BEAUTICIANS AND BARBERS PROFESSIONAL LIABILITY COVERAGE ANALYSIS

(March 2022)

Coverage for professional liability for beauticians and barbers may be handled as simply as adding an endorsement onto a BOP or a CGL or by acquiring a policy especially designed for the professional exposure. This article is a generalized, brief discussion of standalone coverage.

Coverage for incidents that may occur to beauty salon customers is critically important. Besides the various risks, such as customer falls/slips that are faced by any business, there are a wide variety of injuries that may arise from salon employees serving customers:

There are other sources of loss than what’s depicted above such as scalds, electric shocks, damage to customer property due to carelessly handling equipment, tools and being blinded.

INSURING AGREEMENT

The professional liability coverage part (or policy) insuring agreement that applies to full-service beauty salons generally refers to a number of pertinent definitions. However, insurers that target beauty shops and barbershops with relatively limited services may use less-comprehensive provisions. Under this section, the insurer agrees to pay amounts that are the insured's legal obligation to pay for bodily injury or property damage related to beauty salon services (as defined by the applicable coverage form).

Note: Some forms or coverage parts may define and refer to providing coverage for eligible damages rather than referring to bodily injury and property damage.

The distinction between a general premises exposure and a professional liability exposure is not always clear.

As this is a source of professional, rather than premises liability, protection extends to both actions and failing to act when harm is related to beautician and barber services.

Example: Narciss-Us Beauty College is covered by both a Commercial General Liability Policy and a Beauticians Professional Liability Policy.
Scenario 1: A customer leans on a counter to let the receptionist know that she’s here for her appointment. The countertop is new and has yet to be anchored into place. It falls off, crushing the customer’s toes. Covered by CGL? Yes. Covered by Beautician’s Professional? No
Scenario 2: A customer is in a salon chair, undergoing a perm. The solution mixed by the beautician causes severe scalp burns and hair loss. Covered by CGL? No. Covered by Beautician’s Professional? Yes.

Generally, the products hazard is also covered in the professional liability insuring agreement. The protection is substantially the same when the insurer follows the practice of providing it under a commercial general liability coverage part.

DEFENSE OBLIGATION

The insurer may, at its discretion, investigate an occurrence and settle any resulting claim or suit. This right extends even to allegations that may appear to be groundless. Defense is ended when the applicable limit of insurance is exhausted by payment of judgments or settlements.

Note: Some forms include cooperation and voluntary payment wording in the section.

DEFINITIONS

There are regular references to certain terms in beauticians and barbers professional liability insurance contracts. Because of their importance, these terms are defined. While not all of the following terms are defined in the policies of various insurers, they have general acceptance.

"Beauty salon services" means an act, error or omission in the rendering (including the use of related preparations or appliances) of any of the following services:

· Permanent hair waving by cold wave or acid wave, curling iron or blow dryer

· Aromatherapy

· Hair straightening or hair relaxing

· Hair cutting, styling, trimming, singeing, conditioning, dressing, shampooing, shampoo tinting, bleaching, dyeing coloring by liquid dyes, Henna treatment or hair crayons

· Eyelash and eyebrow tinting by use of mascara and eyebrow pencils

· Eyebrow arching, tweezing and plucking

· Finger and water waving

· Removal of unwanted hair by shaving or use of wax, or depilatory preparation

· Hair and scalp massaging and conditioning

· Manual application of cosmetics

· Manual face and neck massaging

· Nail care services

Regarding “services” – It is critically important that an insured understands how the applicable policy defines services. In the event of a loss, the insured and the insurer may dispute what is meant by the definition.

Example: Trendy Tresses Salon is insured by Beauticians Casualty Inc. The following item is a matter that may need clarification:
Policy item listed as a covered service	Trendy’s advertised list of nail services
Nail Care Services	Artificial Nails
	Buffing and Polishing
	Fantasy TM
	Manicures
	Nail Art
	Nail Conditioning
	Nail Repairs
	Pedicures
	Wondrous TM
While most of the items listed appear to fall into nail service that match the policy, what about the trademarked items? It’s possible that they could be packages that include procedures that could be excluded from coverage.

