Chapter 7

Chapters
1 - 2 - 3 - 4 - 5 - 6 - 7 - 8 - 9
2007-08 Lamp Application Guide

Salon Insurance

Salon Insurance: Option Or Necessity? 
Professional vs. Business Liability
Limiting Your Exposure To Liability Claims
Salon Insurance Checklist 
Recommended Basic Coverages 
Keeping Insurance Costs In Check 
Five Commonly Misunderstood Insurance Terms
Protecting Yourself Against Crime
Limitations Of Liability 
Five Tips For Choosing An Insurance Program
Flood Insurance

CHAPTER SEVEN

Insurance

Dedicated solely to the issue of salon insurance, this chapter provides you with the latest information on liability and legalities in the indoor tanning salon setting. Be sure to read this section carefully and evaluate your salon’s insurance program. If you are not insured, consult an insurance specialist before disaster strikes and your business suffers.

Most tanning salon owners would agree that securing insurance is one of the basic costs of doing business. As responsible business owners, they have budgeted for the appropriate coverages as a precautionary measure in the event of a loss—-especially a catastrophic loss.

However, there are a few optimistic souls who think of business insurance as an option. These risk takers appear perfectly content to operate their 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 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. A discussion of both professional and business liability, as well as many other important business insurance coverages, follows below.

Liabilities can also stem from the maintenance of salon premises and even from competing with other businesses. Some sources of liability are unique to the tanning industry, while others are not, however, salon owners must be aware of these potential loss exposures when setting up and operating their businesses.

The second type of coverage is professional liability. Unlike business liability, professional liability only covers 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. But beware: manicurists and beauty salon owners sometimes make the mistake that their professional liability insurance will cover a tanning bed claim — it won’t, and if you are uninsured, your personal assets could be at risk, including your car and home.

Professional liability protects you against accidents or negligent acts that might arise out of your professional services. In view of skyrocketing court settlements, it probably comes as no surprise that a legal liability limit of $1 million no longer can be considered excessive, even for the smallest salon. The good news is, the cost difference between $300,000 vs. $1 million in liability coverage usually is quite affordable.

To determine just how much liability coverage is adequate for your situation, ask your insurance specialist what kinds of awards (in dollar amounts) have been made in your state in the past few years, and under what circumstances. If you are on a tight budget, you should carefully evaluate the amount you can afford to lose (if any) and make sure your coverage protects you to at least that point.

A consumer may seek compensatory damages to recover out-of-pocket expenses for medical care and medications, lost wages, property damage, pain and suffering, disfigurement, loss of consortium and even the loss of the capacity to enjoy life. A business may seek to recover lost profits and out-of-pocket expenses. In the absence of statutes, determining the monetary amount of damages is usually left to the trier of fact.

Since suntanning clients are drawn from a wide range of socio-economic groups, it is fair to assume that the potential range of damages is commensurately broad. For example, what kind of damages would a jury award a surgeon who claims to be unable to practice medicine again; a lawyer who can no longer appear in court because he claims to have been permanently disfigured; or, a truck driver who asserts he can no longer operate his vehicle?

If you, as a salon owner, are served with a lawsuit, the number and nature of available defenses depends on the specifics of the individual lawsuit. In commercial actions, the parties’ contractual agreement may provide a number of possible defenses, such as releases and indemnity agreements.

In injury-related actions, the underlying claims must be analyzed to determine available defense. In negligence cases, the operator may be able to assert that the claimant was contributorily negligent. In some states, the claimant’s degree of fault may reduce or even eliminate altogether his right to recover damages.

The best course of action, however, is to limit liability in advance by avoiding or minimizing potential risks. Try to visualize everything that possibly could go wrong and devise safeguards against those calamities. Be sure your employees also understand why these practices are necessary.

A. Carefully review warnings and safety procedures with every new client. Be sure they are included in explanatory literature that you provide to each customer. Make the customer aware that risks do, in fact, exist and that there also may be risks as of 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.

