The Importance Of Choosing A Comprehensive Insurance Policy

insurance policy

Guest Article by Joseph L. Bolger, Head of Arbitrating / Industrial Relations at ESA Consultants

*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.

Insurance Policy Types

First of all, 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 covers are for protection against potential losses through unforeseen circumstances like theft, liability, property damage, personal injury to customers and staff, and in the event of an interruption of business.

Why is that important? Because 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. So, from a business management point of view, being covered and protected by insurance is the more manageable solution.

The Nightmare Scenario

Imagine a customer makes a claim 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 the company or their insurance companies over €31,276.00 per claim, plus costs.

Scenario Example

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 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 €60k, plus costs.

*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.

The Correct Action Should Have Been…

  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. To have 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.

Other Facts

Where you do settle a case, the following may arise: if it’s an employee collecting illness disability payments and you took your time in reaching a settlement on top of the excess you must pay, you could face a bill from the Social Welfare Department to repay them 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 manufacturers. 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. Also, 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 cost you a lot of money.

Customer Accident

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 €2k 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 only having to pay out €18k plus her own solicitor’s costs.

*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.

Other Issues

The type of claims we get from salons 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.

There are also staff claiming wrongful or unfair dismissal, equality claims, computers crashing with no backup, electrical faults, staff taking customers, and theft.

Our Advice

An insurance policy is invisible: you pay for it, and you get a lot of paper. After that, it only appears on your bank statement every month. So that’s why I have it. Crying over the cost or the fact that insurance policy companies seem to settle out cases even though you object is merely pointing the finger at the wrong people. If you get your house in order, the settlements will be less, and in time, your premium will drop.

The process

If a claim comes in, you must send it without delay to your broker or insurance provider. They arrange for an inspection (costly), arrange the legal team (very costly) and cover such things as experts, medical reports, engineers, court costs (all costly). The hours you spend on prepping a case is incredible. In a recent case, just doing the investigation consumed 2 days with three staff members… and that was just to send it to the insurance company before they sent it to their Solicitors!

I have heard many employers say: “I’ve been in business 10+ years and have never had a claim!”… Just because you have left your car unlocked for the last two years does not mean that one day it won’t get broken into!

Thanks for reading,

#LetsGrow


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