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At last Thursday’s home inspector training Law and Disorder Seminar in Wall Township, New Jersey, one of the inspectors in attendance was currently a defendant in a multi-defendant lawsuit. As the seminar wore on and I was recounting all the reasons that claims against home inspectors by their former clients never have any merit, this inspector asked why the attorney who had been appointed by his E and O insurance company for home inspectors to represent him in his lawsuit was not taking any of the steps that I was saying needed to be taken to terminate the matter in his favor.

For example, even though the inspector had a clause in his contract that required that any dispute arising from the inspection had to be adjudicated in arbitration, the lawyer never filed or evinced the slightest interest in filing a motion to dismiss the inspector from the suit on that ground. Instead, he answered the complaint which constitutes a de facto waiver of the clause. Moreover, even though the inspector had no liability – the alleged defect that was the gravamen of the plaintiff’s complaint had been concealed at the time of the inspection – the lawyer was sending unmistakable signals that he was fixing to fold his tent and cut the losses of his real client, the inspector’s professional liability insurer. Certainly, the insurance company’s continued patronage is more important financially to insurance defense counsel than a random individual insured-defendant.

That’s a scenario that is very familiar to this long-time observer of the inherent conflicts of interest that obtain in the ménage à trois, formed by the prototypical insurance defense contract, among the defense counsel, insurer and insured and the reason that I never sought insurance defense clients. Numerous conflict issues can arise in such relationships but the one that concerns inspectors the most is the unwillingness of both insurers and defense counsel to vigorously defend bogus claims, if the expense of doing so would eclipse the nuisance value of the case.
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A reader recently wrote to me: “One quick question comes to mind in reviewing your E and O insurance for home inspectors blog.  You clearly state a number of times that virtually all claims against home inspectors lack merit and/or can basically be quashed at the point of the initial demand. This being true, why then would one even need to consider E+O when you have made it abundantly clear most if not all E+O claims against inspectors can be successfully defended, likely at a fraction of the cost of insurance?”

In my experience, only three of the over 500 claims that inspectors have asked me to respond to were valid claims. That’s less than one percent. Am I seeing a different segment of claimants than the typical E and O insurer for home inspectors? I very much doubt that I am.

Yet, while my success rate at terminating these claims has been, by any metric, phenomenal, I would still hesitate to counsel inspectors to forgo the back-up protection that an E & O insurance policy with a solid company provides for two very important reasons. One, about 15 % of the time, the first notice of claim is an actual lawsuit. In other words, I will have had no prior opportunity to prevent the suit from being filed in the first place. And while I have successfully persuaded plaintiffs’ counsel to dismiss inspectors from lawsuits multiple times, that is a much more difficult trick with a much lower success rate. Two, my responsive letters are only successful at dissuading claimants 97 % of the time. That means that three knuckleheads out of every hundred cannot be persuaded that they have no claim. In those cases, you will have to hire private counsel and litigation is one of the most expensive undertakings imaginable.
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The general over-the-top excitement bordering on mass hysteria that surrounds the turning of the calendar from one year to the next has always puzzled me. In fact, so un-into it am I that I am seldom awake when it happens. To me the whole cultural phenomenon is a vast waste of calories that could be put to much better use.

One such use that I heartily endorse is the making of New Year’s Resolutions, especially those that revolve around breaking bad habits and forming good ones.

Here are some that home inspectors should give some considerable thought to adopting.
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