Limiting Your Exposure to Liability Claims

Limiting Your Exposure to Liability Claims

While there are a wide variety of insurance coverages available for protecting yourself and your salon, none is as essential as liability coverage. Liability is a vitally important issue for those in the tanning industry, whose business is providing customers a service that may pose some risk of injury.

It is important to note that there are two basic types of liability--business liability and professional liability. Business liability protects a salon against claims for injuries suffered by customers or visitors while on the premises, such as trips and falls, and also covers salon owners against claims of libel, slander, false arrest and false advertising.

The other type of liability that salon owners need is professional liability. Unlike business liability, professional liability only covers professional services. For example, it protects a salon owner against claims made by customers who suffer an injury due to overexposure. This article will examine what salon owners need to know about professional liability, including the difference between claims-made and occurrence-form policies, and how to limit exposure to liability claims.

Claims-Made Policies

Until just a few years ago, most insurance companies only would underwrite professional liability for tanning salons on a claims-made basis. Broadly speaking, claims made means that the policy has to be in effect when the claim is made in order for a claim to be covered. It also assumes that the insurance coverage has never lapsed, even for one day.

If a salon only has been in business for a short while, and never let its coverage lapse, a claims-made policy should provide reasonable protection against professional liability claims. However, if a salon has ever let a policy temporarily lapse in the past--even for one day--it may find that a claim is not covered.

The Advantage of Occurrence Policies

Occurrence policies provide coverage for those claims made if the claim occurred during the policy period. Unlike claims-made policies, the claim does not need to be reported during the policy to be covered. Occurrence policies also differ from a claims-made policy in that they require the claim to not only have occurred during the policy period, but also to have been reported during the policy period.

Occurrence policies offer a distinct advantage for salon owners. If a claim is made one year--or even three years--after the policy has expired, you still would have liability protection up to the limits of insurance in effect at the time of the negligent event, even if the salon currently has no insurance protection at all.

The Importance of Retroactive Protection

If a salon owner currently has claims-made coverage and is planning to switch to occurrence-form coverage, it is important to secure prior acts coverage for the entire time the salon had claims-made coverage. (Always consult with an insurance specialist before changing any coverages.) A common form of retroactive protection is known in the insurance industry as a "nose." A nose is tacked on to the front of a new occurrence-form policy and provides coverage against professional liability claims for a specified amount of time before the policy starts.

If for some reason a salon owner decides to sell the salon, or just close its doors and go out of business, and they have a claims-made policy, the salon owner should consider another form of extended reporting coverage known as a "tail." A tail is tacked on to the end of a claims-made policy, and offers a similar form of retroactive protection. The length of time the tail covers will vary; however, in most cases it is limited to a period of one year. Not all insurance companies currently offer this protection, but it is well worth the time and effort to find one that does.

Limiting Exposure to Liability Claims

If a salon is hit with a lawsuit, there are several different types of defenses available, depending on the specifics of the lawsuit. However, the best course of action is to avoid a suit altogether. Salon owners can begin by minimizing potential risks. Try to visualize everything that possibly could go wrong and devise safeguards against those disasters. Be sure employees also understand why these practices are necessary.

• Carefully review warnings and safety procedures with every new client. Be sure they are included in explanatory literature that is provided to each customer. Make each customer aware that risks do, in fact, exist and that there also may be risks as yet undiscovered. By the same token, take the opportunity to explain the mechanisms and procedures that are in place to reduce those risks (such as protective eyewear and timers) and be sure customers understand their own roles in this process.
• Secure written proof that you have fully warned customers about the known risks. Salon owners will want to document that they have advised their customers that various risks might exist and that they consent to proceed with the service only after considering those risks and securing the advice of a physician, if he or she wishes to do so. Make sure customers disclose a fairly complete medical history and be sure you and your staff know what might be problem signals in that history. If in doubt, request a release or consent form from the client's physician. Whenever possible, have customers sign clearly worded releases of liability. Even if they do not ultimately bar recovery, they may deter litigation.
• Watch out for customers who demand extra-long and overly frequent sessions. Observe and document their behavior, as well as any discussions you may have with them about it. Make sure that you and your staff keep good records about and relating to each customer. Check with customers to be sure they are happy with the service provided and listen to their complaints.
• Conduct regular follow-up quality control of all equipment, methods of operation and staff. Have regular training sessions and keep records of them. If the salon owner does not work in the salon, make sure to find competent managers and check up on them periodically without warning. In addition, make sure the salon looks professional because it's good for business and enhances the impression that you know what you are doing.
• In the event of a claim, be sure to notify your insurance carrier promptly. If the claim is covered, many insurance policies require that the insurer provide defense counsel. In such a case, the insurance company's counsel owes a primary duty of loyalty to the insured as his or her client. A full and honest discussion with an attorney may reduce the cost and expense of a lawsuit and promote settlement where appropriate.

No matter how large or small your salon may be, securing adequate coverage is essential for protecting your business and your peace of mind. Universal Insurance Facilities, Ltd. offers a complete package of  coverages specifically designed to meet the unique needs of the tanning industry. Universal's program is underwritten by the American International Group (AIG), one of the world's largest commercial insurance and financial services organizations. Rated A++ (Superior) by A.M. Best Company.

For more information, or to get a quick, no-obligation quote, contact: Universal Insurance Facilities, Ltd., P.O. Box 40079, Phoenix, AZ 85067-0079, (800) 844-2101, fax (602) 970-6240, www.vpico.com/universal.