By Tony Hopkins, CPCU, CIC, CRM
Cryotherapy and cryospa operations have been a growing trend across the country.
Many gas distributors are concerned that the risk outweighs the reward following the tragic death of a woman in a tank at a Nevada Cryotherapy center back in 2015. Many of the major gas suppliers have stopped selling to these types of facilities, citing too much risk. Other companies see this growing industry as a significant opportunity to grow their business.
The growth in popularity combined with the risk has led to an increase in the number of inquiries we’ve been receiving on how to deal with this fledgling industry. From what I’ve heard, the operators of these businesses run the gamut- from very experienced and professional operations to “fly by night” companies looking to capitalize on a new fad.
Selling into this industry can expose your company to additional liability, but if managed properly, can be done in a way that the risk to the distributor can be limited (but not entirely eliminated). If a company wants to avoid the risk associated with this industry, my recommendation would be to simply go the way of the majors and prohibit the practice.
If you make the business decision to sell to the industry, you need to protect yourself, here are some measure that can help:
- Consult professionals in industry specific organizations, such as CGA (SA-29 addresses Hazards of Liquid Nitrogen in Near-Consumer Applications, https://portal.cganet.com/pubs/free/SA-29_1.pdf) and GAWDA. Please note that neither CGA nor GAWDA has taken a position on the safety of cryotherapy.
- Pre-Qualify Customers
- Develop an evaluation procedure to identify the more experienced operators and facilities from those that present a larger risk (i.e. proper ventilation in the room the nitrogen is stored)
- Ensure your team can clearly see who is and isn’t eligible in your system
- Contractual Risk Transfer
- Develop a contract that puts the risk onto the purchaser of the product by way of indemnification language (we have sample agreements available to clients)
- Include warnings in the contract
- Insurance Requirements (include in the contract)
- Require General Liability, Workers Compensation, and Umbrella coverage, with endorsements for Additional Insured status and Waivers of Subrogation
- Develop a mechanism to collect & track the certificates of insurance and evaluate their adequacy
- Provide warnings to the customer and their employees about the risk prior to purchase
- Provide training to the customer on proper usage, storage, and best practices
- Consider Special Packaging/Labels
- More warnings, designed to educate and protect your customer’s customer
As with anything, it’s impossible to eliminate all risk. With a well-managed program that follows the recommendations above, distributors can protect their business while also taking advantage of a growing industry.
For questions regarding this briefing, including sample contracts or the insurance requirements mentioned above, please reach out to Tony Hopkins at tony.hopkins@thehortongroup.com.