"Bodily injury" means bodily injury, sickness or disease sustained by a person, including resulting death at any time.

Example: Betty sues Bigville Beauty Hangar. Several weeks earlier, she had a pedicure performed by one of the Hangar’s employees. After the service was done, Betty experienced increasing soreness on her left foot, then discoloration appeared and she went to her doctor. The doctor diagnosed a severe infection and several toe nails had to be surgically removed. Betty’s lawsuit alleges incompetence and performing with non-sterile instruments. This would qualify as BI.

"Coverage territory" generally means (but check the contract):

a. The United States of America, its territories and possessions, Puerto Rico and Canada;

b. International waters or airspace, provided injury or damage does not occur in the course of travel or transportation to or from any place not included in a. (above);

c. All parts of the world if the injury or damage arises out of goods or products used or sold by the named insured in the territory described in a., or the activities of a person whose home is in the territory described in a. but who is briefly away on the named insured's business; and the insured's responsibility to pay damages in a "suit" on the merits, in the territory described in a., or in a settlement to which the insurer agrees.

“Insured”

If the named insured is an individual, the named insured is an insured. His or her spouse is also an insured.
If the named insured is a partnership or joint venture the named insured is an insured. The members, partners and their spouses are also insureds.
If the named insured is an LLC, the named insured is an insured. The managers and members are also insureds.
If the named insured is an organization other than a partnership or joint venture, the named insured is an insured. The executive officers and directors are insureds and stockholders are insureds with respect to their liability as stockholders.

Insured also typically includes:

· An operator who rents or leases (from the named insured) booth space, chairs or a portion of the premises for the conduct of beauty salon or barbershop services.

· Employees with respect to employment by the named insured. However, employees are not insureds under the following circumstances:

o Bodily injury to the named insured or another employee in the course of employment

o Bodily injury caused by an employee providing or failing to provide health care services

o Property damage to property owned or occupied by, rented or loaned to any employee or any partner or member

The legal representative of a named insured upon the latter's death.

“Named Insured” refers to the organization or individual described in the declarations page.

"Occurrence" means an accident, including continuous or repeated exposure to substantially the same general harmful conditions.

Example: Sally is enjoying her first week as a cosmetologist at Acme’s Beauty Ranch until, while preparing to do a wax peel on a client, she trips and spills the entire wax pot on not only the client but also on the client’s daughter who was sitting beside her. The client sues Acme for the medical and graft surgery expense needed on both of them. Although two different individuals were injured, it is only a single occurrence.

"Products hazard," with respect to beauticians and barbers, means bodily injury and property damage arising out of the use or handling of any article or product of another sold or distributed by the named insured, provided the bodily injury or property damage meets all of the following conditions. It must occur:

· After the named insured has relinquished possession of the product to another

· Away from the premises designated in the declarations

· Away from other premises owned, rented or controlled by the named insured

Note: It should be stressed that the malpractice insurance basically covers claims arising out of preparations applied by operators in the shop. Coverage for the products hazard applies to claims arising from take-home preparations sold or distributed by the named insured for use by clients to continue hair or skin care. If products liability coverage is not included in the insuring agreement of a professional liability coverage part, it must be made effective under a commercial general liability coverage part for the off-premises products exposure to be covered.

"Property damage" means:

· Damage to tangible property, including any related loss of use. Such loss of use is considered to occur at the time the property was damaged (or destroyed).

· Loss of use of tangible property that is not damaged. Such loss is considered to have occurred at the time of the property's loss.

"Suit" means a civil proceeding in which damages are alleged because of bodily injury or property damage to which the insurance applies. It includes either of the following:

· An arbitration proceeding in which such damages are claimed and to which the named insured must submit (with the insurer's consent)

· Any other alternative dispute resolution (ADR) proceeding in which such damages are claimed and to which the named insured submits but only if done so with the insurer's consent

Note: Participating in arbitration or ADR without the insurer's consent may harm the insurer's rights and possibly void any coverage.

