Determining the potential marketplace for Medi spas is difficult and has no simple statistical answer. There is no separate general liability classification, SIC or NAICS code for these facilities at the present time. Since Medi spas usually begin as either a beauty salon or a physician's office, a logical starting point is the data for both types of businesses. Based on the latest information available, 31,550 beauty shops with five or more employees produce annual premiums of just under $150 million, while 102, 337 physician's offices with five or more employees generate more than $1.2 billion in annual premiums. These premiums include professional liability premium.

For more information:
MarketStance Web site: www.marketstance.com
E-mail: info@marketstance.com

Since the Medi spa industry is still in its infancy, it is not easily defined. Kimberley Byrd, Tennant Risk Services, a specialty wholesale broker in Hartford, Connecticut, pinpoints one of the major problems in providing coverage for a Medi spa when she states, “Often times, the biggest challenge is determining exactly what procedures will be performed at any one Medi spa and who is involved in providing these services. Some companies will cover Botox, for example, only if it is administered by a physician." This rapidly evolving industry is growing from two different directions. Beauty, relaxation and wellness spas are adding medical procedures while medical offices, particularly plastic surgeons, are expanding to include beauty, relaxation and wellness services.

To better understand the coverage concerns, consider this example:

The Gentle Touch Medi spa, owned by Penelope, is a beauty salon that recently expanded and now offers a variety of esthetic services administered by qualified professionals. The spa expanded based on its clients' demands for additional services and Penelope's ability to find qualified people to provide those services. Each of the professionals on staff is an independent contractor and carries his or her own professional liability coverage since most have a private clientele in addition to the customers at the spa. Penelope recently convinced a plastic surgeon to join her staff as the medical director so her clients could receive Botox, dermal fillers and similar non-surgical procedures at the spa. This doctor continues to operate a private practice at a separate location.

Cathy, Lily and Freda decide to pamper themselves with a complete day at the spa. They try many of the treatments, including massage, body wrap, Botox and microdermabrasion. As they are leaving, Cathy faints and strikes her head on the marble floor. She is rushed to the hospital. Her brain swells and she has permanent brain damage. Cathy's estate sues Gentle Touch and each individual who treated her during her visit to the spa.

Since the general liability coverage written for Gentle Touch excludes professional services, the insurer denies all coverage, other than medical payments expense. Each of the insurance companies providing the professional liability coverage on the separate professionals at the spa also deny coverage because it cannot be proved that the service provided by their insured caused the injury. However, those policies do provide defense coverage. Since Penelope has no professional liability coverage on the spa and the general liability insurer denies coverage, Penelope must bear the cost of her own defense.

Robert N. Kretzmer, CPIA, CIC, of Inner Harbour Insurance, Inc., approaches Medi spas from the beauty and day spa side of the industry. He states that many of these spas are written using a standard Businessowners policy with limited or no professional liability coverage at all. Since these are usually small operations, the agent may not have an accurate list of all the services offered by a particular spa.

The esthetician is often a pivotal player. While able to operate unsupervised on the beauty side, a supervising physician must be present when medical procedures are performed. An esthetician must be specifically licensed as such in some states but can operate under a cosmetologist license in others. According to Mr. Kretzmer, from the insurance standpoint, the problem for the Medi spa occurs when both the esthetician and the supervising physician have a professional liability policy. Which one protects the Medi spa? The professional liability policy covers the individual professional, but probably does not cover the Medi spa named in the same suit.

Fran O’Connell, Vice President - Product Manager at Shand Morahan & Company approaches Medi spas from the medical malpractice standpoint. Medical professional liability covers the specific business entity and every employee that provides covered procedures. It also covers the medical director for his or her administrative acts. Note that the medical director is not required to be on-site at all times. The professional that provides services must be either a licensed healthcare professional operating within the parameters of the particular license and trained for the specific procedure, or be trained and certified for the procedures being performed.

Professional liability coverage for Medi spas written by Shand can include coverage by endorsement for any physician performing services. The physician need not be a plastic surgeon or a dermatologist, but must show evidence of training in the procedures or operations being performed. The objective of Shand Morahan’s Medi spa coverage is to provide protection for both the entity and the individuals performing the services. Professional Liability coverage is written on a claims-made basis and is triggered by the reporting of an incident. General Liability coverage is also available.

A third approach is taken by Susan Preston, President, Professional Program Insurance Brokers who worked with Lloyds to develop a program specifically for Medi spas. She tells us that the syndicate she works with has a person researching this and other emerging issues on a full-time basis and is able to move quickly and respond to changes in the Medi spa community. Ms. Preston says, “The Medi spa industry is one of the fastest growing in the United States with franchises and chains expecting to grow it even more.” Ms. Preston cautions agents when comparing coverages offered by different sources to look at the claims trigger in the same way that they would with any claims-made policy. She states that some coverages use the lawsuit as the claims trigger while PPIB uses the incident as the trigger and then works through the claims process with the client.

Click here for the complete article … 

Do you need help finding an expert actively working in this market place? Insurance Marketplace has talked to the following markets interested in writing Medi spas:

BROKERS    
MANAGING GENERAL AGENTS    
INSURANCE COMPANIES