Cooling Off a Fraudulent Home Inspection Claim

The number one complaint that I receive from home inspectors is that insurance companies simply cave in and pay claimants even when the home inspector has done nothing wrong. I used to think that this was just general professional bellyaching that had no basis in reality but that was before personally squashing hundreds of claims that were absolutely ridiculous.

A lot of home inspectors have rather large deductibles on their Professional Liability Insurance [E & O] policies, up to $5,000 in some cases. And I can understand why they do that. For one thing, the higher the deductible, the lower the premium. For another, they just don’t believe that they are ever going to be called upon to respond to a claim from one of their clients.

This belief is based on the fact that they have a lot of confidence in their professional skills, a belief that is entirely justified in my experience. The problem is that you do not have to conduct a negligent inspection to be accused of having done so. You merely have to have a client who thinks that you did. And unfortunately, those sorts of clients abound.

Recently, a friend who inspects houses in Illinois had this experience. After the client moved into the house, he “discovered” that the air conditioning unit was undersized for the house – had insufficient capacity. It wasn’t, but some “professional” told him it was and so the client wanted the inspector to “do something about it.”

And the client was relentless, constantly calling the inspector and the real estate agent, and, of course, telling them both that if they did not knuckle under to his unreasonable demands, he was going to sue them both. The real estate agent went into full panic mode and she kept calling the inspector on the client’s behalf.

Now the inspector’s E & O deductible was $2500, as was the agent’s. So the agent asks the client if he’ll take $2500 to go away. And, of course, he says that he will. And why wouldn’t he since it is $2500 more than he’s entitled to?

The agent then asked the inspector if he would put up $2500 to “make the claim go away.” And the inspector figures that, if he turns that claim into his insurance company, that’s exactly what it is going to do, and he’ll have a chargeable claim on his record.

So the inspector tells the agent that he “probably” would. And then the agent went and told the client that the inspector would give him $2500 to settle.

So the inspector sent the client a General Release and asked him to return it in order to receive the $2500. But the client dragged his feet and then filed a complaint with the Better Business Bureau falsely claiming that the inspector had been negligent.

The inspector then asked me to squash the guy. I wrote the guy and told him: a) that there was no negligence because a home inspection does not determine cooling capacity; b) that his unit was not undersized and c) that he had made a spectacularly foolish and, if not immediately withdrawn, potentially financially ruinous decision to defame the inspector’s professionalism on a public bulletin board.

When he got my letter, he immediately tried to submit the signed release for payment. Sorry, Charlie, you chose unwisely.

Obviously, paying anything – much less $2500 – to settle a claim that has no merit and is completely defensible is a bad business model. It’s a bad business model for insurers and it’s a bad business model for inspectors.

Fortunately, for home inspectors, there is a new sheriff in town. And a new insurer that is completely on board with my approach of nipping these meritless claims in the bud. For a quote visit: http://inspectors.locktonaffinity.com/ or call 800-803-9552.