What reasons might Degree Wellness's Management Company have for increasing or decreasing the required insurance coverage amounts?
Degree_Wellness Franchise · 2025 FDDAnswer from 2025 FDD Document
MENT SHALL BE INTERPRETED AS DIRECTING OR INFLUENCING SUCH REFERRALS. NONE OF MANAGEMENT COMPANY'S SERVICES HEREUNDER SHALL CONSTITUTE OBLIGATIONS OF MANAGEMENT COMPANY TO GENERATE PATIENTS TO LICENSED PROVIDER.
8. Insurance.
8.1 During the Agreement Term, Licensed Provider must maintain in force, under policies of insurance issued by carriers in good standing in the state where the Premises is located: (1) comprehensive commercial general liability and motor vehicle liability insurance against claims for bodily and personal injury, death and property damage caused by or occurring in conjunction with the operation of the Studio or otherwise in conjunction with the performance of the Licensed Provider Services pursuant to this Agreement, under one or more policies of insurance containing minimum liability coverage of not less than $1,000,000 per occurrence and $3,000,000 in the aggregate; (2) worker's compensation and employer's liability insurance as required by law, with limits equal to or in excess of those required by statute; (3) professional liability (malpractice) insurance, for each doctor providing the Licensed Provider Services, having limits of not less than $1,000,000 per occurrence and $3,000,000 in the aggregate; and (4) any other insurance required by applicable law, rule, regulation, ordinance or licensing requirements. Management Company may periodically increase or decrease the amounts of coverage required under these insurance policies, and/or require different or additional kinds of insurance, including excess liability insurance, to reflect inflation, identification of new risks, changes in law or standards of liability, higher damage awards, or other relevant changes in circumstances. Licensed Provider agrees that compliance with any state minimum insurance requirements does not relieve Licensed Provider from the obligation to comply with the contractual insurance requirements in this Agreement.
8.2 Licensed Provider must provide Management Company with 30 days' advance written notice of any material modification, cancellation, or expiration of any policy.
8.3 Deductibles must be in reasonable amounts and are subject to review and written approval by Management Company.
8.4 Licensed Provider's commercial general liability insurance policy must be an "occurrence" policy and must name Management Company, Degree Wellness and their respective owners, directors, employees, agents, and affiliates, as an additional insured on a primary and noncontributory basis.
Source: Item 20 — OUTLETS AND FRANCHISEE INFORMATION (FDD pages 63–66)
What This Means (2025 FDD)
According to Degree Wellness's 2025 Franchise Disclosure Document, the Management Company may adjust the required insurance coverage amounts for several reasons. These include responding to inflation, identifying new risks, changes in laws or liability standards, higher damage awards, or other relevant changes in circumstances. The initial insurance requirements include comprehensive commercial general liability and motor vehicle liability insurance with minimum liability coverage of $1,000,000 per occurrence and $3,000,000 in the aggregate. Additionally, professional liability (malpractice) insurance for each doctor providing services must have limits of not less than $1,000,000 per occurrence and $3,000,000 in the aggregate.
This flexibility in adjusting insurance requirements allows Degree Wellness to adapt to changing economic and legal conditions, which could impact the financial risks associated with operating a franchise. For a prospective franchisee, this means that insurance costs could fluctuate over time, potentially impacting their overall operating expenses. It is important to stay informed about any changes to insurance requirements and factor these potential changes into financial planning.
The franchisee is responsible for maintaining the required insurance coverage throughout the term of the agreement. The franchisee must also provide the Management Company with 30 days' advance written notice of any material modification, cancellation, or expiration of any policy. Furthermore, deductibles must be in reasonable amounts and are subject to review and written approval by Management Company. This ensures that Degree Wellness maintains adequate protection against potential liabilities and that franchisees comply with the contractual insurance requirements, regardless of state minimums.
It is also important to note that the insurance Management Company requires is for its own protection. Degree Wellness encourages prospective franchisees to consult with their own insurance agents, brokers, and attorneys to determine what types of coverages and what level of insurance protection the Licensed Provider may need or desire, in addition to the coverages and minimum limits specified by Management Company.