Finance

The Importance Of Choosing A Comprehensive Insurance Policy

*Please note that the following information may differ from country to country. ESA Consultants operates in Ireland.

I’ll start this article by declaring my independence. I am not connected to any insurance company. However, 30 years of dealing with Safety and HR Legal matters has proven to me that only a fool in a fair would run a salon or spa –or any business for that matter– without a comprehensive insurance policy.

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Insurance Policy Types

Most types of business insurance are optional. That being said, choosing a comprehensive insurance policy is highly recommended for all business owners. You may already be familiar with some types:

  • Landlords will require you to carry property insurance.
  • Public insurance provides cover to your customer’s claims.
  • Employer liability insurance protects you from employee claims.

Most offer protection against potential losses through unforeseen circumstances like theft, liability, property damage, personal injury to customers and staff, as well as interruption of business.

The Nightmare Scenario

Imagine a customer claims that you, or a therapist employed by you, caused her scalp to burn during a treatment, and sues you through her solicitor. You get that awful letter:

Dear XXXX,

We act for XXXX we are satisfied from our instruction that you are responsible for the personal injury, pain and suffering, and loss suffered… and call upon you within 7 days to admit liability.

Unfortunately, very seldom are you given details of the injury or circumstances, and you are being asked to admit liability within 10 days. In 2016, the average award against employers for similar issues cost a business or their insurance company over €31,276.00 per claim, plus costs.

Fictional Example

Disclaimer: Tina is a fictional character. Names, characters, businesses, places, events and incidents are used in a fictitious manner. Any resemblance to actual persons, living or dead, or actual events is purely coincidental.

Tina, who worked for a salon in 2015, claimed that she was exposed to chemicals and worked with water for up to 5 hours a day. Tina developed skin dermatitis that prevented her from working. Her Doctor’s report stated that she needed to keep her hands out of the water and away from chemicals. Her employer, misreading the Doctor’s report, assumed she was no longer able to work and terminated her employment on the grounds of Health and Safety.

Tina’s Solicitor wrote the standard claim letter, and the employer had no insurance. The employer’s Solicitor sought to defend their clients from a claim for unfair dismissal but lost. The suit resulted in a settlement award of €60 000, plus costs.

What Should Have Happened Was…

  1. The employer should have conducted a safety risk assessment. This would have shown the employee could have been provided with PPE (Safety Gloves) and continued to work.
  2. The salon should have had an insurance policy. The insurer would have assumed the liability and representation costs. You may have an excess, but that would be determined by your risk and history.

When you do settle a case, be aware that the following may arise. If the claimant is collecting illness disability payments and you reached a settlement, you could face a bill from the Social Welfare Department on top of the excess you must pay. This bill will repay Social Welfare the entire amount of illness payments the Claimant received.

insurance policy

Product Liability

Users can be liable for loss or damage caused by the products they use in their salons, even when you are not the manufacturer. Should a staff member or customer suffer harm or injury form any product or equipment you use, you could be on the hook for the full claim. You will have to prove you used the product or equipment as per the manufacturer’s recommended guidelines before you can mount a challenge against the manufacturer to recover your costs or join them in the action, and that will be very expensive.

About Claims

If a claim comes in, you must send it without delay to your broker or insurance provider. They arrange for an inspection, arrange the legal team and cover such things as experts, medical reports, engineers, court costs. The hours you spend on preparing a case is incredible.

The type of claims salons tend to get are:

  • scalds,
  • slips,
  • trips,
  • burns,
  • shock,
  • walking into the glass door,
  • cuts,
  • objects falling on the customer,
  • kids getting hurt,
  • pregnancy risk issues, and
  • chemical concerns.
  • You could also face staff claiming wrongful or unfair dismissal, equality claims, computers crashing with no backup, electrical faults, staff taking customers, and theft.

Customer Accident Example

Disclaimer: Names, characters, businesses, places, events and incidents are used in a fictitious manner. Any resemblance to actual persons, living or dead, or actual events is purely coincidental.

In December 2015, a customer walked into a glass door. The door had no markings indicating a danger. The salon owner had removed all stickers from the door while doing up the salon front for Christmas.

The Customer’s daughter claimed that the door was closed, the glass was clean, and the sun was at a low-level, making glass impossible to see. The mother chipped her front teeth and suffered soft tissue injury to her lip. The salon owner offered €2000 to settle the matter at a local level, without taking legal advice or informing her insurance provider. The Customer at first agreed, but then her daughter acting on her behalf, rejected the offer.

The Insurance Company refused liability and the Salon’s solicitors hard work resulted in the owner having to pay out €18 000 plus her own solicitor’s costs.

Our Advice

An insurance policy is invisible: you pay for it, and you get a lot of paper. After that, it appears on your bank statement every month. If you get your house in order, the settlements will be less, and in time, your premium will drop. While you can budget your insurance premiums into your weekly or monthly outgoings, you can’t plan for the legal costs and compensation payments that may arise. From a business management point of view, being covered and protected by insurance is the more manageable solution.

Think about it; just because you have left your car’s doors unlocked and weren’t robbed in the past two years doesn’t protect you from it being broken into eventually!

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Thanks for reading! #LetsGrow


Featured imaged shot on location of Nu Essence, in Dublin. © 2017 Phorest Salon Software.

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