CA liability question

[Mark Krajcar]

Hi All,

I am a new member and am getting started in the business. I have been told that in California the HI is not liable 4 years after the inspection. I have also seen in the codes of business practices where there is an additional 1 1/2 years for discovery which now makes it 5 1/2 years total. An inspector who is coaching me and is a CA inspector, has told me it is 7 years from the date of inspection.

I have looked all over this site and not found his answer listed anywhere. Not on Google or the CA website.

Part of of teaching style is for me to learn how to get the info myself, not just provide the answer which I like. I just can't locate his answer anywhere!

Any help would be appreciated,

Thanks

Mark

[Scott Patterson]

Hi All,

I am a new member and am getting started in the business. I have been told that in California the HI is not liable 4 years after the inspection. I have also seen in the codes of business practices where there is an additional 1 1/2 years for discovery which now makes it 5 1/2 years total. An inspector who is coaching me and is a CA inspector, has told me it is 7 years from the date of inspection.

I have looked all over this site and not found his answer listed anywhere. Not on Google or the CA website.

Part of of teaching style is for me to learn how to get the info myself, not just provide the answer which I like. I just can't locate his answer anywhere!

Any help would be appreciated,

Thanks

Mark

Don't worry about the limit of liability time frame, it should make no difference in how and what you do as a home inspector.

Even with a time limit you can still be named in a lawsuit regardless of how long it has been. You then have to defend yourself and prove your case and if everything works like it should you will eventually be dismissed from the case.

[Jerry McCarthy]

Mark
Good advice from Scott. In California you can be sued any time, for any reason, by anyone. There are more lawyers in California than the entire country of Japan. My advice is carry E&O insurance from a reputable carrier, do a thorough inspection, write a narrative style report (no check-lists), and keep your inspection reports for at least 6 years after the date of inspection including any photos or field notes such as who attended the inspection, what was asked of you, or any details that you deem may be important down the road. Assume that every report you deliver to your clients will eventually be read by an attorney. Download and read the California Business & Professions Code Section 7195 to 7199. Join CREIA; go to their educational chapter meetings and state conferences. CREIA is all about helping their members with education of a very complex industry. Start a building code book library, join ICC, and get certified as a combination residential inspector. Remember, success in the home inspection profession is not just what you know about construction technology, but takes the eye of an eagle, awareness of a jewel thief, perception of a first class shrink, and the communication skills of a world class actor.

[Mark Krajcar]

Thank you for the advice. Let me ask this a different way. You are a CA HI and you decide to retire. How many years after you retired would you keep your E&O and why?

If I can be sued 20 years after retirement (I'm going far fetched here) does that mean I keep E&O active for 20 years? That would be a bit expensive!

Different question. I responded by clicking the respond with quote and then just deeted the quote. Is there an easier way I missed?

[Billy Stephens]

No need to Post using the Quote Feature.

To Post go down Past the ad ( if there is on ) and click on Post Reply Button Left Side Under the other Posts.

[Jerry Peck]

No need to Post using the Quote Feature.

To Post go down Past the ad ( if there is on ) and click on Post Reply Button Left Side Under the other Posts.

Huh?

What's your point? :p

[Jerry McCarthy]

Mark

This article should help you understand.

Home Inspector Insurance 101 | ASHI Reporter (http://www.ashireporter.org/articles/articles.aspx?id=1430)

[Mark Krajcar]

The ASHI article was very good, thank you. It really explained a lot of the ins and outs I would not have considered.

I hate to keep beating the horse here but the question of how long does one need to maintain E&O (assuming you did not have occurrence type coverage) AFTER one stops inspecting homes? If you retire in 2012, do you need to maintain E&O for 4 years, 5 1/2 years, 7 years, forever in California? Or do people just retire, close the business down and hope for the best?

[Ian Page]

The term limit - 1, 2, 3 years or more after the expiration of the policy would be determined by an 'Occurrence Policy'. The longer the effective term after the covered and claimed event, the more expensive the premium. I'm sure all such policies will have a specific duration of coverage and not cover claims ad-infinitum. Other policies would only cover events while the policy is in effect. It would be useless and irrelevent to carry a 'Claims Made' policy after leaving the business for coverage of an event which took place while in business and when an actual policy was in effect. Any claim made against your policy would be for actions, errors or omissions while performing or engaged in your business at which time any policy should be in good standing. I doubt any underwriter would/could write a policy providing coverage for past events and prior to the effective issue date of the policy.

[Scott Patterson]

The ASHI article was very good, thank you. It really explained a lot of the ins and outs I would not have considered.

I hate to keep beating the horse here but the question of how long does one need to maintain E&O (assuming you did not have occurrence type coverage) AFTER one stops inspecting homes? If you retire in 2012, do you need to maintain E&O for 4 years, 5 1/2 years, 7 years, forever in California? Or do people just retire, close the business down and hope for the best?

When I stop inspecting I will also stop all of my insurance. My company will be folded-up, the doors closed and the phone turned off. In other words I will be very, very difficult to find.

[Billy Stephens]

Thank you for the advice. Let me ask this a different way. You are a CA HI and you decide to retire. How many years after you retired would you keep your E&O and why?

If I can be sued 20 years after retirement (I'm going far fetched here) does that mean I keep E&O active for 20 years? That would be a bit expensive!

Different question. I responded by clicking the respond with quote and then just deeted the quote. Is there an easier way I missed?


