Medical spa owners and operators must maintain an array of insurance coverage to help protect their practices from everything from medical malpractice penalties to flooding. However, there are some types of coverage that medical spa owners may not realize they need until it is too late. Here is a quick look at a few of them.

(Note: Check out additional information about the American Med Spa Association's Medical Malpractice Insurance Program, available to AmSpa members only through the Insurance Office of America.)

Cyber Liability

Businesses didn't used to have to worry about people hacking into their networks and stealing customer data. Unfortunately, in 2018, cyber security is a major concern for all companies—even medical spas. Cyber liability insurance helps policyholders endure a cyber attack by paying their recovery expenses.

"Its purpose is to help with the notification process, because every individual who could have been impacted by that breach has to be notified," explains David Shaffer, vice president of Professional Medical, the health care division of Insurance Office of America and AmSpa Medical Malpractice Insurance Program representative. "You have to offer them credit monitoring, and there are going to be legal fees and various other expenses associated with making the situation whole again."

Cyber liability insurance also provides crisis management and public relations services that can help a policyholder rebuild its name after a cyber security event.

"A lot of my medical spa accounts often wonder, 'Why is anyone going to be interested in what I have to offer? Why am I going to end up being a target?'" Shaffer says. "Small businesses are the primary target these days for a few reasons. I think the biggest reason is that small business owners are less likely to have a strong defense against someone trying to hack into their systems, as opposed to a larger organization that's actually going to spend money on building this infrastructure."

According to PricewaterhouseCoopers, a cyber attack typically costs a small business between $84,000 and $148,000.¹ What's more, 60% of small businesses that suffer cyber attacks close within six months, according to a Champlain College study.²

Cyber liability insurance is available from most business office package insurers, and some malpractice insurers also offer a token amount of cyber liability coverage. And, of course, it can be purchased as a standalone policy.

Employment Practices Liability

If you run a small business, such as a medical spa, it is somewhat likely that at some point, you will be confronted with an employment-related tort—that is to say, a lawsuit filed by an employee who feels that he or she has been mistreated in some way. Employment practices liability insurance covers claims such as wrongful termination, harassment, failure to hire, failure to promote, wrongful disciplinary actions, libel, slander, and any other type of grievance brought by an employee against an employer.

(For more employment-related issues see AmSpa's webinar on employee handbooks in a medical spa.)

Spoilage

Many medical spa owners and operators overlook coverage for spoilage, but those who have experienced the problems created by a loss of electricity can attest to the fact that this can save a practice a lot of money.

"Most of these facilities are performing some form of an injection, and a lot of those medications need to be kept refrigerated," Shaffer explains. "If there's fire or water damage that shorts out the refrigerator and they can't get into their medications to try and prevent them from spoiling, they need coverage for those medications that have been lost due to the temperature change."

This coverage can be obtained as part of a business office package policy, but it is not an automatic coverage—it has to either be acquired through a loan endorsement that can be added to coverage or as part of blanket endorsements that are incorporated into a policy.

If you determine that your practice needs spoilage coverage, it's probably best to purchase a bit more than you think you need, provided you can afford it.

"I had a couple of clients during hurricanes that, while they had some spoilage coverage, they were inadequately insured—instead of needing $10,000 worth of coverage, they needed $20,000, because they did a lot of injection-based services," Shaffer says. "I would probably say that's one that needs to be focused on—at least ask to see if the appropriate amount of coverage is there, if it's there at all. If it's not, get that taken care of."

Off-label Use

Kybella is an injectable designed to combat "double chins," and it is becoming extremely popular in the medical aesthetic industry. It is approved by the U.S. Food and Drug Administration (FDA) for treatment of subcutaneous fat under the jaw line and, as long as it is being used in this manner, it should be covered by most insurers. However, some practices are using Kybella to treat fat deposits elsewhere on the body, and that is where coverage problems can arise.

"Because [practices] have notified their insurers that they're performing Kybella, they believe that it's a blanket-type coverage that's being offered to them," Shaffer says. "All malpractice policies have wording in them that say non-approved drugs and devices are specifically excluded from coverage, so unless they get written verification from their underwriter that off-label services have been approved, the likelihood of them actually having coverage is probably not as strong as they believe."

Practices that are using Kybella (and any other drugs, for that matter) for treatments beyond those for which they have been approved should consult with their insurers to make sure that they are covered for this sort of use. If not, they should either amend their policy to cover these treatments, which may be possible, or stop offering them.

Making the Right Decision for Your Practice

For most medical aesthetic practices, the amount of insurance coverage they have is dictated by what they can afford. Generally speaking, most of the issues a medical spa will encounter can be covered by malpractice, general liability, property, and worker's compensation insurance. Policies such as the ones described above sometimes take a back seat to more common insurance types because they aren't as obviously valuable on a daily basis. However, if your practice can afford it, you may want to consider investing in the more overlooked coverage covered here. After all, you can't be too safe.

References

1. https://www.theguardian.com/business/2015/jan/21/cybersecurity-small-business-thwarting-hackers-obama-cameron

2. http://mastersinlaw.champlain.edu/internet-privacy-in-the-digital-age/