What is Public or Broadform Liability insurance? It covers you for fines and/or costs or charges if you are found guilty under any Act of New Zealand Parliament of negligence to a client or employee (but does not cover the area you are working on*.) Note only accidental negligence is covered; intentional negligence and other criminal actions are excluded.
Salon Liability insurance is essential for even the most conservative of beauty therapists. However, there is still misunderstanding with some therapists on what liability insurance is.
Standard liability insurance. (Broadform Liability)
Cover for property damage. For example – A tap is left on overnight and water floods your landlord’s premises or wax is split on a client’s expensive jacket.
Cover for bodily injury. For example – The massage table collapses and the client falls off it and is injured.
Liability insurance is a versatile product, which can be extended to include –
Cover for Employers Liability. For example an employee lodges a personal grievance under Occupational Safety and Health Act, alleging that the work is repetitive and stressful. This will pay for lawyer’s advice, fees and any charges you are liable for.
Cover for Statutory Liability. For example a client alleges that insufficient information was given for perceived inadequate treatment and takes the case to court. This will pay for the lawyer’s fees and any charges you are liable for.
Cover for Fidelity Liability. For example a staff member commits theft or fraud. An example of this is a refund card when clients pay by credit card or Eftpos card. If the employee is given permission to use this card, it is now a concern that the employee can set up a system whereby they can use this card to put money into their own bank account. Using the refund card, should be only used by the owner of a clinic.
Cover for Employment Practices. For example you are wrongfully charged by a previous employee for unfair dismissal and you have written proof of your actions. This will pay any fees or charges you incur.
Cover for Director and Officers Liability. For example you are partners in the ownership of the business and one partner wrongfully takes money from the business. This will pay towards resetting up the clinic.
Cover for punitive and exemplary damages. For example –
A judgement over and above any other awards made because the court rules extreme negligence.
Mrs Dickens, the client, is unhappy with her treatment. She is told by one of your staff that the laser machine will “puff” out her wrinkles. After three treatments Mrs Dickens’ facial skin is very inflamed (she alleges she was not advised that there could be an allergic reaction) and she states the wrinkles have become more deeply set. As the owner, you explain to Mrs Dickens that the process is not instant but gradual but she disagrees and immediately stops the treatment. A week later, you receive a letter from Mrs Dickens’ lawyer asking for payment of $3,000 which includes a refund, and damages for alleged stress and medical treatment. You ignore the letter hoping the problem will go away. A month later a letter is received from the Department of Courts advising of a Notice of Hearing naming you as respondent.
Professional Indemnity is only part of the cover you will claim against. However, without Statutory liability no claim can be made as the two liabilities work in unison. The reason being, Mrs Dickens is claiming that you breached the Fair Trading Act 1986. The Act is specific – If you are offering a treatment where you guarantee results, and the promised results do not occur, you can be held liable. The Statutory Liability policy covers you under any Act of New Zealand Parliament in force at the time of claim.
Another example, is misleading advertising. Using the words “permanent removal” treatment is a concern because if the condition recurs, this is a breach of the Consumer Guarantees Act. You can be taken to Court under the Act.
With the changes to the Commerce Act for 2015, the rules under the Consumers Guarantees and Fair Trading Acts will become even firmer.
The tail of liability refers to the date on which you first became aware that there was dissatisfaction felt by a client. This means that you must advise your broker/insurance company immediately if there is even the suggestion of a claim. This procedure will enable you to get advice before the situation leads to court action. If you do not advise the insurer within a limited time, then they have the right to refuse your claim.
Please be aware also that verbal advice is not enough to guarantee clinic owners security from allegations of negligence. Having written evidence of any advice given by you will ensure peace of mind.
The rule of thumb is to check your policies to ensure that you have the two extensions – Statutory Liability and Professional Indemnity.
With the increasing use of technology by the beauty therapy industry the two liabilities are a necessity not a luxury. Ensure that in the event that you are the salon owner in the above tale that it ends happily ever after.
* The area you are working on is covered by Professional Indemnity Insurance NOT Broadform Liability. Misunderstandings occur because a claim for professional negligence is also a claim under statutory liability.