COVERAGE TRIGGER

The fact that beauticians and barbers professional liability coverage parts are not standardized makes it especially important to check how coverage is triggered in a particular contract. Provisions (usually in the insuring agreement) relative to time of injury and time of the act allegedly causing it are crucial, as are pertinent definitions.

The triggering mechanism in policies issued by a cross-section of insurers makes clear that professional liability coverage applies to covered services only if all of the following are true:

· The covered services are rendered at premises identified in the policy

· "Bodily injury" and/or “property damage" is caused by an "occurrence" that takes place in the "coverage territory"

· "Bodily injury" and/or "property damage" occurs during the policy period

Example: Darla had been a regular customer of Mane Street Saloon for years. One day she went in for her appointment which included shampooing, drying and styling her hair. Her stylist showed her a new list of salon service prices that appeared in two columns. The stylist said that, in several categories, the new, higher prices applied to her. When asked why there were two columns since she would be getting the same services she normally received, she was told that the hair that usually belongs to their more “diverse” customers was more difficult to handle. The owner wanted prices to reflect the increased amount of salon employee labor. Darla left the salon and later filed a lawsuit.

Mane Street’s owner filed a claim with its insurer, forwarding all the legal paperwork she received from Darla’s attorney. The insurer denied the claim. The owner was informed that, while the lawsuit involved actions directly related to the salon’s operations, no bodily injury or property damage was involved with the occurrence (charging a special fee for "diverse" customers) that triggered the lawsuit.

With regard to coverage for the products hazard, whether incorporated in the professional liability coverage part or through a CGL coverage part, the coverage applies to "bodily injury" or "property damage" resulting from the "products hazard" only if:

· "Bodily injury“ or "property damage" is caused by an "occurrence" that takes place in the "coverage territory"

· "Bodily injury" or "property damage" occurs during the policy period.

Further, the BI or PD to which the policies respond are also defined by the applicable contract (though, realistically, the terms should be similar).

LIABILITY LIMITS

The limits of liability specified in the declarations are the maximum the insurer will pay for covered services performed (and, if included in professional liability coverage, for the products hazard). The limit applies, regardless of the number of insureds, claims made or suits brought, or persons or organizations making allegations and seeking compensation. The limits apply separately to each consecutive annual period.

An occurrence limit and an aggregate limit are shown in the declarations. The occurrence limit is the maximum that will be paid for all damages (bodily injury and/or property damage) that are suffered by one or more parties when the damage is caused by an eligible incident (covered occurrence).

Example: A new employee with Trendsetturz Beautyspot is nervous as she is asked to step in to do a bleach job on the store’s most important customer. In a hurry to get things started, she grabs the wrong chemicals for mixing the salon’s “special hair formula.” She creates a highly caustic mixture that fills the salon with fumes. More than a dozen customers suffering eye and throat injuries sue Trendsetturz. The salon’s $500,000 limit is the entire amount available to apply to the flood of claims seeking nearly a million in damages.

The aggregate limit is the most that the insurer will pay for all eligible claims and lawsuits that occur during the applicable policy period. The aggregate amount is not affected by the number of insureds or number of claims. Once the aggregate amount is reached during a policy period, no other coverage is available.

DEDUCTIBLE

The insured must pay all claims and expenses up to the amount of any applicable deductible specified in the policy declarations as a condition of payment by the insurance company. In general, the deductible applies separately to each claim and is payable as claim expenses are incurred or payment for a claim is made.

However, some beauticians and barbers professional liability coverage parts contain a provision that gives the insurance company the right to pay a claim or a judgment in its entirety and then request reimbursement from the insured for the amount of the applicable deductible. This allows an insurer to maintain more control over its settlement costs.

Example: Freda demanded to be paid for damages for a perm that went horrendously wrong. Her once beautiful tresses were reduced to brittle stubble due to a huge mistake in the amount of peroxide used by one of “Hairy Excited’s” stylists. She demands $6,700. She has yet to sue, but after several weeks of stalling by “Hairy’s” owner to pay the $2,500 deductible, Freda announces that she will bring formal suit and add an allegation of bad faith. “Hairy’s” insurer pays Freda the entire amount and then requests payment of the deductible from the salon.

