Are You Looking for The Right Insurance for your Aesthetic Spa?

May 10, 2018

Professional Liability Insurance for Spa, Injectables and Laser

When you've been looking online and asking friends for the perfect answer :affordable, comprehensive appropriate insurance for your injectable, aesthetic skin and laser – your spa business. You want to find the right Medical Spa Professional Insurance with a stable insurance carrier and you have finally done so!…only to be asked to sign the bold disclosure form indicating that the company with which their insurance is place is not licensed by the state of California.

What is up with these ‘disclosure forms’ that you’re asked to sign in order to buy your liability insurance to insure your laser, injectable spa business:??

Question: There is a disclosure that this Insurance company is not licensed in California and therefore if I get this policy I don't have the protection of the Insurance Guarantee Funds created by California Law, which for many reasons I obviously would like to have!!??

Many insurance policies (especially Medical Malpractice Professional Liability Insurance ) are written outside of the ‘admitted market’…in every state in the country.

The Surplus Lines Carriers.

The California Disclosure Form states that these ‘not licensed’ insurance carriers are ‘Non Admitted’ or ‘Surplus Lines’ Insurers. The reason many professional liability policies, (especially in the Medispa niche) are written outside of admitted forms in the surplus lines market is the procedures are new and constantly evolving. The liability insurance policies need to be flexible to respond to cover you for each procedure that you perform.

Question: Can you help me understand why I would want a policy with them despite this major detail of not being covered by the states Insurance Guarantee Funds created by California Law?

The Surplus Lines Carriers are Licensed in other states (just not in California)…And, They are closely monitored!

State Guarantee Fund

The Disclosure form says that the insurance company is not an admitted carrier is not licensed in the state of California and therefore is not subject to be financial solvency regulation. (does not actually mention California Law) The financial solvency regulation was created by legislators in every state save to help salvage some claims when insurance companies fail. This is about solvency, not protection under the law. {sections 2 and 3 of that form} refer to the disclosure that the financial guarantee fund is not going to help pay a claim in the event of an insurance company failure.

What is Surplus Lines?

Often called the “safety valve” of the insurance industry, surplus lines insurers fill the need for coverage in the marketplace by insuring those risks that are declined by the standard underwriting and pricing processes of admitted insurance carriers. With the ability to accommodate a wide variety of risks, the surplus lines market acts as an effective supplement to the admitted market.

According to A.M. Best, 2018 surplus lines premium volume was nearly $38 billion and represents a vast number of insureds who, without the surplus lines market, would have a difficult time obtaining insurance, if they were able to secure it at all. The surplus lines market, a group of highly specialized insurers exists to provide coverage that is not available through licensed insurers in the standard insurance market. Each state has surplus lines regulations and each surplus lines company is overseen for solvency by its home state. A number of states maintain lists of eligible surplus lines companies and some keep a list of those that are not eligible to do business in that state. In addition, depending on the state, the surplus lines agent or broker, who must be licensed, is responsible for checking the eligibility of the company.

For the many thousands of businesses that rely on some level of surplus line protection to keep their doors open, surplus lines is an important segment of the market.

Surplus Lines – Your application is part of the legal insurance contract, binding, directing the coverage. Surplus lines policies are more flexible than standard med mal, auto, homeowners policies.

These policies allow the company to respond to the risk as described in the application. The application then becomes part of the legal binding contract directing the insurance carriers response, defense and payments.

Much of the medical profession liability industry is written on the surplus lines forms… and for some reason the states require that we disclose that to the consumer. Hence the disclosure form with that big bold language.

Healthcare Liability (including Aesthetic and MediSpa) is considered a category 2 class for surplus lines:

Risks typically written in the surplus lines market fall into three basic categories: (1) non-standard risks, which have unusual underwriting characteristics; (2) unique risks for which admitted carriers do not offer a filed policy form or rate; and (3) capacity risks where an insured seeks a higher level of coverage than most insurers are willing to provide

The surplus lines market plays an important role in providing insurance for hard-to-place, unique or high capacity (i.e., high limit) risks. Surplus lines insurers are able to cover unique and hard-to-place risks because, as nonadmitted insurers, they are able to react to market changes and accommodate the unique needs of insureds that are unable to obtain coverage from admitted carriers. This results in cost-effective solutions for consumers that are not “one size fits all,” but are instead skillfully tailored to meet specific needs for non-standard risks.

3) Aside from General Liability, E&O, does this policy provide coverage if we sell products to the public (Product Liability Coverage)?

Answer: Some…yes, you have Products completed which covers you if there is a claim against you due to one of the products that they purchase from you causes harm as they apply it at home.