home inspection claims

Limitation of Liability is NOT a Home Inspector’s Best Friend

Myth 2: Limitation of Liability Not Home Inspector's Best FriendHome inspectors love Limitation of Liability clauses because, in most U.S. jurisdictions, they put a cap on a home inspector’s potential liability for negligence. However, these same clauses also stifle a home inspector’s earning potential.

How?

I describe in the video below how Limitation of Liability clauses are completely unnecessary and don’t prevent clients and co-defendants from suing home inspectors.

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No Country For Old Inspectors

There is nothing like a road trip for restoring your faith in the future of this country and reminding you that, despite our manifold problems, the present is pretty awesome, too.

As I write this, I am sitting at the departure gate for my flight home to Philadelphia after having spent a few extra days in New Hampshire and Maine following the presentation of the Law and Disorder Seminar to about 25 home inspectors at the ASHI Northern New England Chapter’s Spring Conference in Eliot, Maine.

The inspectors who came to this seminar were all seasoned veterans and virtually all of them had had one or more bad experiences with an unreasonable client, a cowardly insurance company, an unprofessional real estate agent or a vindictive seller that had caused them considerable agita and cost them lots of money. In other words, this was a sampling with a margin of error of zero.

This, of course, is not exactly terra incognita to me. I am accustomed to inspectors being shocked, shocked that their insurance company would pay a bogus claim, or would immediately offer their deductible to the complaining former client, or would assign them an attorney “who didn’t seem to know anything about home inspections” and who would churn the file, running up legal fees for years, before eventually caving in and settling the case for “nuisance value.”

And I am completely inured to the astonished reaction from veteran inspectors who are hearing for the very first time in their inspection careers that there is no longer any reason for them to stand for this nonsense. That there is a new sheriff in town! That their days of routinely refunding inspection fees are over!
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Is E & O Insurance A Waste Of Money?

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.
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Inspection Agreements: Is There Anything They Can’t Do?

When home inspectors contact me to squash a claim, there are three documents that I always ask for: All correspondence with the claimant, the Inspection Report and the Inspector’s Inspection Agreement. These documents essentially constitute the “claim file” and invariably provide a torrent of reasons why the claim will fail.

After having sucessfully dispatched over 300 home inspection claims since 2006, I never expect a claim to have any merit and my expectations are never dashed. Of course, claimants and their attorneys, by and large, do not regard the mere fact that a claim has no legitimate predicate as any obstacle to making it. Indeed, their most frequently and fervently expressed desire is that the inspector “turn [the claim] over to your insurance company.”

And who can blame them? After all, most insurance companies operating in the home inspector professional liability field do not regard the mere fact that a claim has no legitimate predicate as any obstacle to throwing money at it. As long as the amount does not exceed the insured’s deductible, that is.
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Home Inspectors: Competence Does Not Equal a Claim-Free Existence

Myth 1: Competence Equals Claim-Free ExistenceMany home inspectors believe that competence and experience guarantee a claim-free existence. They are stunned when they receive their first claim (likely a meritless one) after 20 years on the job.

As part of my home inspector training video tip series, ClaimsAcademy, the video below debunks the theory that competence equals a claim-free existence. Watch the video for further examination of the myth and how that false sense of security can hurt your business and professional reputation as a home inspector. Then make sure to sign up for my free video and case study library, which includes a robust collection of valuable information to help you, the competent home inspector, protect your business.
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Good News for Arizona Home Inspectors! Not!

“Good News for Arizona Home Inspectors!” was the headline on a blurb sent to members of Arizona ASHI. What was the “Good News”? The Arizona State Board of Technical Registration – the guys who impose preposterous punishments on home inspectors who have had the misfortune of being the subject of a complaint by their delusional clients – had been operating under the truly ludicrous notion that there should be no statute of limitations for home inspections. In other words, to the citrulls on the Board, you should be subject to suit for a claimed negligent inspection until the end of time. And beyond.

How professional licensing boards always manage to comprise a startlingly large number of knuckleheads would be, it seems to me, an interesting avenue of scholarly inquiry for some enterprising doctoral student.

So the “Good News” for Sun Devil inspectors is that the Arizona State Legislature has reduced the time within which a home inspection claim can be brought from whenever and forever to four years. While four years is a damn sight better than the incumbent standard, which remains in full force and effect until the legislative session mercifully ends, pardon me if I seem underwhelmed by this legislation.
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The Kamikaze Claimant

One reads a lot of news stories nowadays about people who engage in so-called “self-destructive” behavior. I’m prone to feel sorry for these folks who can’t seem to help themselves, providing that the destructive behavior is self-confined, as well.

Unfortunately, that is rarely the case and the self-destructive behavior invariably causes collateral damage to other innocent bystanders.

I sometimes see home inspection claimants engaging in self-destructive behavior when they allow their perhaps understandable annoyance at the development of some unexpected problem with one of the systems in their new residence to morph into a full-throated and completely unwarranted attack on their home inspector’s level of professionalism.
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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.
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You Don’t Need A Weatherman To See Which Way The Wind Is Blowing

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.
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When Attorneys Amend Your Agreement

One of my home inspector clients contacted me the other day for advice on what to do about a prospect whose attorney had lined out in its entirety the portion of his Inspection Agreement that a. required binding arbitration and b. required claims to be brought within one-year of the inspection.

In his transmittal email to the inspector’s prospect, the attorney wrote the following: “The stuff below that I red-lined should be removed. I don’t have a problem for him not to be responsible for stuff he does not inspect. Any questions let me know.” Italics mine.

And I, for my part, do not have a problem with this lawyer lining out those two items, especially if the inspector can exact a higher inspection fee as a result. Here’s why.
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