Small business owners often look at their insurance coverage as an unwanted expense or a necessary evil because a landlord is making them carry it,” says Brent Allen, president of the Allen Financial Group, an insurance brokerage firm based in Phoenix, Ariz. “But for the salon owner, that business is usually her largest asset. In many instances, her professional liability insurance policy is the only thing standing between her and bankruptcy.”

For that reason, Allen and other insurance experts advise salon owners and techs to take an inventory of their assets and consider what they would do if a customer sued them for hundreds of thousands of dollars. And they’re not crying wolf either. The Marine Agency Corporation, a Maplewood, N.J.-based insurance company recently paid out two large claims after nail technicians were sued.

“One was after a manicure — a person ended up with a severe infection, cellulitis in the finger — and doctors had to amputate a good portion of the finger,” says Mary Lynne Blaesser, a certified insurance counselor with the company. “The reward claim was well over $100,000. In another case we had a person who fell getting out of a pedicure chair and was awarded $60,000 for injuries that she suffered.”

Unfortunately these two incidents are not extraordinary. “We are seeing more claims for infection, which highlights the need for better sanitation service — but at the same time, it also highlights the need for insurance to pay for those claims when they do arise,” says Blaesser.

Insurance Benefits

So what does professional liability insurance really cover?

“Salon owners need professional liability insurance to protect themselves in the event of bodily injury or property damage occurring as a result of a professional service rendered in the salon,” says Frank Monaco, a spokesman for Hairdressers Agency, a division of Bay Shore, N.Y.- based insurance company WH Brownyard Corporation.

That doesn’t just apply to incidents that occur while someone is in the salon. That could also apply to an incident that takes place at a later time if the customer attributes its cause to something that happened in the salon.

“Professional liability also deals with long-term exposures. Say someone maintains that you caused them injury by using a particular product in repeated treatments over a long period of time,” says Allen. “If, all of a sudden, a customer’s fingernail started falling off, someone is going to assume that it might be the fault of her nail technician.” Even if a technician was not responsible for the problem, she might not be able to prove it, so professional liability insurance would kick in and pay the claim.

There is also the possibility that a salon owner will be wrongly sued for something that she can prove she did not do. In that case, there may not be a huge payout, but there will still be costs involved in defending the case.

“Attorney fees can be quite costly,” says Blaesser. “You can have someone who falls and gets hurt coming into a salon, and it may not be the salon owner’s fault; maybe the landlord didn’t clean the sidewalk properly. But in that event, all the people who are involved in that business — the landlord, the salon owner, and the nail technician — will probably all be sued. If you have to go out and hire your own attorney to defend you, you could spend $50,000 or $60,000 in attorney’s fees just to get to the point where it’s thrown out of court.”

Professional liability insurance will not only take care of any settlement that is awarded to the customer, but it will pay for legal fees, as well. “To me, that’s one of the best benefits of having professional liability insurance — to pay that attorney’s fee,” Blaesser adds.

Who Needs It

Every nail technician should be covered by professional liability insurance, but not every nail tech will have to pay for it herself. Some nail salon owners buy an umbrella policy that will cover all of the technicians that work in the salon.

True employees will generally be covered under the salon owner’s policy. But since insurance coverage isn’t required by law, employees should ask their salon owner if a policy is in place. “I don’t worry about it,” says Cindy Nguyen of Angel Nails and Hair Design in Hermosa Beach, Calif. “I’m just an employee. The owner handles all the insurance.”

At booth rental salons, the owner’s policy may or may not cover the renters, and if it does, the coverage may be limited. In some booth rental situations, the owner may demand that renters buy professional liability insurance as one of the rules of the contract.

Salon Plaza, a nail and hair salon in Largo, Md., is one such company. Salon Plaza makes sure each renter is covered by a professional liability insurance policy, says Torrence Wimbish, a nail technician and manager of the salon. However, to enforce this policy, the company takes care of all the details and merely adds the cost of the insurance to each tech’s rent.

“In order to simplify a lot of things we add the premium into their rental amount. It’s simplified with one big umbrella policy — it just makes it easier for the individual to be covered,” Wimbish says.

However Wimbish also encourages the technicians to buy additional coverage since the umbrella policy only covers the basics. “We urge techs to get additional coverage individually. They may need individual coverage that protects them in areas that a basic policy does not.” If, for example, the salon owner’s policy covers nails and hair, and you do skin care or waxing, you may need additional coverage.

The important thing to do is make sure all parties who may be sued communicate with each other. A nail salon owner is not immune to a lawsuit brought against a renter, so everyone needs to get together to determine whether all parties are covered, and if they’re not, they must determine who will pick up the tab for a policy.

“Sometimes there are an awful lot of assumptions being made,” says Allen. “Some young nail tech comes in, rents a space, buys product and some other things, and it’s often easy to make an assumption that she’s getting some kind of insurance along with it.”

Never assume. If you’re a renter, ask your owner if you’re covered under an umbrella policy. If you’re an owner, ask your renters if they have professional liability insurance. “As an owner, I would certainly want to be sure of two things,” says Blaesser. “That the tech’s coverage is in place and that the salon or spa is named as what we call ‘additionally insured’ so that if the salon or spa is brought into the lawsuit that the technician is involved in, they would be covered under that technician’s policy.”

In some cases, as Wimbish suggests, you may find that it makes sense for both the renters and the owners to buy policies in order to adequately cover the business’ assets.

