home inspection

Bonds are NOT a Form of E&O Insurance for Home Inspectors

Reader Martin Greenberg brought up a good point in a comment on my recent post “The Importance of E & O Insurance for Home Inspectors.”

“In the state of Arizona,” he wrote, “the licensing bureau offers a choice. E & O coverage or post a bond. Since few inspectors are successfully sued and plaintiffs rarely win more than a few thousand dollars, bonds make sense. However, the inspector is ultimately responsible for paying the claim in the event a plaintiff is successful.”

A number of states that require a license to perform home inspections also require that Home Inspectors carry Errors and Omissions Insurance for home inspectors in certain minimum amounts as a condition of licensure. The intent is to assure that the inspector will be able to respond financially in the event that her negligence causes harm to one or more of her clients. A handful of states allow Home Inspectors to fulfill their financial responsibility requirement by securing a surety bond.
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Brand X Insurance Companies Can Be Hazardous To Your Wealth

As I was writing that headline, the thought struck me that many readers might not be familiar with the Mad Men-era advertising invention. For those benighted youngsters, in ubiquitous television commercials of the day, Brand X was the competing product that left ring around the collar, caused soapy buildup and dry lifeless hair. In real life, Brand X E and O Insurance Companies for home inspectors are ones that can cost you a small fortune.

A veteran home inspector recently called me about a claim that he had only the day before turned into his insurance company. He advised the company that he wanted to engage his own attorney to respond to the claim. The company told him not to do that; that it would handle the claimant. That, the inspector told me, was what he was afraid of.

The claim, of course. was completely ridiculous and involved the inspector’s alleged failure to advise the claimant that the supports for an elevated deck were inadequate. By the time that the claimant notified the inspector of the issue, she had already completed the “repairs”.
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Home Inspector Attorney Fees Clauses and Their Value

As I mentioned a few weeks ago, I am in my twenty-fifth year of practicing law, the last five of which have been heavily concentrated on the representation of home inspectors. Over the years, close to 1500 inspectors have attended my home inspector training at the Law and Disorder Seminar, which itself has undergone major revisions as I have continued to develop defense strategies and techniques in response to the large volume of claims that home inspectors are continually asking me to help neutralize.

My experience handling claims against home inspectors has caused me to completely reverse my position respecting provisions in Inspection Contracts that call for the prevailing party in disputes arising from the home inspection to be awarded its attorneys fees. The so-called American Rule is that each party to litigation is responsible for its own attorneys fees. The British Rule is that the prevailing party is awarded its attorneys fees.
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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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Don’t Get Caught in Pre-Sale Inspections Trap

Pre-Sale Inspection Trap - Tip 34Sellers are encouraged to obtain home inspections prior to listing their house for sale.

That said, home inspectors MUST be aware of exposing themselves to liability to non-client third parties.

Home inspectors run into problems when someone with whom the home inspector does not have a contract claims to have been warned by the alleged negligence of the home inspector.

In this week’s video tip, I discuss why home inspectors like you should not get caught in the pre-sale inspection trap, illustrate how you can avoid it and detail an example from a case I recently handled.

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Store Your Home Inspection Reports in The Cloud

A home inspector recently asked me, “Joe, how long should I keep my inspection reports?”

Home Inspection Report StorageInstead of using a lot of paper, rely on an electronic version for your own records. There are various free electronic storage options that are beneficial to home inspectors, who are looking to store 250-plus inspection reports, along with corresponding photographs.

I look at these storage options and the benefit of using electronic storage in this week’s video blog.
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Clarifications

When I was studying calculus in college, I thought that the text book that we used belabored a lot of points that seemed obvious to me. The book would take three or four steps to illustrate some mathematical operations that the professor would illustrate in one or two. I found this disconnect a bit annoying until a classmate explained that the author of the text could not know in advance how versed a potential reader might be in mathematical arcana so, of necessity, he would have to over-explain concepts so as not to shortchange or frustrate large segments of his readership.

I recently had occasion to recall that episode when I received an email from a home inspector that read as follows:

“I have a client making a claim and am not currently covered by an E&O policy. Are you able to assist? Does one already have to be a member of ClaimIntercept™ to use your services?”

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Timing of Home Inspection Claims

When I was assembling the material for my home inspector training at the Law and Disorder Seminar a little over four years ago, I gathered some data about home inspection claims from an underwriter for an insurance company that is a major player in the home inspector professional liability insurance market. And while talking to an insurance underwriter can definitely cause drowsiness, I took one for the club and learned one interesting factoid concerning the timing of home inspection claims.

Sixty percent of claims against home inspectors, according to this underwriter, are presented within the first year after the inspection. Ninety percent are presented within the first two years after the inspection. The other ten percent arise more than two years after the inspection.

While this company extracted those percentages from a huge database of claims over many years, the numbers are actually almost congruent with my own experience over an obviously much smaller number of cases and shorter period of time.
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Follow-up Inspectors: Don’t Ruin Your Credibility

I get a lot of mail from home inspectors offering their services, should the need ever arise, as expert witnesses in negligence cases against home inspectors. Fortunately, I never have a need for their expertise because the home inspection claims that I get asked to squash almost all go away secondary to a compellingly written letter that explains a. why the claimant has no case, despite what his expert claims; b. why, even if he had a case, he has no damages; c. why, even if he had a case and had damages, his claim would be barred because of his own conduct; d. why, even if he had a case and had damages and his claim were not barred due to his own conduct, his recovery would be contractually limited; e. that the claim, if brought, will be vigorously defended; and f. the retaliatory action that will ensue following the certain defeat of the claim.

Nevertheless, I do get to see a lot of reports from would-be “experts” for claimants. Usually, these individuals are not experts at all – that is they were not hired to give an “expert opinion” on established facts. They are merely professionals re-inspecting the same property several weeks and often several months after the original inspection and not infrequently after the massive destructive probing that first allowed the defect to be, literally, “uncovered.”
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