B. Secure written proof that you have fully warned your customer about the known risks. You want to document that you have advised your customer that various risks might exist and that your customer consents 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 the customer discloses 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.

C. 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.

D. Conduct regular follow-up quality control of your equipment, your methods of operation and your staff. Have regular training sessions and keep records of them. If you do not work in the salon, find competent managers and check up on them periodically without warning. Make sure the salon looks professional because it’s good for business and enhances the impression that you know what you’re doing. Never oversell. Each staff member should have some sales know-how, but customers will complain if they feel pressured.

E. Consultations with attorneys are important in assessing risks before liability attaches. It’s a pay me now or pay me later principle, and if you have to pay the attorney later, the bill usually will be much higher. Learn to use attorneys effectively; discuss fees openly and confirm arrangements in writing in advance.

F. In the event of claims, 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.

Every salon owner needs professional liability insurance. If, for example, one of your customers suffers burns from overexposure, or has a photosensitive reaction, professional liability could protect you against claims he or she may make. In other words, professional liability protects you against accidents or negligent acts that might arise out of your professional services.

Since personal injury claims can easily run into hundreds of thousands of dollars, professional liability coverage must be considered mandatory for every salon owner. In this section we’ll examine the differences between claims made and occurrence professional liability policies to see which one is right for you.

Occurrence Policies 

Occurrence policies offer coverage for claims made if the claim occurred during the policy period. 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 a claims made policy requires the claim to have not only occurred the policy period, but also to have been reported during during the policy period.

Occurrence policies offer an advantage for you as a salon owner in that if a claim is made against you a year — or even three years — after your policy has expired, you would still have liability protection up to the limits of insurance in effect at the time of the negligent event even if you currently have no insurance protection at all if the claim occurred during the policy term.

If for some reason you decide to sell your salon, or just close your doors and go out of business, you should consider another form of extended reporting coverage known as a “tail”. As you can probably guess, a tail is tacked on to the end of your claims- made policy. The length of time the tail covers will vary, but in most cases is limited to a period of one year. Not all insurance companies currently offer this protection, but it is well worth your time and effort to find one that does.

Finally, no matter how tempting it may be, avoid any temptation to let your insurance coverage lapse, especially during your off-season and/or summer months. As previously mentioned, occurrence form policies provide protection against any claims arising out of events that occur during the period when the policy is in force. However, if you lapse your coverage for any reason —-even for one day —-you may find your claim denied, and that you are liable for the full amount of any financial judgment held against you.

Check with your insurance specialist and be sure you understand both the coverage you have and what you could obtain. For example, is excess or umbrella coverage available? In addition to liability coverage, it’s a good idea to know the details of your property, casualty and business income policies.

• Building Coverage 
• Business Personal Property Coverage 
• Replacement Cost Coverage 
• Business Income and Extra Expense 
• Computer Equipment Coverage 
• Money and Securities Coverage 
• Glass and Sign Coverage 
• Business Liability 
• Product Liability 
• Personal Injury Liability 
• Fire Legal Liability 
• Medical Payments 

To determine whether your current level of coverage is adequate, check with your insurance specialist about the history of claims that have been filed against similar businesses in the past and what the results were. Find out from a competent legal professional what kinds of awards have been made by juries in the past and what the circumstances were. Finally, evaluate what you can afford to lose and make sure that your coverage protects you at least to that point. It’s not an easy or particularly attractive question, but it is one that could avert future disaster.

As every business owner knows, recognizing and controlling liability exposures is a prime concern in today’s litigious society.

However, merely having coverage in place is not enough. Today’s courts are getting tough on business owners who allow hazardous conditions to exist, and judging by the awards juries sometimes hand out, no amount of protection may be enough. To help you avoid the legal headaches and financial hassles of a liability lawsuit, here are some tips designed to help you recognize, avoid and control your liability exposures, and hopefully save you some money in the process.

For example, you may discover a glaring hazard, such as a pothole in your salon parking lot that needs to be blocked off and covered up. Or you may chance upon a less obvious risk, such as a worn or curled floor mat, which was intended to prevent slips and falls but may actually cause them.

