joe ferry

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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As I mentioned last time, I had returned home from a few days of R and R at the shore to a torrent of fresh home inspection claims, several of which were actual lawsuits. The lawsuits were all multiple-defendant affairs comprising multiple counts and exceedingly vague allegations that made it impossible to ascertain exactly what it was about the inspection that was aggrieving the plaintiff so.

Nevertheless, after speaking with the inspectors and then the attorneys, I was not surprised to learn that the claims were all for something that was highly defensible: outside the scope of the Standards of Practice; or concealed at the time of the inspection; or disclaimed in the report; or discovered and reported; or working then but not working now.

Not surprised because that is universally the case.
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My friend Hugh Gilmore is a local Philadelphia celebrity and, I hasten to add, justifiably so, whom I met rather serendipitously about a year ago. He writes a widely read column, in one of our local community newspapers, that celebrates the quaint pastime of reading books. Imagine. So that’s how I first came to “know” him.

Of all the gin joints in all the world, we met in a local liquor store – go figure! – during the Christmas rush in 2010. I espied him, relying for markers on the Seurat-like pointillist portrait that accompanied his column, as I was checking out and asked “Are you Hugh Gilmore?”

He owned up to the make, even while expressing astonishment that it was even possible to do so, given the source. Not the first time I’ve been ordered to move to the head of the class!
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One of the collateral benefits of being an itinerant speaker is having the ability to catch up with friends who have pulled up stakes and scattered across the continent while I happen to be moving about the country fulfilling a speaking invitation.

As you read this, I will be en route to Columbia, South Carolina to speak to the Winter gathering of the South Carolina Association of Home Inspectors on Saturday morning. I’m heading to Savannah, Georgia this morning because I have two high school buddies who have retired to Hilton Head and they were kind enough to invite me to stay a few days with them on either side of the speaking engagement.

I also have a friend from Artillery OCS who owns a seafood restaurant in Hilton Head and I am hoping to be able to stop by to see him, as well.

Of course, I am also looking forward to meeting the home inspectors who have registered for the seminar. If this South Carolina seminar is even half-way typical of others what follows is bound to happen.
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A reader recently wrote to me: “One quick question comes to mind in reviewing your E and O insurance for home inspectors blog.  You clearly state a number of times that virtually all claims against home inspectors lack merit and/or can basically be quashed at the point of the initial demand. This being true, why then would one even need to consider E+O when you have made it abundantly clear most if not all E+O claims against inspectors can be successfully defended, likely at a fraction of the cost of insurance?”

In my experience, only three of the over 500 claims that inspectors have asked me to respond to were valid claims. That’s less than one percent. Am I seeing a different segment of claimants than the typical E and O insurer for home inspectors? I very much doubt that I am.

Yet, while my success rate at terminating these claims has been, by any metric, phenomenal, I would still hesitate to counsel inspectors to forgo the back-up protection that an E & O insurance policy with a solid company provides for two very important reasons. One, about 15 % of the time, the first notice of claim is an actual lawsuit. In other words, I will have had no prior opportunity to prevent the suit from being filed in the first place. And while I have successfully persuaded plaintiffs’ counsel to dismiss inspectors from lawsuits multiple times, that is a much more difficult trick with a much lower success rate. Two, my responsive letters are only successful at dissuading claimants 97 % of the time. That means that three knuckleheads out of every hundred cannot be persuaded that they have no claim. In those cases, you will have to hire private counsel and litigation is one of the most expensive undertakings imaginable.
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When I first launched this website, my biggest concern was whether I would have enough material to meet my self-imposed twice-a-week publishing goal. I didn’t want to have a site that inspectors would come to once, never to return which is the justly deserved fate of static sites that never change after their initial publication.

So twice a week, I confront the white bull. That’s the name that famed bullfight enthusiast Ernest Hemingway gave to the blank page, the quite worthy adversary that writers regularly face.

“It’s a real albatross” I explained to a lawyer friend over lunch last week even as I was enthusing over the beyond-all-expectations effect the site has had on virtually every aspect of my practice: from an immeasurably heightened profile to new clients to great testimonials to speaking engagements. All together, a pretty good return on an investment of about four hours of research and writing a week.
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