No need to Post using the Quote Feature.

To Post go down Past the ad ( if there is on ) and click on Post Reply Button Left Side Under the other Posts.


Huh?

What's your point? :p
.
Now I understand the Confusion.

You Must Read The Comments Before Inserting . :D
.

[Jerry McCarthy]

I had one major law suit during my time in the trenches and that came 3 years after I had retired. Thank goodness I had occurance type E&O!
Two week trial for almost a half mill and the jury found me not guilty on all counts.

A reminder to all home inspectors who get sued and win in court. Don't forget to claim your deductable as a cost as the winning side gets all their court costs covered by the losing side.

Scott will never retire, but that's another story. :D

[Ian Page]

Also... CA Business and Professions Code 7199 provides a 4 year statute of limitation for a Breach of Duty claim from the date of the inspection. An 'Occurrence Policy' should extend at least to cover four years after concluding business. However a 'Claims Made Policy' would cover only the time period for when premiums have been paid and the (from/to) dates when the policy is effective.

[Marc M]

.
Now I understand the Confusion.

You Must Read The Comments Before Inserting . :D
.


Wow, that's disturbing. Hope that is photo-shopped..:eek:

[Ben Garrison]

Also... CA Business and Professions Code 7199 provides a 4 year statute of limitation for a Breach of Duty claim from the date of the inspection. An 'Occurrence Policy' should extend at least to cover four years after concluding business. However a 'Claims Made Policy' would cover only the time period for when premiums have been paid and the (from/to) dates when the policy is effective.

If you have a claims made policy, you simply need to purchase a tail when you get out of the business. The difference between an occurrence and claims made is pay now or pay later. Safe to say that the vast majority of inspectors are on a claims made policy, not an occurrence.

[Jerry McCarthy]

A Tail E&O policy is no bargain and you will need to keep it in force for at least 4 years after you bought that bass boat and started tying your own flies. Occurance type E&O insurance is best in the long run.

[Ian Page]

My agent told me that the 'tail' rider on a Claims Policy was only good for the duration when the actual C.M. Policy was in effect and would not provide coverage for periods of lapse. So if the Claims Made policy lapsed for any period of time - when premiums were not paid - then the 'tail' rider would not cover that period either. That's as I understood it, anyway. A Jerry said, that option was pretty spendy.

[Ben Garrison]

It depends on how long the ERP (extended reporting period) is with an occurrence based policy. If it's only 3 years, what happens if a claim is filed against you 4 years later?

If you're in this business for the long haul, I think a claims made policy is the way to go from a financial standpoint. The cost of buying a 4-5 year tail at the end will save you money in comparison to paying the higher premium each year for the built in ERP that an occurrence based policy offers.

Any inspector carrying E&O insurance will agree that it's a hefty expense. Putting an additional 25% load on top of it for the occurrence obviously makes it even more of a burden. It really just depends on your personal financial situation and what makes you feel comfortable sleeping at night. But I can tell you that the vast majority of inspectors are carrying claims made policies.

[Rolland Pruner]

If it is 46 months and a defect is found it is four years after that!! If proven your fault, BUT you are never off the hook, your insurance company will still payoff. (settle anyhow) CROOKS!!

In other words after discovery.

[Ian Page]

Nope...Ca B&P Code 7199 provides a four year statute of limitations from the date of the inspection NOT date of discovery of the breach of duty claim. However, with certain rare, remote and exceptional circumstances that four year term could be extended, under a 'tolling of time' legal argument. The plaintiff would have to prove that they were not and could not have been aware that the inspection or breach of duty arising from such, had occurred until a later date because (...insert reason) thus extending the time beyond a four year scope. The clock, therefore, would not start running until the new date as ordered and confirmed by the Court. Extremely unlikely. None of which applies if the claim is not for 'Breach of duty'.

A simple tort claim for causing damage would likely have a two year statute of limitation. If the damage was so egregious it would, more than likely, manipulated into and filed as an alleged breach of duty because of the longer open window. Again, extremely unlikely. Due to the nature of inspections, most claims would be for an alleged Breach of Duty. Clients/Plaintiffs have certain expectations which are/should be clearly stipulated in your contract. They also enjoy the benefit of 'reasonable practice' i.e. - What most Inspectors would do in your area, under similar circumstances - even if it's not in your SoP. And, if you say you will examine an item, not included in your SoP, fail to do so and is later determined to be defective...beware!

Legal 'Discovery' - is a whole 'nother ball o'wax.

Not intended or to be construed as as legal advice.

LP

[Jerry McCarthy]

Good post Ian. :D

[Mark Krajcar]

Thank you Ian. Great reply.

[Ian Page]

Thanks both...You're welcome.

[John Ghent]

Thank you for the advice. Let me ask this a different way. You are a CA HI and you decide to retire. How many years after you retired would you keep your E&O and why?

If I can be sued 20 years after retirement (I'm going far fetched here) does that mean I keep E&O active for 20 years? That would be a bit expensive!

Different question. I responded by clicking the respond with quote and then just deeted the quote. Is there an easier way I missed?

I am a Connecticut inspector that retired and kept e&o for 6 years. But each year I listed my company as having few if no inspections so the premiums went down but the coverage still took care of past inspections. I also kept all records for 6 years and am dumping the last box of old reports when I get home from my winter stay in Florida. Get educated, Get insured, Get good legal representation.