We at Business Risk Partners are pleased to partner with the American Society of Home Inspectors to provide professional liability insurance. While for the past several years many insurers wrote home inspectors professional liability insurance, poor loss experience has caused many of these carriers to exit the industry. We believe that we have structured a mutually beneficial insurance program, and one that we are hopeful will enable us to partner for years to come.
While we all strive to reduce liability and you strive to give the best possible service to your clients, callbacks and claims are a part of the industry. With the increased use of the home inspection in the typical real estate transaction, it stands to reason that there may be more unhappy homebuyers who will turn to you when problems arise.
Since the purchase of a home is often the single largest investment a person makes in his/her life, regardless of how diligent an inspector may be in the inspection, claims against inspectors are inevitable. Accordingly, home inspectors should be aware of this, and take care to proactively prevent claims situations. Risk management takes on several forms, including, among other things, educating the client as to the nature and scope of the inspection, a thorough and professional inspection, and a quick and courteous response to questions and complaints. We have committed to sharing relevant information on specific claims as well as advise on ways to avoid claim situations. We will share the knowledge we have gained in handling home inspector professional liability claims with ASHI, through articles in the ASHI Reporter. Our goal is to reduce the time and expense wasted in defending these allegations, which in turn will increase the profitability of your business.
Solid risk management begins with a prudently drafted pre-inspection
agreement. Your agreement should set forth the duties and obligations as well as establish reasonable expectations, and provide a reference point and legal defenses in the event of a future problem. We know that the vast majority of inspections that ASHI inspectors perform are done with a signed inspection agreement, however, for those of you who do not currently use the agreement – it is imperative that you begin doing so immediately, and make sure it is signed prior to each inspection. Simply providing the contract prior to inspection is not adequate. It is crucial to have it signed. There is no better shield against claims than a signed contract.
In this article, we set forth the 10 most common claim situations. We would ask that you keep these situations in mind when you are performing your inspections and take steps to avoid them:
1). The inspection report understates the significance or meaning of a problem condition;
2). The inspector orally dilutes the significance or meaning of a problem condition identified in the inspection report;
3). The inspection report fails to suggest that the client retain an expert to more fully evaluate a problem condition;
4). The inspection report fails to identify (or understates) a limitation which prevents or hinders a more thorough inspection of an area of the premises;
5). The inspection report identifies a problem condition but not its significance or meaning;
6). The inspector does not obtain a signed pre-inspection agreement from the client;
7). The inspector presents the inspection agreement for the first time immediately before or during the actual inspection;
8). The inspection agreement does not contain a limitation of liability provision and other key contracted for limitations;
9). The inspection agreement does not identify what services are being offered and excluded; and
10). During a re-inspection, the in-spector makes some admissions of liability to the client or agent.
Taking steps to avoid these situations will help to prevent claims, so we set forth the following recommended provisions for your agreement. This is not intended to be an exhaustive list of appropriate provisions. Actual contractual language should be drafted or reviewed by an attorney experienced in home inspection law in the state in which you operate.
Services provided/not provided
Company agrees to provide an inspection and report to identify major deficiencies of the structure and/or system.
Inspection and report do not cover radon, termites, underground tanks and wells, septic and asbestos.
Inspection of the excluded items should be performed, detected and evaluated by other specialists of your choice and hire.
Inspection visual only
Inspection and report are based upon visual observations only of conditions existing at the time of the inspection.
Company does not probe, bore, pry, poke or otherwise invade any physical structure.
Company does not look behind dry wall, paneling, wall papering, under carpeting, floor covering or in areas blocked or impeded by furniture or other items.
Limitations of liability
Limits the damages that may be recovered against your company to the cost of the home inspection, even in the event of your company’s own negligence or breach of contract.
Waiver of subrogation
Precludes the home buyer’s insurance company form recovering damages against your company even if the insurer pays the home buyer for a claim submitted under a policy of insurance for damage to the house which should have been detected by your home inspection.
Third party indemnification
Provides that the home buyer must pay the attorney’s fees and costs incurred by your company in defending any lawsuit filed against your company by a non-contracting party (i.e. real estate agent) as well as any judgment entered against your company and in favor of the non-contracting party.
One year time to file suit
Modifies the otherwise applicable statute of limitations and provides that the homebuyer must file a lawsuit against your company within one year of the date of the home inspection or be forever time barred.
Repair or replace
Provides that if the customer repairs or replaces the subject matter of the claim before providing the Company with an opportunity to inspect, the customer waives any claims against the Company.
Provides that all lawsuits against your company must be submitted to the American Arbitration Association and decided in accordance with the rules for Commercial Arbitration.
Provides that the homebuyer must pay the reasonable attorney’s fees and costs incurred by your company in attempting to collect for any unpaid service rendered by your company.
We hope that this advice helps you to avoid any problematic situations, so that your attention and energy remain on what you do best (and what provides you a living) –
performing home inspections.
Business Risk Partners looks forward to continued participation with all ASHI Members and Candidates to reduce the incidence of claims resulting from your business.