Home Inspectors frequently ask me if having E & O Insurance is “worth it.” The unspoken subtext of the question, of course, is “Hey, if I never have a claim, haven’t I wasted my money?”
I guess that the answer would be “Yes”, if you felt the same way about any other line of insurance. If you never have an auto accident, never have a health issue, never have a house fire, never lose time from work due to sickness, have you wasted the money you spent on auto, health, homeowners and disability insurance?
The problem that I think that home inspectors have with legacy E & O insurers is that they don’t really trust them to do the right thing. And with some considerable justification.
I’m currently representing an Arizona inspector in a multi-party claim: the seller, a seventy-something woman, the real estate broker, a very successful entrepreneur and the inspector. The claimants are a real estate lawyer and his wife.
The lawyer-claimant wrote the Mother of All Demand Letters, a real magillah, fourteen pages, that sought $150,000 in damages. My response, according to counsel for the other defendants, “really infuriated him.”
Well, good, I thought. My fastball has not lost any of its velocity.
By and by, the seller’s attorney contacted me to ascertain my level of interest in participating in settlement discussions. He and the real estate broker’s attorney had some authority to settle – not much, mind you because the case against them was nearly as thin. They were in the $17,000 area. I was in the $500 range.
I participated in the settlement discussions via telephone. The Arizona lawyers were very impressive professionally and, though their clients had scarcely more exposure than mine, were nevertheless realistic about the cost to their clients should the case not settle.
The claimants were at $150,000 prior to the conference and, after the cold shower they got from the defendants, came down to a still absurd $85,000.
The other defendants subsequently came up to $30,000 and the inspector’s insurance company, having pulled me for a pinch-hitter magnanimously offered $5,000, coincidentally the very amount of its insured’s deductible.
So this is what you are up against as an inspector: regardless of your lack of culpability, Brand X insurers will routinely offer up your deductible to appease unmeritorious claimants.
This unmeritorious case, if tried, will likely result in a defense verdict. Of course, defense costs will vastly exceed $35,000. So the last time I spoke to counsel for the other defendants, they were inching upward toward $45,000.
If my client did not have E & O Insurance, it would cost him many thousands of dollars to defend this meritless case. Even with his insurer selling him out, though, he is still better off with the insurance.
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