ClaimIntercept

If you ever find yourself being named as a defendant in a lawsuit alleging that you were professionally negligent in conducting your inspection of the plaintiff’s prospective home, I have really good news for you. You are going to win. The overwhelming majority of lawsuits alleging professional negligence that are actually tried to verdict result in the exoneration of the professional defendant.

Why do you suppose that is? It is because professionals are, by and large, pretty competent at what they do. They know what they are doing, how to do it, follow an established protocol and do it every day.

Well, if that’s the case – and it is – you have to ask yourself this question: Why are there so many unfruitful professional negligence lawsuits and what can be done to stop them?

Most lawsuits alleging professional negligence stem from what attorneys term a “bad result” or a “bad outcome.” A patient acquires an infection during surgery. Never mind that the surgeon took every conceivable precaution to prevent that from happening, In the patient’s mind, he is responsible.
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The number one complaint that I get from Home Inspectors on the home inspector training Law and Disorder Tour is about E & O Insurance companies for home inspectors. Their perceived default claim posture of caving in and paying unmeritorious claims – usually with a hefty contribution from the inspector pursuant to the deductible feature of the insurance policy – sends inspectors over the edge. And justifiably so, in my opinion.

Having quashed over 200 claims at the demand-letter stage in the last four-and-a-half years – and several more where the first notice of claim was an actual lawsuit – I am confident that I have solved that problem – at least for those insured under the Lockton Affinity E & O Program described elsewhere on this site.
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One of my home inspector clients in California recently wrote to me about a home inspection claim that was being brought by a client for whom he had performed an inspection about three months earlier. The client was experiencing some leaks due to recent heavy rains. The leaks were discovered only after removing baseboard and flooring to do some remodeling. After opening the walls they found that the leaks were due to the fact that the vapor barrier had been torn in several areas.

A review of the inspection report demonstrated that the inspector had noted that “stains were observed at baseboard, dry at time of inspection, unable to determine cause, advise review with seller.” Photos of the area taken at the time of the inspection completely support the inspector’s position.

The clients were quite upset and were unwilling to grasp the fact that, since the defect was not visible during the inspection, the inspector was not liable. They subsequently threatened to file suit if the inspector did not refund the fee.

Since he was clearly not responsible for the clients’ problem, he refused to refund the fee and the client followed through on the threat and filed a claim in small claims court.
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There is absolutely nothing that a home inspector likes better than limiting her liability. And there is nothing that limits a home inspector’s ability to make money more than clinging to this completely unnecessary clause that is way past its sell-by date.

Home inspectors love limitation of liability clauses – also known as exculpatory clauses – because, in the majority of US jurisdictions, they are routinely enforced on freedom-of-contract grounds and, thus, effectively put a cap on the inspector’s potential liability to her client for professional negligence. Indeed, every home inspector association and every home inspector franchisor actively encourage their members and franchisees to embrace this evolutionary holdover. And you would be hard pressed to find a home inspector forum whose contributors do not wax enthusiastic about the preternatural cleverness of their personal attorneys who counseled them to include such a clause in their pre-inspection agreements.

One problem with exculpatory clauses, of course, is that they also put a cap on the inspector’s earning potential. What sophisticated purchaser, in her right mind, would hire a professional home inspector who limited her liability? That’s a rhetorical question that answers itself. The sophisticated consumer will pay hundreds of dollars more to secure the services of an inspector who does not limit her liability – and makes the point in her marketing material that, unlike her lowball competition, she stands behind her inspection reports.
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There was a recent story in the local news about a lawyer who accidentally killed a fellow hunter last deer season. The lawyer was a convicted felon, a circumstance that not only should have precluded his admission to the bar but also under Pennsylvania law, precluded him from owning or possessing firearms of any sort.

As you can imagine, the lawyer is in a heap of legal trouble. He recently pleaded guilty to two felony counts of illegal possession of firearms and no contest to a charge of involuntary manslaughter and faces 12½ to 25 years in prison when he is sentenced later this summer. But he also faces massive civil damages from a wrongful death suit filed by the slain hunter’s widow.

Recently the widow requested the Bucks County Court of Common Pleas to void the transfer of four parcels of land that the lawyer, in a ham-fisted attempt to shield assets from what figures to be an enormous civil judgment, had sold to his mother for one-dollar and a fifth that he had sold to his sister for the same amount following his arrest last December.

That development reminded me of a frequent observation made on home inspection forums and to me at the Law and Disorder seminar that “putting everything in [one’s] wife’s name” would render an inspector judgment-proof and, thus, eliminate the need for an inspector to carry professional liability insurance. This, I suppose, is a corollary to the E-and-O-puts-a-target-on-your-back theorem that is so widely embraced in this industry.
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