The following risk management bulletin is provided as a service by Business Risk Partners, Inc. and their claims administrator. Please note, the bulletin is merely a general discussion of topical matters involving the home inspector, and it is not and should not be construed as legal advice of any kind. Further, as laws differ from state to state and because the law related to the home inspection industry changes regularly, please consult with an attorney in the proper jurisdiction to obtain legal advice on any particular matter.
In the past year and a half, there has been a dramatic shift in the economy and the housing market. While there has been an overall unprecedented decline in overall home sales and home values, some areas are experiencing a precipitous decline. These market fluctuations directly impact home inspectors, as decreased home sales lead to a decrease in business.
Market fluctuations also have resulted in a significant increase in lawsuits against home inspectors as individuals seek to offset a decline in their home value by filing a claim against their home inspector. Therefore, it is more important than ever to be diligent in writing inspection reports. Below is a list of suggestions that, if followed, can help avoid these lawsuits. Some of these ideas might seem basic and may relate to your common sense, but everyday claims with these exact avoidable mistakes continue to be made. Sometimes, simply spending a few more minutes on a report can save hours of work and worry in the future.
Tip #1: Signature
While a signature on an inspection agreement contract seems obvious, many claims that are filed actually lack a signed contract. This makes it that much more difficult to defend against the lawsuit. That is because oftentimes the contractual defenses such as limitations of liability and arbitration clauses are included in the home inspector contracts. Many states, but not all states, will enforce these provisions. Nevertheless, when the signature is missing it is much harder, if not nearly impossible, to assert these defenses and the home inspector is exposed to significantly higher liability. So, please always double-check to ensure that you have obtained the signature of the individual for whom you are performing the inspection.
Tip #2: Specificity
One of the biggest problems facing home inspectors is inspection reports that lack specificity. Many times, inspectors properly note that there is a problem; however, they fail to document the exact location of the problem. For example, claims are often seen with the following: “Cracking in basement foundation wall.” This is not enough; a better and more thorough report would state: “Two 4-inch cracks noticed in a lower left-hand corner of the northeastern basement wall running under the dining room.” This level of detail is a great help fighting and resolving claims.
Additionally, it is worth noting that many claims are settled for a nuisance value of a couple thousand dollars
because there is no supporting documentation to specifically refute the charges. Many times, inspectors will say that they had a one-hour conversation with the individual about the faulty roof that had to be replaced at a cost of $50,000. Nevertheless, if this conversation is not reflected with specificity in the report, then there is no documentation to refute the claim. It becomes a “he said, she said” situation that ultimately has to be settled instead of simply defended. With proper documentation, it is significantly easier to aggressively counter the claim.
Tip #3: Avoid Boilerplate Disclosures
Although specificity should be your goal, so, too, should avoiding checklists and boilerplate disclosures. Even from an objective position, checklists and boilerplate disclosures often make the report appear sloppy and give the impression of hasty preparation. It’s best to be specific, while at the same time tailoring your report to the specific customer.
Tip #4: Photographs
“A picture is worth a thousand words.” This statement has never been truer than in the case of home inspections. Especially now that every cell phone has a camera, it is more important than ever to supplement your inspection report with plenty of photographs. Photos help strengthen your position by providing unequivocal evidence of the defect or condition. It might take slightly longer to add photos to a report; however, when photos are combined with a report that is written with specificity, the inspector creates a true position of strength.
The four tips mentioned above might seem like common-sense reminders, but it is truly surprising how many claims with similar types of problems are
submitted daily. You might have 99 out of 100 people sign their contract, but given “Murphy’s Law,” it is that one contract you did not get signed where you will have a problem. So, as the economy continues to weaken, it becomes more important that you follow the above-outlined tips, as they only will help strengthen your position if a claim is filed. Additionally, your customers will be impressed with your diligence and thoroughness, which will likely lead to referrals.
Business Risk Partners, Inc. is ASHI’s endorsed E&O insurance provider. Please call 866-268-1327 or visit www.inspectorinsurance.com for a no-obligation “quick quote” today! Lower rates/deductible available now!