Keep in mind that a potentially dangerous situation can be created in an instant by a careless employee in the normal course of his or her work — for example, by leaving a wet floor unattended for a few moments while mopping up. Courts can and will hold management responsible for the actions of their employees in these situations. Once again, a pro-active response is the key; in this case, by advising third parties of a specific risk by posting a “Caution! Slippery When Wet” sign in the area being cleaned.

There are several other important procedures for reducing liabilities that can help prevent lawsuits, including conducting accident training sessions with your employees; conducting regular quality control measures of your facilities and equipment; and keeping documented records of preventive maintenance. Be sure to hire competent employees and regularly monitor their performance. If you are not at your salon on a daily basis, make a practice to drop by periodically without notice in order to spot unforeseen risks.

Begin reducing your liability by keeping floors dry. (Remember, you can reduce your liability substantially when you take reasonable and prudent care to prevent accidents). In bad weather, put up caution signs when the floor is wet; install non-skid moisture absorbing carpet or mats; and keep a mop and bucket handy to control runoff.

A. Require minors to provide written parental consent prior to use and/or be accompanied by a parent or guardian, and that all users provide written consent stating that they’re aware of the risks.

B. Take a drug history to determine the risk of photosensitive reaction.

C. Require the use of and provide protective eyewear. Advise tanners to cover any and all sensitive or untanned areas.

D. Post clear warnings as to the adverse side effects associated with tanning-bed use. Provide an accurate, informational pamphlet, outlining the risks, and avoid any signage claiming that these beds are safer than the sun.

E. Set specific time limits on session length, adjusted on the basis of skin type, and allow no more than one session per day. Prescribe this accurate dosage based upon joules/ centimeter rather than minutes, a less accurate measure.

F. Determine the irradiance levels of both UVA and UVB units regularly.

G. Make sure the safety switch is easy to locate and use, and that ventilation and room temperature are appropriate.

The insurance industry is full of technical jargon that often seems designed to confuse. The following capsule definitions can help you make sense of some commonly misunderstood insurance terms and may even save you some money when shopping for business insurance by helping you understand which coverages are best for you.

Crime coverage is one type of insurance that may be as essential for protecting your business as fire or liability insurance. Dishonesty losses in the United States are known to be in the billions of dollars each year, and employee theft stands out as one of the most under-reported crimes affecting businesses. In fact, more money and property are stolen annually by trusted employees than by all of organized crime.

One compelling reason for securing crime insurance is that employee dishonesty losses are excluded from coverage under virtually all commercial property policies. When you consider the potential losses you may suffer from employee theft vs. the very affordable cost for this coverage, crime insurance becomes a prudent investment for concerned business owners.

Unfortunately, dishonesty insurance often is overlooked by many salon owners and managers who prefer not to be suspicious of the people working for them. The fact of the matter, however, is that your most trusted employees are in the best position to use their knowledge of your business operations to steal or embezzle.

What can you, as a tanning salon owner, do to protect yourself from employee dishonesty? The best available defense includes implementing strict operating controls in combination with careful employee supervision and securing adequate insurance protection. The focus of this section is to provide a brief overview of commercial crime exposures facing salon owners and the coverages available to protect yourself against them.

Crime coverages can be tailored to fit the size and scope of your tanning facility and can protect you against such losses as robbery, burglary, theft and embezzlement. In most cases, your business property and liability package policy can be endorsed to provide coverage against employee dishonesty, the loss of money and securities from your premises, and the loss of other covered business property such as computers or office furniture. Keep in mind that covered property may also include the property of others for which the insured is liable, so you will be covered in the event that an employee were to steal from one of your customers.

One very important point concerning employee dishonesty claims is that dishonest acts must be committed with manifest intent — that is, a loss resulting from an unethical act, such as lying, must be due to the employee seeking personal gain.Without manifest intent such claims would be disallowed. Also, inventory shortages claims are excluded from employee dishonesty policies because losses can occur from a variety of reasons besides theft, such as accounting errors.