Determining Coverage

“A person can buy as little or as much insurance as an insurance company’s willing to sell,” says Allen.

One determining factor in how much coverage you’ll need is the number of techs being covered by the policy and the worth of the assets you’re trying to protect. Also consider the risks involved and what the chances are that an error can lead to customer harm. You’ll also have to take into consideration what you can afford. A policy can cost from $500 to thousands annually.

Some insurance companies demand that business owners take out a minimum amount of coverage in order to be insured. “Insurance companies are typically not comfortable selling less than a certain amount of coverage, and I would say the floor of liability coverage that is typically available is about $300,000,” says Allen. Sometimes landlords will also demand a certain amount of coverage. For example, if a salon rents a space in a strip mall, the owner of that strip mall might require tenants to carry a certain amount of professional liability insurance.

However, the most common amount of coverage sold to small businesses is $1 million, says Allen. “It’s just a number that everyone jumps to and it seems to establish a comfort level for a lot of people,” he says.

If you buy $500,000 and you get sued, the insurance company will pay up to $500,000. In many cases that figure does not include attorney’s fees, so in reality the insurance company would pay out $500,000 to the person filing the claim, in addition to any attorney’s fees that you rack up in the process of trying your case.

Exclusions from Coverage

While professional liability coverage gives your business an added layer of protection, it does not give you free reign to be careless.

The insurance won’t cover you “if you intentionally mean to hurt someone,” says Blaesser. It’s also important that you know all of the rules and regulations of your state because if someone gets hurt and you’ve violated a state regulation in the process, the insurance won’t kick in either. “In some states you can’t use certain types of equipment or certain products in nail salons — if you’re using those products and it’s against the law in your state, then of course the insurance will not apply,” Blaesser adds.

When shopping for coverage, it might make sense to find an insurance agency that is familiar with the salon industry. Several companies offer programs for salon owners and nail techs. For example, Allen Financial Group offers a policy called the Ultra Salon Service Program, which is a package of insurance coverage that is specific to the beauty industry. “The woman who heads up that program and her assistant were in that industry for over 10 years,” says Allen.

Likewise, Brownyard has its Hairdressers Agency. When calling around to insurance companies, it won’t hurt to ask them whether they offer coverage to many salons and if they have a special program for salon owners and booth renters. The more familiar they are with the nail industry, the better they will be able to meet your insurance needs.

The Psychological Factor

While it seems logical that one could use professional liability insurance, the truth of the matter is that many nail techs are not covered, industry officials say. For some it’s a matter of cost. Others don’t think they’ll ever need it.

“People feel like ‘I’ve been without it this long and had nothing happen,’” says Wimbish. “They fall under the category ‘nothing’s happened to me so far, so why do I need it?’”

But just because nothing has happened thus far doesn’t mean nothing ever will. And unfortunately, you don’t have to do anything wrong in order to be hit with a lawsuit.

“Even though you don’t want to think about it, some customers come in with an ulterior motive to see if they can make a fast buck, and it’s more of a scam situation,” says Wimbish. “They come in and put the blame on the professional technician and then try to sue. Insurance is a good way of protecting us and them.”

The bottom line is that every salon owner and nail tech is at risk of someone filing a claim against them no matter how careful or how good at the job they are. Even if that claim does not lead to a judgment against them, the cost of legal representation can set their businesses back years. For that reason, it makes good business sense to take precautions and make sure your business has enough professional liability insurance to carry you through any emergency.

In other words, says Allen, don’t take it lightly. “People should maybe spend a few more minutes looking at the quality of the coverage and making sure that the coverage limits are adequate rather than just trying to satisfy some landlord’s requirement,” he says.

Tamara E. Holmes is a freelance writer based in Largo, Md.

Shopping Tips
When shopping for liability insurance, compare apples to apples, because not all policies provide the same coverage. Some policies include legal fees in the face value of the policy, while others have “defense in addition to liability” limits, which means that even if someone wins a claim for the full face value of your insurance, the insurer will pay legal fees in addition to the settlement amount.

You’ll also want to find out if the policy is on an “occurrence” or “claims made” basis. With the latter, a claim made after the coverage ends won’t be covered, even if the incident occurred while the policy was in coverage. An “occurrence” policy, on the other hand, provides coverage as long as the policy was in effect, regardless of when the claim is made.

Medical-expense coverages are another desirable option. The purpose of medical-expense coverage is to provide relief from small claims where the person really just wants reimbursement for medical expenses and lost pay.

Really do read all the fine print before signing a policy and paying premiums. And if you sell private label or repackage any products, know that you’ll need product liability insurance as well.

Salon-Friendly Insurance Companies:

AIG Companies
New York, N.Y.
(877) 638-4244; (908) 679-3150
Online support: Yes

Allen Financial Group
Phoenix, Ariz.
(800) 874-9191
Online support: Yes

Bell-Anderson Insurance
Kent, Wash.
(800) 442-1281
Online support: Yes

GLS Underwriters, Inc.
Mesa, Ariz.
(800) 653-1450
Online support: Yes

Hairdressers Agency (a division of WH Brownyard Corporation)
Bay Shore, N.Y.
(800) 645-5820, (631) 666-5050
Online support: Yes

Marine Agency Corp.
Maplewood, N.J.
(800) 763-4775
Online support: Yes

Palomar Insurance Corp.
Montgomery, Ala.
(800) 489-0105
Online support: Limited

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