MADAM SCHOLASTICA'S HAIR SALON Madam Scholastica owns a big salon in centre of Lagos with fifty hair driers and two motorized: generators in a large premise. She had in her employment, sixty staff out of which forty five are professional stylists, five cashiers and ten support staff. The company makes a lot of money from high class members of the society who are prepared to pay heavily for their services at their convenience, even in their offices or homes. The company has comprehensive insurance cover. on 'all their four vehicles. It also has Employer's Liability Insurance which it Continues to renew for the past five years without making claims. The policies were taken from different companies. Recently, a chemical was bought for washing hair which caused damage to .many customers' hair, this.led to the payment of compensation to, some customers while others deserted the salon. The director had been advised to obtain other insurance policies to cover their liabilities to customers and third parties but did *not do anything about it. In the last two weeks of operation, four staff had accident with the Company's car while returning from home service to a customer. Twb of them were seriously injured. A cashier disappeared, with a sum of N21-00;000 cash withdrawn from the company'S bank account.
(b) State and explain two policies that the director should have taken to cover their liabilities to customers and third parties.
(c) What other insurance policies would the company take in future to cover the cashiers that handle cash?
(a) Policy under which the injured employees will be compensated
The four staff were injured in an accident with the company's car while returning from rendering a home service to a customer, that is, in the course of their employment. The appropriate policy is the Employer's Liability Insurance (backed in Nigeria by the Workmen's/Employees' Compensation arrangement).
This policy covers the employer's legal liability to pay compensation for bodily injury, disease or death suffered by employees arising out of and in the course of their employment. Since Madam Scholastica has renewed this cover for the past five years, the two seriously injured staff and the other two can validly claim under it.
(b) Two policies the director should have taken to cover liabilities to customers and third parties
- Product (Products) Liability Insurance: This covers the insured's legal liability for injury, illness or damage caused to customers or the public by goods or substances supplied or used by the business. The harmful chemical bought for washing hair, which damaged many customers' hair, is exactly the kind of loss this policy indemnifies. It would have met the compensation paid to the affected customers.
- Public Liability Insurance: This covers the insured's legal liability to members of the public (third parties) for bodily injury or property damage arising from the conduct of the business or the condition of its premises, for example a customer slipping in the salon or being injured by a generator. It protects the salon against claims from persons who are neither employees nor parties to a contract of sale.
(A Professional Indemnity Insurance, covering negligence in the professional styling service, would also be acceptable as one of the two.)
(c) Insurance policy to cover the cashiers that handle cash
The company should take a Fidelity Guarantee Insurance. This policy indemnifies the employer against loss of money or property caused by the dishonesty, fraud or embezzlement of named employees who handle cash, such as cashiers. The cashier who disappeared with N2,100,000 withdrawn from the company's account is precisely the risk covered. A Money (Cash-in-Transit and Cash-on-Premises) Insurance, covering loss of cash by theft while in transit or on the premises, should also be added.
(d) Two other useful insurance products for the company
- Fire Insurance: The salon operates from a large premises containing fifty hair driers and two motorised generators. Fire insurance would indemnify the company against loss of or damage to the building, equipment and contents caused by fire, lightning and explosion, allowing the business to rebuild and re-equip after such a loss.
- Burglary/Theft Insurance: This covers loss of or damage to the salon's stock, equipment and fittings resulting from forcible and violent entry into the premises by thieves. Given the valuable equipment and cash handled, it protects the assets of the business against burglary.
(Group Personal Accident/Group Life cover for the staff and Business Interruption (Consequential Loss) insurance would also be valid answers.)
