The Risk of Expanding Spa Services Without Protection

Today, there are more than 10,000 spas across the country, running the gamut from larger day and medical spas to the rapidly emerging trend of spa and salon suites with individual estheticians now setting up one-to-two-person businesses.

The beauty industry is booming as customers prioritize self-care, and the global skin care market is responding. It is continuously reinventing itself with a new wave of treatments introduced every year to help customers maintain skin health and ward off signs of aging. This provides opportunities for beauty professionals to expand into new service areas and redefine their businesses to generate new revenue. Day spas and independent estheticians, who have typically offered waxing, facials, hair, nails and massage, are now offering more invasive procedures like lower-end laser treatments.

Medical spas, which traditionally focused on more invasive procedures like Botox, microneedling, and cryotherapy, are now adding pampering and relaxation services like massage and aromatherapy. While seemingly good for business, operators who may not understand the risks associated with the addition of these new services, may quickly find themselves in legal and financial trouble, even risking closure.

Risks of Running a Spa

A bit of due diligence at the front end can help protect your business while still ensuring you can grow by adding new business segments. The majority of lawsuits filed in the day spa segment of the beauty industry are against establishments offering massage therapy or other closed-door services. At medical spas, laser treatment procedures as well as injectables, like Botox, are the biggest risks.

When evaluating new services, establish a checklist of the most frequent liability issues and consider the following questions:

How invasive are the services and what level of expertise is required to provide them?

Basic spa services like waxing, facials, hair, nails, microdermabrasion and low acid chemical peels are all minimally invasive and are often performed by cosmetologists. The more invasive procedures like Botox, dermal fillers and cryotherapy should be provided by a licensed medical practitioner, like nurse practitioners, physician assistants or registered nurses. Similarly, laser service should always be administered by a licensed esthetician or a board-certified plastic surgeon. As spas are adding these more invasive procedures, many owners do not realize the level of training and expertise required, leading to treatments gone wrong and unhappy customers. In fact, there has been a rise in the number of claims due to services performed by unlicensed professionals. This is especially true for estheticians as they incorporate injectables like Botox.

Do I have a full understanding of what my insurance coverage protects?

You would be surprised how many professionals do not understand what is required to protect their business, are underinsured, or worse, do not have coverage at all. It’s not just about the type of insurance you have, but what it includes so that you can limit coverage gaps and exposure as you expand your business. Owners should have a full understanding of their policies, so there are no surprises when accidents occur or customer issues arise.

There are three main coverage options that owners should consider regardless of business size.

• General Liability Insurance (GL). This is recommended for beauty businesses as it protects against claims made by others, including, but not limited to, bodily injury, property damage or personal injury. For example: imagine before a laser treatment your esthetician recommends the use of a particular cream and the client has an allergic reaction. These situations should typically be covered under general liability insurance as they are considered accidents.
• Professional Liability Insurance (PL). Also known as errors and omissions, this is important for beauty businesses that provide a professional service or give clients advice on a regular basis. It covers completely different scenarios not covered by general liability insurance, including alleged or actual negligence in the performance of professional services. For example: if the laser tech does not calibrate the equipment properly during a treatment, burning the client’s skin, this should typically be covered by professional liability Insurance as it is considered professional negligence or an error in their service.
  For businesses that offer closed-door services, PL is critical as it typically offers some level of coverage for sexual abuse and misconduct allegations while GL policies do not.
• Business Owners’ Policy (BOP). This will cover general liability in conjunction with the personal property of the business. This coverage could prove very valuable if the expensive equipment used by a technician is damaged or even stolen. And remember, property theft isn’t always done by burglars. In many cases, employees steal products, serums or even false eyelashes. BOP should typically protect the owners in these cases as well.

Staying Protected

Whichever insurance coverage options you choose, make certain that all the services you provide are covered, so there is no misunderstanding later. Additionally, check if your policy protects you against allegations of causing bodily injury or negligence and communicate with your provider immediately if the business is threatened with a lawsuit. Many insurance companies will reach out directly to the spa’s customer to negotiate an acceptable solution. This helps both parties avoid time going to court, the associated legal fees and the headaches that go with both. In fact, the vast majority of liability claims are settled before they go to trial.

As the beauty spa business continues to evolve, the owners of both large and one to two person businesses who proactively address risks in their salons are more likely to succeed. It’s a risky business that requires smart, risk-averse businesspeople to avoid an ugly fall in a beautiful industry.

Tyler Peterson is the Head of Professional Risks at Hiscox USA, a leading insurer for more than 600,000 U.S. small businesses, freelancers, contractors and others.