Money and security claims and business personal claims are not the only losses that can be covered under employee dishonesty. Riders are available to protect you against check forgery, credit-card misuse and computer fraud/theft of information to supplement your existing protection at extra cost.

In addition to implementing security controls and procedures, several common sense measures can help minimize your risk of theft. Checks should be immediately stamped for deposit only, for example, and invoices should always be stamped paid to circumvent the chances of paying the same invoice twice. Fidelity bonds also are available that can give you added protection. However, for true peace of mind, it is recommended that you expand the value of your insurance by purchasing dishonesty insurance. Consult with your insurance specialist for complete details.

What is surprising is that a recent survey conducted by a major insurance company showed that the vast majority of its customers knowingly purchased liability limits that would not fully indemnify them against the awards being handed down by today’s juries. This can be a very dangerous practice, especially in view of today’s litigious climate.

If you believe your current limits of liability are adequate, consider the following examples: In one case, a jury awarded a $1.95-million judgment to a delivery man who tripped over an uncovered hole and injured his back. In a second case, there was a $3.5-million award to a man who was scalded by hot water in a hotel shower; and, in a third case, there was a $22-million award for injuries sustained by a woman who was hit on the head by a wooden box that fell off a shelf in a hardware store.

These examples serve to illustrate three important points. First, juries are routinely awarding enormous sums in personal injury cases; second, the liability limits you choose can spell the difference between solvency and bankruptcy; and third, liability limits of $1 million or more must no longer be considered unusual or excessive.

Fortunately, the news is not all bad. Increased liability is available for tanning salons in $500,000 to $1 million and $2 million limits.

Assuming you recognize the need for increasing your liability insurance, how do you go about estimating the amount of coverage you’ll actually need? Some experts say you should base your limits on annual revenues, but that can be costly. The best method I have found for determining coverage limits is to ask your insurance specialist what kinds of claims have been filed against similar businesses in the past and what the results were. You also may want to consult with a legal professional to find out what kinds of awards (in dollar amounts) have been made in your state in the past few years, and under what circumstances. Base your limits accordingly.

If you are on an extremely tight budget, evaluate how much you can afford to lose and make sure your coverage protects you to at least that point. Remember, a catastrophic loss can deliver a knockout punch that can devastate your financial future, so don’t put yourself at risk.

Insurance must be considered a mandatory part of the cost of doing business. However, securing adequate coverage needn’t be a difficult or unpleasant experience. Simply follow the five tips outlined in this section to get the coverage you need:

1. Select An Insurance Specialist 
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.

2. Read And Understand Your Policy 
If you don’t understand it, call your insurance specialist and have him or her explain it to you. In order to fully protect yourself and your assets in the event of a lawsuit, you must thoroughly understand the types of coverage you have, applicable limits and policy exclusions.

3. Review Your Policy Annually 
Most insurance companies modify their policies from year to year 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.

4. Reduce Potential Liabilities 
One example of this would be advising third parties, in writing, of specific risks (i.e.: when washing a floor, post a “Caution! Slippery When Wet” sign in the area where you are working). Should an accident occur, take immediate action by calling an ambulance for the injured person and document all known facts surrounding the accident including date, time, name of injured party, type of injury, etc. so you may accurately reconstruct the events should the injured file a lawsuit.

5. In The Event Of A Claim, Notify Your Insurance Company As Soon As Possible 
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, it is you who will be liable for the costs of settlement and defense. By following these five tips, you should adequately be prepared for any unforeseen actions against you.

Keep Yourself Liquid With Flood Insurance

More businesses are damaged by floods each year than by any other type of natural disaster. Flood damage can happen to any business at any time—you don’t have to be located near water to be at risk. Heavy rains or winter water runoff can cause flood damage, even in areas normally not prone to flooding.

But did you know that losses due to flooding are excluded from coverage under most commercial property policies? Many business owners don’t realize that they are not covered against flood until it’s too late. Fortunately, it’s easy and inexpensive to protect yourself against flood through the National Flood Insurance Program (NFIP), which is backed 100 percent by the federal government. Making plans to insure your business against flood now will keep you liquid when the waters do rise.

