Avoid This Deadly Ménage Á Trois

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.

The end result, under this outdated protocol, is that inspectors are routinely forced to fork over their deductibles to their insurers, amounts which are quite substantial in many cases, to resolve claims that have no validity whatsoever when I have demonstrated time and time again that a clear explication of the invalidity of the claim and a firm resolve to stand one’s ground combined with a credible threat of certain retaliatory action to restore the status quo ante, if need be, will neutralize the overwhelming majority of claims against home inspectors before they get anywhere near a lawsuit.

If you think that this is a better way of dealing with the torrent of bogus claims that plagues this industry, you should click on that blue “Get A Quote” button to the right and re-read this recent post.