Anchors Aweigh: The Limitation of Liability Effect

Regular readers know that I am dead set against refunding inspection fees to unhappy clients. Ever.

I have written extensively elsewhere on this site as to why this is a bad idea and a terrible habit to cultivate. Yet inspectors continue to do it.

Why? On my daily 4 mile sortie through my leafy neighborhood the other day, I pondered that very vexing riddle.

And I concluded that it most likely stems from the fact that most inspectors are in thrall of the Limitation of Liability Clauses in their pre-inspection agreements. Most of these clauses limit the inspector’s liability to the cost of the inspection, say, $400.00. This number, thus, becomes a subconscious “anchor” for the inspector.

“Anchoring” is a psychological phenomenon that can cause one to focus solely on one piece of information – the anchor – when making decisions. For example, if I asked a real estate agent whether she thought that the number of real estate transactions that involve a home inspection was more or less than 60%, she might give one or the other answer. If I then asked her, what the actual percentage was, she very likely would say about 60% because she was anchored by the previous mention of that figure.

Similarly, home inspectors, when confronted with an unhappy client, may be far too influenced by their Limitation of Liability “anchor” – slash security blanket – to analyze whether this client’s unhappiness is in any way justified, which, as I have also extensively chronicled herein, it almost never is.

The thought process may go something like this: “My maximum liability is $400. I know that I didn’t do anything wrong but, if I can get rid of this “claim” for $400, it’ll be worth it.” Thus, the home inspector, in this example, is focusing on the “anchor” – the $400 fee – and not the fact that he is blameless.

Now, here’s the problem. The client does not know this. He does not know that the inspector has a Limitation of Liability Clause in the pre-inspection agreement because he hasn’t read the agreement. If he has read it, he certainly does not remember this clause.

So the inspector’s offer to refund the inspection fee backfires. Instead of mollifying the pest, it emboldens him and not only confirms in his mind the inspector’s blameworthiness but ratifies the repairman’s observation that “the home inspector should have found this”, as well.

I recently had to squash a claimant emboldened by an inspector’s improvident offer to return the inspection fee for an infraction that he did not commit. And I must confess to experiencing a certain schadenfreude when I tell these unworthy claimants that, not only will they not be getting the $3700 that they are claiming, they won’t be getting the $400 that they “foolishly rejected” either.