The following is a real home inspector E&O insurance claim from our archives. To protect the insured’s identity, all identifiable characteristics from this claim—including names, associations, and locations—have been altered or removed.
Wantonness. Gross negligence. Breach of contract. These were the three counts a former inspection client brought against their home inspector in a lawsuit. There was no warning, no indication that the home inspector client was upset before they served a court summons. And they were demanding $100,000.
Immediately after moving into their home, the claimants began discovering defects. They found improperly installed windows, visible cracks in the brick veneer, and improperly installed shower tile.
The home inspector did not find these problems. But if he had argued they could have gotten a better price. They wanted their inspector to pay for the repairs—and their mental anguish and emotional distress.
Little did the claimants and their attorney know that, when they filed a claim against the home inspector, he’d used our model pre-inspection agreement. In turn, they would be hard pressed to satisfy their demands.
He submitted his home inspector E&O insurance claim to us, his errors and omissions insurance provider. Then we got to work.
After reviewing the inspection photos and report, we confirmed the damage was not present during the inspection. Whether the damage happened during the sellers’ or buyers’ moves or in some other way, we were confident the inspector was not at fault. We sent the claimants and their attorneys a letter denying the home inspector’s liability and citing our evidence.
Unfortunately, the claimants still believed they had a case. We turned to our model inspection agreement, which the inspector and their clients signed prior to the start of the inspection. It limited the home inspector’s liability to double the inspection fee—not $100,000—and mandated the case go to arbitration instead of court.
The case appeared before our arbitration company of choice. The arbitrator, who had a background in construction, reviewed the inspector’s standards of practice, pre-inspection agreement, and report. When compared to the claimants’ demands, the arbitrator ruled that the home inspector was not responsible for the defects because they weren’t visible during the inspection. It also wasn’t in his inspection scope to predict future failures.
The case closed with no award to the claimants. Plus, the claimants had to pay their own attorney’s fees. Thanks to his careful reporting and signed home inspection contract, this home inspector’s E&O insurance claim closed at no cost to him—not even his deductible.
It may be a new year, but we’re still giving the same advice. Get. 👏 It. 👏 Signed. 👏 Above all, get a signed contract before your home inspection.
Should you do an inspection before clients sign a home inspection contract?
No.
When the clients show up after the inspection?
No.
Ten minutes into the inspection because they got there late?
No.
How about before you send them the report?
NO!
You MUST get your home inspection agreements signed BEFORE you start your inspections. No ifs, ands, or buts. Many home inspectors have suffered facing bogus claims because they delayed getting their home inspection contracts signed, or forgot them altogether.
Don’t make the same mistake. Don’t wait for your own home inspector lawsuit or E&O insurance claim to happen. And don’t risk your precious defense and insurance coverage. Get your pre-inspection agreement signed prior to every inspection, every time.
If you need help being consistent—even with the least cooperative clients—read these 12 tips from your fellow inspectors.
You may love binging “The Lincoln Lawyer” and “Judge Mathis.” But court isn’t as fun when you’re in it.
It’s time consuming, stressful, and expensive. A judge and jury aren’t likely to know your field. That lack of understanding can lead to lengthier, costlier court cases that don’t rule in your favor. Worse still, when you go to court, those documents can be public, which can damage your reputation.
Compare that to arbitration, where you can pick an arbitrator familiar with the inspection industry, keep the claim confidential, and close the case faster and cheaper. In the words of Jay Rock: “Win, win, win, win.” You can learn more about arbitration provisions and the benefits of arbitration here.
While getting your agreement signed is up to you, crafting your agreement doesn’t have to be. In fact, cobbling together your own home inspection agreements can be detrimental to your inspection business.
You run the risk of missing essential information and provisions. You might even accidentally incorporate a clause that isn’t enforceable or legal in your state, which could lead arbitrators or judges to throw out your whole home inspection contract.
That’s why we give our insured inspectors our model pre-inspection agreement at no additional cost. Built on 15 years of claim-fighting experience, our agreements are tailor-made to your state and standards of practice. They’re living documents, too, meaning we update them as we learn from new claims, case law, and legislation.
We’re so confident they’ll work that we’ll offer you a $1,000 deductible discount if you receive a claim while properly executing our agreement. Combined with other deductible discounts, you can pay as little as $0 for a claim—just like the inspector in our opening story.
As a home inspector, getting blamed for things that aren’t on you can become a regular occurrence.
Be ready for home inspector E&O insurance claims—both meritless and warranted—by using our model pre-inspection agreement, complete with an arbitration provision, and getting a signed contract before every home inspection.
Insured with us? Click here to learn more about our model agreements and get your copy.
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