Subrogation Claims Against Home Inspectors

To the ever expanding list of rent seekers that Home Inspectors have to fend off, please add insurance companies that have paid a first-party claim on behalf of a homeowner and then want to recover that payment from the home inspector through subrogation.

Subrogation is a legal concept whereby one party – the subrogee – succeeds to the rights of another – the subrogor – either by operation of law or by contract. The most familiar examples of this concept involve insurance companies that pay losses sustained by policyholders and then seek to recover those payments from tortfeasors that may be legally liable for the policyholder’s loss. The insurance company by virtue of its payment would succeed to the policyholder’s rights against the tortfeasor.

Thus, if an insurance company paid a collision loss on behalf of its policyholder who was not at fault in the accident, it can seek to recover that payment through subrogation from the driver who had actually caused the accident. Health insurance companies and workers compensation insurance companies who pay medical bills on behalf of their insureds will endeavor to recover those outlays from parties who may be legally responsible for causing their insureds’s injuries.

In the home inspection context, this would most often involve a claim by the seller of a home that was being inspected for damage caused by the inspector during the inspection. For example, if an inspector mistakenly turned off the heat in the house that he was inspecting and water pipes subsequently froze and burst as a result, the seller’s homeowners insurance would pay that claim on behalf of its insured and then seek to recover its payment from the home inspector.

That’s an example of a general liability subrogation claim.

Lately, however, I have been seeing claims that implicate the inspector’s professional liability. In those claims, the insurance company paid a claim on behalf of the client who had hired the inspector to evaluate a house he was considering buying and then took the position that the inspector’s negligent inspection caused the damage to the property that the insurer had to pay to rectify.

Thus, even though the inspector’s client may not be blaming the inspector, the client’s insurer is. Of course, these subrogation claims are no more meritorious than the prototypical home inspection professional liability claim and can be squashed in the very same way: by pointing out that the alleged defect could not have been discovered due to concealment or inaccessibility; that it was discovered and reported; that it was actually working at the time of the inspection; or that it is not something that is part of a home inspection.