joe ferry

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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Something that I emphasize quite heavily in the Law and Disorder seminar is the importance of adhering to whatever Standard of Practice you happen to be following when you are conducting your inspection.

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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A couple of years ago, Lady Agag (my lovely wife) and I were invited to a cocktail party that was being held at a restaurant in the Chestnut Hill section of Philadelphia. The restaurant was actually closed that evening to all but those who had been invited to the party. The hosts of the party had “won” it by outbidding others at a silent auction to benefit Norwood-Fontbonne Academy, the private Catholic grade school that our two boys had attended.

Because of that provenance, the guests were, by and large, well-established inhabitants of the middle-class with a vast over-representation of lawyers. Lady A and I, about fifteen years senior to the gathering’s statistical mode, were clearly skewing the assemblage geezerish. Nevertheless, due to our surpassing young-at-heartness and preternatural gregariousness, we were warmly received by our fellow guests.

I was introduced to a couple, whose male component I had been reliably informed, was also a lawyer. After establishing that I was a colleague, he asked me what sort of law I practiced. My spontaneous response surprised even me.
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I am starting to see a disturbing number of home inspection claims brought against home inspectors by non-client home sellers who are blaming home inspectors for the failure of their clients to follow through on the Agreement of Sale as a consequence of the inspector’s findings. I am hoping that this trend is secondary to the very depressed real estate market that we are currently experiencing and will not survive beyond the eventual market recovery.

Some of these frustrated sellers completely lose control of their senses and foolishly decide to vent their fury at the home inspector in inappropriate ways. In one case, for example, the aggrieved home seller filed a complaint against the home inspector with the state board that oversees the licensure of home inspectors claiming that the home inspector had “several false finding and inaccurate statements of the existing condition on his home. In your report you stated a retaining wall was on his property which is not, you also reported an HVAC unit as hazard when it is in excellent working condition. You further listed termite infestation which owner states there is no infestation.” Sic.
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Many of the home inspectors who attend my home inspector training with the Law and Disorder Seminar are shocked, shocked to hear me say that their corporate entities, be they Subchapter S or Limited Liability Corporations, do not insulate them from personal liability for conducting a negligent home inspection.

For my part, I am shocked, shocked that they could possibly believe that. And to an individual, they absolutely swear to me that that is exactly what their attorneys told them when they formed their corporate entities. And even if that is not what their attorneys told them, it most definitely is what they heard.

Corporations do protect their shareholders from personal liability for obligations of the corporation, for example business loans or credit obligations to a supplier or a landlord. Thus, if the corporation defaults on a bank loan or a lease, the creditor can not look to the shareholders for payment. That is the reason that banks, suppliers and landlords, if they are even half-way sophisticated, always require loans, credit lines and leases to corporations to be personally guaranteed by the corporation’s owners. That is often true even for closely held corporations that have high credit ratings and substantial retained earnings on their balance sheets.
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One of the tools and techniques that I teach in my home inspector training with the Law and Disorder seminar, and that I encourage home inspectors to incorporate into their practice, is the appropriate use of the disclaimer. While home inspectors and other real estate professionals know that there are many, many issues implicated in a home-buying decision that are not going to be addressed or uncovered by a home inspection, their clients are almost universally unaware of that.

For example, a home inspection is not going to determine a property’s boundaries or whether appropriate permits for additions or improvements had been obtained. Nor will it address title or zoning issues. Or any of a myriad of other matters. Easements, covenants and the like.

Consequently you have to disclaim any responsibility for those issues. These are issues that are common to all properties.
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A question that comes up frequently at the Law and Disorder seminar is whether or not it is a good idea for home inspectors to take photos during the inspection. When I first started getting this question, I could not imagine any reason why anyone would ask that question. It turned out that a lot of home inspectors were afraid to take photos because they might later “prove” that the inspector missed something during the inspection, a decidedly counter-intuitive measure apparently based on a “your-word-against-mine” defense strategy.

I always advise home inspectors, though, to take lots of photos during their inspections because they will invariably prove conclusively that they did not miss something. About 50% of all claims against home inspectors are for conditions that were concealed at the time of the inspection. By carpeting, furniture, wall hangings, finished ceilings or other finished work. So having a lot of photos of the home is more likely to “prove” that a subsequently discovered defect was concealed at the time of the inspection.
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