Risky Business: Looking Into Liability Insurance
YOU’VE RISKED A LOT to build your business, but what are you doing to protect all that sweat equity? One careless mishap and your salon of cards could come tumbling down. Director of insurance membership for Associated Hair Professionals, Jenny Flanagan shows how and why it’s important for both you and your staff members to protect yourselves.
ST: Why is it important for a salon owner to have professional liability insurance?
Flanagan: “In any business where you work with the public, there is inherent risk. No matter how careful, experienced or well-trained you and your stylists are, accidents happen. Common mishaps include: clients slipping on a wet floor or tripping over a cord, as well as more direct injuries such as nicks and cuts, scalp burns, and allergic reactions to a color or a styling product. All it takes is one customer who feels they have been harmed—right or wrong—to make an accusation and start a nightmare sequence of events for you and your business. Even unfounded claims and lawsuits are costly in lawyer’s fees, not to mention the damage to your salon’s reputation. Liability insurance gives you peace of mind, so you can concentrate on growing your business, instead of worrying about losing your investment.”
ST: Why is it important for stylists to have their own liability insurance?
Flanagan: “While you may believe your salon’s insurance covers your stylists, it may not. More and more often, lawsuits name individual stylists as well as the salon. Under some insurance plans, the salon is covered as a business, but other individuals named in a lawsuit are not. Those individuals are then responsible for paying their own legal defense costs, court fees, and share of the settlement. One court case could easily threaten the assets and future earnings of a stylist, or even bankrupt him or her. An individual policy ensures that stylists are covered wherever they work, giving them an additional level of protection.”
ST: What type of coverage does a salon owner need?
Flanagan: “At a minimum you should carry traditional business owner or commercial property insurance as well as liability insurance. Business owner and commercial property insurance provides property and liability insurance to businesses that qualify. These policies may provide protection for your building, business property, loss of income, crime coverage (including employee theft) and other protection you may need for your business. A complete liability insurance package should include three types of liability coverage: professional liability (malpractice), general liability (slip and fall), and product liability. Every industry has its own nuances so you should look for insurance tailored specifically to the salon profession. An important distinction is to check whether your policy is ‘occurrence form’ or ‘claims made.’ These reflect two different ways of dealing with lawsuits that arise long after the actual incident occurred. Attorneys commonly wait as long as two years before filing a claim, just before the statute of limitations is about to expire. When this happens, a policy with the preferred occurrence-form coverage would still protect you, as long as you were insured at the time of the incident. Claims-made coverage only protects you if the policy is still in effect, so an expired policy would leave you and your business vulnerable.”