The National Flood Insurance Program (NFIP) divides risk areas into three basic groups—low, medium and high. Somewhat surprisingly, less than one-third of all reported flood claims come from high-risk areas; slightly more than one-quarter come from low-risk areas. That’s why many business insurance experts strongly recommend that you secure flood insurance, even if you are located in a low-risk area. Remember, your business doesn’t have to be located near a river or a lake to be at risk; heavy storms can cause just as much destruction as local waterways overrun by spring rains.

The good news about flood insurance is that anyone can obtain affordable coverage, even if your salon is located within the boundaries of a flood plain. The National Flood Insurance Program and its Write Your Own (WYO) servicing companies guarantee coverage for anyone living in a high-risk area, regardless of location.

The typical commercial flood policy costs, on average, just a little over $1 a day, and a special low-cost Preferred Risk Policy is available for those businesses located in less hazardous areas. However, keep in mind that while you can purchase flood insurance at any time, in most cases there is a 30-day waiting period from the date of your application before coverage goes into effect. You can’t just call your agent when the rain begins to fall to put coverage in place.

The maximum amount of flood coverage currently available through the National Flood Insurance Program is $500,000. Depending on the area where you live, though, it may not be necessary to purchase flood insurance at maximum amounts. If you are located outside a designated high-risk area, you can purchase partial coverage and receive an ACV (actual cash value) payout for damages up to the purchase amount.

However, if you have a lot of equity in your buildings and property, you may want to consider purchasing Excess Flood Protection, which can provide total coverage for up to $1 million (twice the regular limit). This extra protection may be very prudent given today’s inflation and excessive construction costs.

Last but not least, don’t wait until disaster strikes your business! Assuming you have (or are going to get) flood insurance for your salon, now is a good time to take preventive action to minimize your flooding risk exposures and reduce damage claims. Remember, in most cases there is a 30-day waiting period from the date of your application for flood insurance, so don’t wait; one low annual premium can protect you and your tanning operation.

If you would like more information on flood insurance or any of Universal’s other specialized insurance coverages, please contact Universal Insurance Facilities, Ltd., 3300 N. Central Ave., Suite 1520, Phoenix, AZ 85012; phone: (800) 844- 2101; fax: (602) 222-3019 ; e-mail info@univins.com; www.universalinsuranceltd.com. 

1. Floods Can Happen to Any Business at Any Time 
Your business doesn’t have to be near water to be at risk. Several inches of rain in a short period can cause flood damage, even in areas not normally prone to flooding. In fact, approximately 25 percent of flood insurance claims come from low- and medium-risk areas. Unfortunately, only a fraction of businesses exposed to the risk of flood damage are insured.

2. Floods Occur Far More Often Than Fires 
You wouldn’t consider leaving your business uninsured for fire, yet you are four times as likely to experience financial loss from flood than fire if your business is located in a flood plain. Every year, more homes and businesses are damaged by floods than any other natural disaster.

3. Don’t Count on Federal Assistance in the Event of a Flood 
Federal assistance is available only if the U.S. President declares a major disaster, and less than 50 percent of all floods qualify for federal assistance. And even if a disaster is declared, assistance is just a loan, which must be repaid in full with interest.

4. Floods Damage Far More Than Buildings 
Affordable flood insurance is available for the property in your building(s) ranging from merchandise to machinery, even for improvements you have made to a building you don’t own. Up to $500,000 of contents coverage can be purchased. If the value of your business is more than $500,000, you can purchase an Excess Flood Policy to provide total coverage for up to $1 million.

5. Flood Loss is Excluded Under Most Commercial Property Policies 
Fortunately, flood insurance is readily available through the Bankers Insurance Group. Today Bankers Insurance insures more than 4 million policyholders in more than 19,000 communities across the United States. The waiting period for new policies is generally 30 days, except when securing a new loan, so don’t delay—contact your insurance agent for more information today.