By Donald S. Malecki, CPCU

At one time it might have been customary to associate beauty salons with females and barber shops with males but those days are long gone. It is no longer unusual for males of all ages to visit beauty salons for all of their hair care needs. However, it is rare to see females frequenting barber shops. One reason may be that barber shops are not perceived to have the stylists on staff that beauty salons do, nor are barber shops perceived as providing as many diversified services as a beauty salon.

It is not unusual for beauty salons not only to cut and shape hair, beards and mustaches, but also to do facial waxing, hair dyeing, manicuring, pedicuring, ear piercing, massages and tanning services for men and women, alike. While some barber shops do provide many of these services, few, if any, provide them all.

Strictly from a risk analysis standpoint, both barber shops and beauty salons, with the exception of professional liability exposures, are confronted with many of the same property and casualty loss exposures facing other business establishments.

One marked distinction of the exposure faced by barber shops and beauty salons is with products liability exposures. It is not unusual for beauty salons to sell health care products, liquid and tablet vitamins, cosmetics, perfumes, and even small appliances, such hair dryers and curling irons.

Producers need to counsel these insured prospects that, while injury or damage emanating from these products may fall on the shoulders of the manufacturers of these products, beauty salons and barber shops could also be required to share in the payment of damages sought by claimants and to bear the burden of defense costs.

Compounding the problem is the fact that it is not unusual for hair dressers and barbers to recommend or even "push" a certain product after diagnosing a customer's problem or request. To say that a certain product will fulfill a certain purpose creates a problem if the product fails to meet the purpose for which it was prescribed.

Therefore, it is important for these kinds of businesses to maintain products liability insurance instead of allowing this important coverage to be deleted from the liability policy in order to cut costs. Or, in some cases, the insurer may offer a hybrid of the owners, landlords and tenants policy whereby products liability coverage needs to be added if the coverage is desired.

The vendors endorsement

It would be a definite plus if the barber shop or beauty salon could obtain a vendors endorsement from each of the manufacturers or distributors whose products are sold at these establishments. Whether this is possible will likely hinge on the status of the competition, what the establishment's prospects for sales might be, and the ability of the producer to educate his or her customers on these issues.

Producers need to counsel these business establishments that the vendors endorsement is not to be viewed as a substitute for products liability insurance. In fact, this caveat goes beyond barber shops and beauty salons because many business owners are confused over the vendors endorsement, including some manufacturers and distributors.

While there are many intricacies involved in analyzing these kinds of endorsements, one important point that needs to be remembered is that the endorsement is primarily intended to cover the vicarious liability of the vendor. In other words, if there is something wrong with the product and suit is filed against the vendor, as being one of several parties involved in the stream of commerce, the liability imputed to the vendor should ultimately fall on the shoulders of the manufacturer or distributor.

However, there are some exceptions where the vendor is given some latitude and coverage for its direct fault. This is in the area where most exposures confronting barber shops and beauty salons are likely to occur--that is, with express warranties.

For example, consider the vendor who is asked by a customer to recommend a shampoo that will add body to hair, give it shine and eliminate dandruff. The shampoo recommended by a barber fails to provide the satisfaction the purchaser was looking for and, in fact, causes excessive dandruff. The manufacturer's literature, while somewhat vague, does indicate that its product should fulfill the qualities expressed by the barber. In this case, the alleged liability of the barber in recommending the product should be covered by the vendor's endorsement.

However, consider the vendor who, in attempting to effect a sale of vitamins, allows an employee of a beauty salon to tell the customer that the vitamins in question will provide rejuvenating energy when, in fact, there is nothing in the literature to support that statement. In this instance, the barber shop or the beauty salon may have to rely on its own products liability insurance if the product fails to live up to such claims. The reason is that the vendor's endorsement customarily excludes any express warranty not permitted by the manufacturer or distributor.

This situation puts beauty salon or barber shop owners in somewhat of a dilemma. They must be careful about what is said to effect the sale of a product; yet, on the other hand, if the sales fall below the expectations of the manufacturer or distributor, no vendors endorsement request may be honored.

One of the ventures of beauty salons, in particular, that can be especially troublesome is the tanning service. The problems that are likely to develop are of the long-tail type. That is, the effects of prolonged exposure to the special lighting may not culminate in alleged injury until years after treatment.

What complicates matters further is the fact that liability insurance for tanning services is commonly available solely on a claims-made basis. It may not be clearly evident to beauty salons and tanning parlor operators that insurance may have to be maintained for a long period after these services are terminated, particularly if the operators have valuable assets at stake. Unfortunately, the tail coverage may not be as long as required, and while long-tail coverage may be available, it may be cost-prohibitive.

There is not much the producer can do here if the business establishment desires to get into that line of business. It is strictly the business owner's decision. The only thing the producer can do is inform the owner of the long-tail exposure (preferably in writing) and some of the problems that may occur if this service is terminated.

Even though the nature and magnitude of claims against these businesses are more in the form of frequent, nuisance claims, rather than catastrophic ones, much of this business is handled through the excess and surplus lines market. This can be advantageous, particularly when the insurer will write the general liability, including products coverage along with professional liability. There is less likelihood of being confronted with a so-called "gray-area" claim problem that is, one that could be labeled as either a professional liability or general liability claim.

According to the 1995 issue of The Insurance Marketplace, published by The Rough Notes Company, "beauty shop liability," as a class, protects those engaged in operations against claims arising from alleged malpractice, product liability and ordinary premises liability. Coverage against liability arising from chiropody, hair removal by electrolysis and slenderizing may be added by endorsement.

Some underwriters also have recently introduced a new coverage for loss or damage to customers' wigs or hair pieces left in the care, custody or control of the business establishment.

The markets listed for both beauty shop and barber shop liability reveal that most are program administrators, underwriting managers or the principal market for such coverages, as opposed to an insurer for those classes of risks.