The Changing Face of Business Interruption Insurance for Salons
Do you have business interruption insurance for your salon? This type of cover has been in the news in recent times due to the effects of the pandemic, and this may lead to some changes in how these policies are written. What should you know about your risk and need for coverage?
Facing the Unexpected
It’s true that nobody saw the COVID-19 threat coming, and in one way or the other, it has affected everybody and every business. Salon owners have certainly been impacted, especially as they provide close-up, one-to-one services. While most people understand the risk to health and the burden on hospitals, it’s nevertheless difficult to stand back and deal with the loss of income due to an enforced closure. This may be why many salon owners have been keeping a close eye on the insurance industry and high-profile cases challenging some of their policies.
What Does Business Interruption Insurance Cover?
Insurance companies offer business interruption insurance to protect owners who may be forced to close their doors. However, these policies are generally meant to cover closures related to “natural disasters.” Such disasters could relate to cyclone or storm damage, severe flooding or a devastating fire. All of these are unpredictable events, and the business owner may be powerless to avoid them. As such, the insurance company will pay out if their business is forced to close.
Some business interruption policies also extend to “man-made” events. For example, a business owner may be able to get a policy that will pay them a certain amount each day should they be without telephone service due to a failure on behalf of the providing company. Likewise, they may also get some damages if one of the public utility companies encounters an issue. In this case, the electricity provider may suffer a system failure, leaving the business in the dark, without air conditioning or power.
The insurance company may honour a claim if a business is forced to close due to malicious property damage. So, if the fire that triggered a closure was caused by an arsonist and not a mechanical issue, it may be admissible.
Understanding the Level of Coverage
Business interruption insurance can certainly be a lifeline during unexpected situations. And these policies are not necessarily short-term either, with some companies willing to extend coverage for months or even years. They may agree to include outstanding debts, so long as they are itemised before the loss event, should the owner be unable to recover them following the interruption.
Primarily, business interruption insurance can help the owner deal with those major and recurring costs that will mount up whether they can open their doors or not. After all, the landlord may insist that rent is paid. Even though workers cannot get into the building to perform their tasks as contracted, they still need a salary to survive. Without business interruption insurance and in the absence of any other arrangements, staff members may decide to go elsewhere, which could be disastrous for the organisation.
How Has COVID Affected Business Interruption Insurance Claims?
Certainly, business interruption insurance has been in the news due to the effects of the coronavirus pandemic. In a somewhat controversial ruling, the government issued a mandate to close under what they termed “stage II” restrictions. Beauty salons were not deemed to be essential services, even though some hairdressers were. In this case, salon owners with business interruption insurance in place may have turned to those policies to see if they could claim.
Dealing with Appeals and Counter Appeals
This led to a great degree of confusion as policies did not automatically cover a government-enforced shutdown due to a health-related event. Many companies may have initially denied a claim, but this led to appeals, and the entire case went through several different stages before ending up at the High Court. It appears that this case may drag on for some time, and it’s not clear whether it will ultimately come out in favour of the insurance companies or the appellants.
Being Aware of Any Pandemic-Related Losses
While these cases drag on, any salon owner with business interruption insurance that was affected by the pandemic should ensure that they have gathered as much information as possible. They should itemise their losses from the day of any enforced shutdown and include any relevant costs they may have incurred after being allowed to reopen. They should also talk with their insurance provider to get further advice and keep an eye on those court cases as they proceed.
Getting Back to Normal
The pandemic has caused a lot of disruption, but the worst effects appear to be in the rearview mirror. Salons across the country have been allowed to reopen and are, for the most part, back to normal. Customers have returned and are eager to avail themselves of services again. In many respects, it’s business as usual, although many salon owners are certainly still feeling the knock-on effects of those difficult two years.
Realising the Need for Business Interruption Insurance
For those without business interruption insurance, these events have indeed been a wake-up call. If you do not have this type of coverage in place, you should consider taking action to provide an additional level of protection going forward. Hopefully, society will not be affected by a raging pandemic again for some time, and there may be no confusion over whether insurance may cover its associated losses.
Nevertheless, the threat of arson or accidental fire, storms and flooding are ever-present, so it only makes sense to seek protection. After all, a closure is a closure, and if your salon business cannot operate for some time, you may face significant hardships and an existential threat to your organisation.
Making Sure That You Are Adequately Protected
Reach out to the Salonsure team to discuss business interruption insurance and to ensure that you have adequate levels of protection as part of your overall salon insurance package.