need to contact your insurance agent and have them obtain the correct coverage for you. They may be able to add it to your current policy for an additional premium and they may have to purchase a separate policy for you.

As for hurricane coverage, the loss and cause of loss will determine coverage within your policy. If you have water damage from a hurricane but no wind damage to your business, you may not have coverage. If you have electrical outage but your business did not withstand a direct hit and the outage is due to damage in your area, you may not have coverage in your policy. You need to understand what is covered and assess your need for areas that are not automatically included within your policy.

—Paula Whitenight, IMC

In The Salon

Both employee dishonesty and customer theft coverage are available but there has to be some evidence for an insurance company to consider paying a loss. Many times this requires a police report, etc. Employee dishonesty can cover a variety of things including theft of money, merchandise or clients’ personal possessions.

—Joan McHenry, Universal Insurance

There is no need for a separate policy, however, you must advise your insurance carrier that you have added sunless services to your business and make sure it is added to your insurance policy. Sunless tanning units can be a large investment and you need to increase your property values to include this value.

—Paula Whitenight, IMC

Worker’s comp varies on a state-by-state basis, and salons should refer to their state statutes to see if it is required. If it is required, there is not a set limit that a salon is required to carry. The best route is to check with the state.

—Joan McHenry, Universal Insurance

Personal injury liability provides the salon owner with liable, slander and invasion of privacy insurance to protect them from suit in case of peeping toms and/or verbal abuse by customers or employees. If a customer is in a tanning unit and discovers someone has been watching them from above the wall the coverage would be provided within the personal injury form. Personal injury coverage most often is included within a business liability policy. Check with your agent to ensure your policy provides this to you along with any limits or exceptions that would apply.

—Paula Whitenight, IMC

Claims Section

On average 3.35 percent of all businesses file claims yearly.

—Chris Beshore, Insurtec

Our statistics reveal that about 3 percent to 4 percent of policyholders file a claim each year. The most common claim generally is the “slip-and-fall” claim, followed by theft and property damage from fire or water.

—Chris Beshore, Insurtec

It takes about 47 days to settle a claim. A salon owner should keep detailed records including receipts and daily records of customer purchases. It is also important to provide as much information as possible to the claims adjuster. In general, a prepared salon owner will settle their claim much faster.

—Chris Beshore, Insurtec

Either the professional or business liability policy would respond depending on whether the client was tanning or just buying and being on the premises. They have coverage under one of the policies for allergic claims. It is important to note that legal defense is a huge part of both of the professional and the business liability policies.

Let’s examine a scenario. A client buys a product, takes it home and has an allergic reaction. If the client decides to file a lawsuit, he or she will sue the lotion manufacturer, the salon and the salon’s landlord. The salon owner’s policy will pay legal defense and possibly cover a claim if it was proven negligent. It wouldn’t just pay the claim because there might not be any negligence.

A critical thing to keep in mind is that coverage pays for legal defense. The salon owner can continue to run the business while an insurance company and their attorney take care of what might just be a nuisance claim that could rack up considerable legal costs. The salon owner doesn’t have to worry about it because the insurance company’s attorney is knowledgeable in the industry.

—Joan McHenry, Universal Insurance

Named form property insurance provides coverage for specific exposures such as fire or wind damage; while special form covers more causes of loss with certain exposures specifically limited or excluded on your policy. Generally speaking, the special form provides additional coverage—and at minimal increase in premium.

Salon owners often question the need for burglary coverage. Do not overlook the fact that there are many items which could be burglarized such as products, clothing, your register and that painting on the wall. Remember that in a burglary, there must be evidence of forced entry and merchandise or equipment taken. Conversely, robbery refers to the taking of cash from a facility by threatening an employee, most often at gun-or knife-point.

This coverage relates to a liability exposure in which the salon owner is responsible for damages to the building due to his negligence. This peril does not cover damages to the salon’s equipment. A landlord often requests, in his lease agreement, for the tenant to insure this peril.

Insurance companies will cancel a policy pro rate without a penalty to the insured—normally for non-payment of premium or due to a salon going out of business. If a salon replaces coverage on their own behalf at mid-term, coverage might be canceled on a short rate basis subject to a penalty which equals 10 percent of the unearned premium.

Additional Insured refers to either the landlord of the building or a lessor of equipment who requests his interest added to a liability policy. A Loss Payee is a lien holder on equipment and is included on your property policy.

Business liablilty protects you against bodily injury lawsuits, such as a lawsuit claiming that a customer or visitor was injured while on the salon’s premises. Some of these are commonly called “trips and falls” or “slips and falls”. Business liability also provides protection against property damage claims; personal injury lawsuits involving libel or slander; claims arising from the physical eviction of a person while on your premises and/or claims of false arrest; and claims arising from false advertising.

Professional liability protects you against accidents or negligent acts that might arise out of your professional services.. That is to say, professional liability might protect you against claims made by customers who suffer an injury due to overexposure, etc. However, manicurists and beauty salon owners sometimes make the mistake that their professional liability insurance will cover a tanning bed claim—it won’t. If you are uninsured, your personal assets could be at risk— including your car and home.

Know your Risks

Human Behavior:

• Negligent behavior (failure to use reasonable care under the circumstances).
• Intentional behavior (behavior that is deliberate, although the consequences may not be anticipated).
• Criminal behavior (behavior that is forbidden by law, or failure to behave as required by law, which subjects the offender to legal punishment).
• Positive behavior (other behavior that benefits the business).
• Negative behavior (other behavior that damages the business).

Commercial and Legal Relationships:

• Leases of property
• Franchise agreements
• Licensing agreements
• Supplier relationships/contracts
• Customer relationships/contracts
• Employer/employee relationships
• Contractor/subcontractor
• Insurance program

source: Public Entity Risk Institute; www.riskinstitute.org

5 Tips For Choosing An Insurance Program

Insurance is considered a mandatory part of the cost of doing business; however, securing adequate coverage does not need to be an unpleasant experience. The following five tips should help take the headache out of the insurance process and prepare you for unforeseen actions against you.

Agencies that specialize in tanning salon insurance can offer a unique and realistic perspective on the exposures you are most likely to face, and can advise you on the best course of action to meet your specific needs.

If you don’t understand something in the policy, call your insurance specialist immediately for an explanation. In order to fully protect yourself and your assets in the event of a lawsuit, you must understand the types of coverage you have, applicable limits and policy exclusions.

Most insurance companies modify their policies on an annual basis to take advantage of today’s rapidly changing legal climate. Don’t assume that a blanket renewal of your policy will enable the exact same coverages prior to the renewal.

One way to reduce potential liabilities is to advise third parties, in writing, of specific risks. This would include posting a “Caution! Slippery When Wet” sign in the area where a floor is being cleaned. Should an accident occur, take immediate action by calling an ambulance for the injured person and document all known facts about the accident including date, time, name of injured party, type of injury, etc. This allows you to accurately reconstruct the events should a lawsuit be filed.

Assuming the circumstance is covered, the insurance company will come to your defense. Remember, if your claim is disallowed because of incomplete or inadequate coverage you will be liable for the costs of settlement and defense.