EXCLUSIONS

Under this section of a beauticians and barbers professional liability coverage part or policy, common exclusions involve exposures covered by commercial general liability insurance and other major types of property and casualty insurance available to and appropriate for salons and shops, notably workers compensation insurance. A pollution exclusion, similar to that associated with commercial general liability insurance, and exclusions pertinent to violation of law are a given.

In general, insurance does not apply to claims involving:

· Use of procedures and use of preparations that are illegal

· Injury related to a professional service performed by a minor or by an unlicensed operator (when licensing is required by law)

· Combustion, burning or explosion of (hot) combs, or other articles or products of a flammable nature

· Use of any appliance, apparatus or device employing x-ray, electrical rays, radio rays, radio waves, or electronic waves

· Ear piercing, electrolysis, slenderizing, reducing, body massage, or bath treatment, unless such practice is covered by endorsement or, otherwise, specifically described as a covered service

· Face lifting, plastic surgery

· Use of any electrical or mechanical apparatus or device for massage

· Chiropody (treatment of minor foot ailments), podiatry and/or any procedure involving the cutting and/or removal of warts, moles, calluses, corns, skin, or any other growths (including the removal of hair from such growths)

· Use of any method or type of tanning service

· Service involving the breaking, piercing, cutting, lacerating, or suturing of the skin, or any procedure involving any surgical technique, major or minor

· Microdermabrasion

· Hair implants or transplants

· Illegal or dishonest acts

· Performing services which the entity is not properly licensed to offer to clients

Products Hazard Exclusions

Several exclusions are generally applicable only to the products hazard when the hazard is covered in a beauticians professional liability coverage part. They include claims arising from:

· Goods or products manufactured by, bottled by, rebottled by, or repackaged by the insured

Example: A dozen customers sued Normaleen’s Facials after being burned and scarred after using “Normaleen’s Special Exfoliant.” It is made by a company in another state but is relabeled by Normaleen. Though the salon is protected by a Beauticians Professional Liability policy, these claims are ineligible for coverage.

· Goods or products sold under the insured's label

· Withdrawal, inspection, repair, replacement, or loss of use of products manufactured by, bottled by, rebottled by, repacked by, or sold under the insured's label or that of an affiliate owned or controlled by the insured.

The exclusions in a policy prepared for a salon or shop must be examined carefully and thoroughly discussed with the insured.

CONDITIONS

This section explains the various obligations that exist for the insurance company and the insured under the policy. Some of the common conditions are:

Bankruptcy – this informs the insured that bankruptcy has no effect on the operation of the policy and its provisions.

Event of Loss Duties – it is here where the insured finds information on the duties that the insurance company and the insured owe to each other when a loss occurs, including reporting requirements, level of cooperation and payment obligations.

Note: Some forms may include more detailed and separate Cooperation and Voluntary Payment provisions.

Notice – typically informs the insured what is considered to be proper notification to the insurer regarding contact about significant events such as loss, lawsuits, policy changes, etc.

Other Insurance – this provision explains how the insurance policy responds when other sources of coverage exist at the time a loss occurs. Coverage may apply on a primary, proportional or excess basis depending upon circumstances.

Predisposition or Allergies – a provision which excludes coverage for harm arising out of an incident which required that a person be tested prior to the use of a treatment or process. An exception typically exists for customers who previously experienced uneventful results from previous treatments or processes.

Representations – such a condition typically advises that information provided by the applicant/insured are held to be accurate and, in the event that information is found to be false, missing or misleading, the result could be voiding of the policy or denial of a claim.

Subrogation – this condition advises that the insurer is granted permission to take over the insured’s right to pursue a third party that has responsibility for damages the insurer has paid on behalf of the insured.

Termination – provides information on notification obligation the insurer owes to the insured when coverage is either cancelled or nonrenewed, including amount of advanced notice, effective date of termination and method of notification. The insured typically only needs to inform the insurer of termination and advanced notice is not usually required.