home inspection claims

At last Thursday’s home inspector training Law and Disorder Seminar in Wall Township, New Jersey, one of the inspectors in attendance was currently a defendant in a multi-defendant lawsuit. As the seminar wore on and I was recounting all the reasons that claims against home inspectors by their former clients never have any merit, this inspector asked why the attorney who had been appointed by his E and O insurance company for home inspectors to represent him in his lawsuit was not taking any of the steps that I was saying needed to be taken to terminate the matter in his favor.

For example, even though the inspector had a clause in his contract that required that any dispute arising from the inspection had to be adjudicated in arbitration, the lawyer never filed or evinced the slightest interest in filing a motion to dismiss the inspector from the suit on that ground. Instead, he answered the complaint which constitutes a de facto waiver of the clause. Moreover, even though the inspector had no liability – the alleged defect that was the gravamen of the plaintiff’s complaint had been concealed at the time of the inspection – the lawyer was sending unmistakable signals that he was fixing to fold his tent and cut the losses of his real client, the inspector’s professional liability insurer. Certainly, the insurance company’s continued patronage is more important financially to insurance defense counsel than a random individual insured-defendant.

That’s a scenario that is very familiar to this long-time observer of the inherent conflicts of interest that obtain in the ménage à trois, formed by the prototypical insurance defense contract, among the defense counsel, insurer and insured and the reason that I never sought insurance defense clients. Numerous conflict issues can arise in such relationships but the one that concerns inspectors the most is the unwillingness of both insurers and defense counsel to vigorously defend bogus claims, if the expense of doing so would eclipse the nuisance value of the case.
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That headline is not a typo.

Other than summer jobs during high school and college, a stint helping my Uncle Sam prevent the Domino Theory from becoming the Domino Law, a cup of coffee at an insurance company after the service and a brief interlude at a major Philadelphia white-shoe law firm to learn the ropes of my new profession, I have always been self-employed. Coming, as I do, from a long line of Irish farmers who had to coax a hard-scrabble living from unforgiving ground and dicey, to say the least, weather, I suspect that working for “the Man” was very likely bred out of my genetic code multiple generations ago.
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About once a week, a home inspector who has heard me speak or is otherwise familiar with my work on behalf of home inspectors will contact me to discuss a claim that is already in suit. These contacts are always engendered by the inspector’s utter disgust with the way in which the lawyer engaged by the inspector’s insurance company to represent his interests in the litigation is executing that assignment.

Last week an inspector who had been at the seminar that I conducted for the West Virginia Association of Home Inspectors in February of this year called me about a case that he has been involved in for over two years. The attorney who is representing him has been running up “enormous bills”, currently over $150,000, while taking no action whatsoever to terminate the case.

The inspector’s deductible has long since been exhausted and he has since switched his insurance coverage to Lockton Affinity to avoid any future repeat of this sort of nightmare. Thus, he really has no further financial stake in the outcome of the litigation, assuming, of course, that attorneys fees do not eventually exceed his insurance policy limits. That fact notwithstanding, he is morally outraged at the way that this attorney is exploiting the file financially and wanted to know what he could do about it.
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Another fervently held belief of the parishioners of the Church of Lalalala I Can’t Hear You is that only a fool would carry professional liability insurance because, you see, lawyers who represent home buyers are so surpassingly naïve and venal that, if you tell them that there is no insurance from which they can collect a judgment, they will simply go away. Problem solved.

I think that this widely held belief very likely stems from the pop-culture meme that lawyers are blood suckers whose only interest is what’s in it for them. Now, I’m not so naïve that I would deny that examples of that stereotype exist in some profusion in my profession. However, against that negative stereotype you have to contrast advocates like, for example, the effulgent Daniel Petrocelli. whose masterful prosecution of the wrongful death case on behalf of Fred Goldman against the man who murdered his son, was undertaken without any realistic hope of adequate compensation – or any at all, for that matter. The vast majority of lawyers of my acquaintance, less renowned than Daniel Petrocelli to be sure, though no less skilled, embrace the same ethic. They want to see that their client gets justice.

To be sure, “justice” for a home inspector’s client who is unhappy that the air conditioning system suddenly stopped working some ten months after the inspection, eight months after the client took occupancy of the inspected dwelling and some two months after the system was performing its function flawlessly may well be – and invariably is – a firm explanation that, you know, stuff happens that, as much as you would like to wish it otherwise, is nobody’s fault.
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One way to tell whether an issue is important to home inspectors is to count how many threads and posts it generates on home inspector message boards.

There was a recent dust-up on one board that I monitor fairly regularly that centered around an inspector’s having found black air-conditioning coils on an inspection in an area of the country where Chinese Dry Wall (“CDW”) is known to exist. That tell-tale sign raised the inspector’s suspicions and he duly reported them, noting that the condition was associated with the presence of CDW and recommending further evaluation by a qualified professional. He posted a photograph of his discovery to give colleagues a heads-up and noted that his client had walked as a consequence of this discovery.

Well, before long, another inspector noticed that the coils appeared to have been painted black and, thus, the CDW reference was very likely unduly alarmist, after which, following well-established industry message board protocol, much piling on of the original poster ensued.
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A home inspector recently asked me a question that I suspect has crossed the minds of a lot of home inspectors who regularly visit this website. “If I have ClaimIntercept™,” he asked, “do I still need to have E and O Insurance for Home Inspectors?”

He has been an inspector for several years and has conducted a couple of thousand inspections. When he started out as an inspector, he owned a home inspection franchise and the franchise agreement required him to carry professional liability insurance. When he parted company with the franchisor a few years ago, he dropped the E and O insurance because he felt that it only protected the client, not the inspector.

That is a very common sentiment among home inspectors, almost all of whom have either personally had a bad claim experience with a professional liability carrier or have a close colleague who has. Interestingly, the bad experience almost never involves the insurer’s failure to pay a legitimate claim. Rather, it predominantly involves insurers who, in inspectors’ minds, seem to have adopted a default posture of settling illegitimate claims rather than aggressively defending them. There is certainly no shortage of anecdotal evidence on home inspector message boards to support this widely-held belief.
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Almost every day, I get email correspondence from an inspector who is about to get jammed up royally by the unholy alliance of his insurance company and its panel defense counsel. I really wonder why any inspector, who chooses to be insured or who has to be insured by law, would go anywhere other than Lockton, the only home inspector professional liability insurance provider that endorses my claim response techniques and the only one whose default strategy is not “surrender”.

Consider this very typical situation:

Mr. Ferry:

I am fearful that it may be too late in the process for me to avail your services.  I just today found out about your services.

I am in the middle of a claim against me and my Errors and Omissions Insurance here in [location redacted].

Turns out my insurance company is attempting to defend the claim against me but under a very specific “reservation of rights” clause that appears to ultimately leave me with representation but no coverage.  The Insurance Company is also looking for my deductible up front.
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