Customer Service

Is Refunding A Client's Money Admission Of Liability?

Are you vulnerable to a client lawsuit if you refund money to an unhappy client? Our legal experts say “maybe.”

Rare is the business owner who has not had to refund the money of an unhappy customer. But if the unhappy customer is a nail client who developed a reaction to a nail product, does offering a refund equate to an admission of negligence? This unhappy scenario is facing salon owner Jean Johnson of Wayzata, Minn. What follows is her account of the incident and recommendations from NAILS’ legal and insurance experts.

Jean Johnson: A new customer, referred by another client, wanted to try-acrylic nails. She told me she had worn gels in the past and had had a slight problem with them, but she wasn’t very specific about what that problem was. I admit, I didn’t ask her for more specifics either. One of my nail technicians, an experienced professional who has been doing nails for more than 10 years, serviced this customer.

Things were fine at first with her nails, but a few-days after her second fill, the client had an unusual and strong reaction (the nail technician said she had never seen anything like it in her experience). The client had bubbling around her cuticles and the skin was tender and red up to her first knuckles.

You could tell it was an allergic reaction. We couldn’t use acetone to get the nails off because it stung. We waited a few days, hoping the condition would improve, but it still stung so we buffed off what we could. I gave the client a natural manicure and some nail products at no charge. But that wasn’t the end of it.

A few days later, the client called back. She wanted a refund for the original full set and for both fills. Because the technician is an employee, the problem was now mine. The client told me that she was now being treated by a dermatologist and that her fingers were so sore that she couldn’t braid her horses’ tails and had to pay someone else to do it.

NAILS: Should Johnson refund the client’s money, or will she be admitting that the salon was at fault? Could she be setting herself up to be sued in the future? Is she legally liable for damages?

Dave Kason, a liability insurance adjuster in California, says the salon owner could give a refund in the spirit of dealing with a dissatisfied customer, but warns that if a lawsuit is filed, the plaintiff’s attorneys will use anything against a business owner, including the argument that a willingness to refund implies guilt.

Barry Sigman, a Michigan civil litigation lawyer, says salon owners must make refund decisions on a case-by-case basis. “It’s a delicate thing. If she gives a refund, she might want to ask for a ‘release from liability’ from the client. Of course, that could put ideas into the client’s head, and you certainly don’t want to drive them to a lawyer,” Sigman warns.

Sigman says that if an owner can get a client to agree to sign a liability release or a promise not to sue in exchange for the refund, the client cannot bring a suit. In a case like Johnson’s, where someone is already making some demands, Sigman advises the business owner to keep communication with the customer to an absolute minimum.

To prevent this situation from happening in the first place, a nail technician working on a brand-new client should provide that client with a printed informational handout that describes the known risks of that particular nail treatment, and what the client should do in the event she develops a problem. Further, a nail professional could even ask that a client sign such a handout, indicating that she fully understands that there are some risks associated with the application and upkeep of artificial nails. At the very least, a nail professional should discuss the possible responses to product with the client and make a note of the discussion on her client card. (For samples of disclaimers and client handouts, see “I’ll See You in Court” in the January 1993 issue of NAILS.)

Says Sigman. “You don’t want to chase business away by declining to service a client altogether, but if you believe a client is at risk because of a previous problem, you should tell the client, essentially, ‘If we’re going to take the chance, I want you to signify that you understand it,’” he says.

Should the nail technician have worked on the client in the first place?

Probably not. When the client indicated that she had had a previous reaction to gels, it should have indicated to Johnson that acrylic-based services, which include gels, were inappropriate. At the very least, the nail technician could have done a “use test,” (similar to a patch test, to see if a client would develop a reaction to the product) before she applied the new set. Says Doug Schoon, an industry chemist and the executive director of Chemical Awareness Training Service in Newport Beach, Calif., “The chemical make-up of gels and acrylics isn’t that different, so the nail technician should not have used gels. If the client had already had a reaction to gels, it’s likely she’d also have problems with acrylics.”

But the client never made it clear what her earlier problem had been. Johnson says. “She really downplayed it; she didn’t make if sound anything like this.” Johnson believes the customer knew the risks because of her past sensitivity.

“It was a judgment call. If that’s what the client wanted, we’d do it,” says Johnson.

But as Kason points out, when it comes to the law, even though the customer is king, the business owner is supposed to protect the customer, even from herself.

“The business owner is supposed to know more than the customer,” says Kason. “It doesn’t matter how bright your client is in her own field, when it comes to nails, the operator is the expert and is supposed to protect the client.” Kason, who is hired by insurance companies to represent them on cases, says that the consumer almost always gels a favorable ruling in court. The bottom line, he says, is that business owners must know their products and must warn customers about the risks in using them.

Although Johnson made some mistakes in handling this client, whether she is genuinely liable is unclear. “It’s a question of fact that only a jury can decide,” Kason says.

Sigman and Kason both say that besides strong warnings to clients, the best protection for business owners is to maintain liability insurance.

Schoon, who believes these kinds of nail problems are caused by improper application of the product, says the problems can be solved by better nail technician education.

For Johnson, the situation remains an awkward one. She’s reported the matter to her insurance agent. “The worst part is the client was referred by another client who still conies here but feels put on the spot. We’ve never lost a client to this kind of thing,” she says ruefully.

Johnson did not refund the client’s money, and although no lawsuit has been filed against Johnson or her nail technician, she is unsure whether the client considers the issue over. Johnson’s business owner’s insurance company is now dealing with the client. Johnson believes that the insurance company may pay the expenses the client incurred to see the dermatologist. Johnson’s case is a good example of the need to make sure clients are fully aware of what’s involved in artificial nail care. Johnson and her staff are considering new salon policies to prevent this from happening again — including requiring client waivers or refusing service to clients who have had sensitivities to a product. We will report any further developments of this case in this column.

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