January, 2008
Ethics
Inspection News and Views from the American Society of Home Inspectors



Real estate agent indemnification and working with a pest control company

KEITH OBERG

The ASHI Code of Ethics Committee is charged with developing ethics education and awareness for ASHI’s membership and with answering Requests for Interpretation of our Code of Ethics.

Two Requests for Interpretation (RFI) made within the last year are presented below. The first makes a distinction between paying for referrals in violation of the code and promoting the advantages of an inspector’s services that may appeal to a real estate agent. The second deals with business relationships between inspectors and related professions or services.

In each of our monthly Focus on Ethics articles, we present one or more RFIs and the responses developed by the committee since the new Code of Ethics was approved. Our membership is encouraged to submit an RFI to the committee if serious questions arise about the intent and applicability of the code. The required form is available here.

 Keith A. Oberg, Chair, 2007 ASHI Code of Ethics Committee

Request for Interpretation

e070622 Real estate agent indemnification

When marketing inspection services to real estate agents and brokers, does promoting the fact that an inspector’s professional liability insurance includes an endorsement that indemnifies referring brokers and agents constitute direct or indirect compensation in violation of 1.C of the Code of Ethics?

Response

The committee believes that the reduction of risk gained by a referring real estate agent or broker from a “limited additional insured” status provided by an inspector’s insurance policy does not constitute direct or indirect compensation in violation of 1.C of the Code of Ethics.

This limited indemnification coverage is provided only to the extent that the referring agent is held liable for the insured inspector’s errors or omissions. While an agent may consider the indemnification to be an inducement to refer a specific inspector when he or she compares one inspector’s services with another, the agent gains
nothing for referring an inspector who includes such indemnification, compared to making no referral at all.

The indemnification simply reduces the risk to the agent, as does referring the most thorough inspector.  
Promoting the benefits and value of one inspector’s services over those of another to real estate agents does not constitute a violation of the code so long as those advantages are represented honestly and do not include some form of direct or indirect payment for referrals.  

Request for Interpretation

e070830 Working with a pest control company

Would it violate the Code of Ethics if a pest company bundled my inspection services with their pest inspections? The client would pay me directly for my services, no money would change hands between my company and the pest company, and I would not be required to recommend the pest company. 

Response


Combining services with other companies that offer a similar class of real estate services would not appear to present a significant conflict of interest situation or a violation of the Code of Ethics. 

Care should be taken to ensure that client information is not shared with a partner company without express client approval, and that any home inspection findings related to pest observations are unbiased.