A couple of home inspectors in West Virginia recently alerted me to a hot-off-the-presses West Virginia Supreme Court decision that invalidates Limitation of Liability clauses in home inspection pre-inspection agreements. The case, Finch v. Inspectech, LLC, No. 11-0276 (W.Va 2012) can be found here.

The Court’s reasoning, which I found quite compelling, was that the State licenses home inspectors and prescribes a Standard of Practice for the precise purpose of protecting lay consumers from incompetent providers. Thus, contractual provisions that purport to limit that protection thwart the legislation’s intent and are, thus, contrary to the public policy of the state and unenforceable.

To bolster its argument, however, the Court made the unfortunate decision to note, in addition, that “the standard of home inspector conduct requires home inspectors to maintain liability insurance of at least $250,000”. Ironically, this reference actually weakens the argument because the $250,000 liability insurance requirement is for General Liability Insurance, which would not respond to the inspector’s alleged professional negligence, not Professional Liability [E & O] Insurance which would.

Not surprisingly, this ruling has set West Virginia home inspectors’ hearts aflutter, especially those without E & O Insurance. Since the ruling is not prospective, that is, it is not limited to allegedly negligent inspections that occur subsequent to the date of the ruling, it potentially implicates hundreds of inspectors and tens of thousands of inspections conducted over the last two or three years and before.

As the leading proponent of the proposition that inspectors should abandon their reliance on the “protection” of the Limitation of Liability clause, I was sorry to see this decision come down because it eliminates the competitive advantage enjoyed by inspectors who “stand behind their reports” that I discuss elsewhere on this site.

The take-away from this decision for home inspectors, at a minimum, should be an increased awareness of the need to re-examine their risk management strategies. Especially so, if a Limitation of Liability clause is a major – or, for heaven’s sake, only – component of it.

The most effective risk management strategy for limiting your exposure to financial and career-ending loss is to secure professional liability insurance through Lockton Affinity by clicking on the blue “GET A QUOTE” button on the right and ClaimIntercept™ by clicking on the amber “Subscribe” button on the right.

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