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  1. #1
    daniel nantell's Avatar
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    Default E and O Insurance

    Just attended the 3-d seminar at Orlando and talked to 3 or 4 seasoned Inspectors and asked whether they carried the E and O or not. My survey was 2 carried it and 2 did not. It was the position of the 2 that did not carry the Insurance that did at one time, they felt like it made them a sitting target for law suits. In fact one of the Inspectors said he was sued when he carried it, and the Insurance carrier dropped him after the case was closed. they said he was a high risk by having the suit filed against his company . What the consenus of any other Inspectors out there, pro or con.

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  2. #2
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    Default Re: E and O Insurance

    Daniel,

    This conversation comes up at least once a week seems like. There is a wealth of information on the subject that can be found on the link below.

    It comes down to how much are you willing to be at risk.

    http://www.inspectionnews.net/home_i...al-inspectors/


  3. #3
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    Default Re: E and O Insurance

    As Rick said, this comes up almost weekly

    I will add this however:

    It is folklore that having E&O increase the risk of being sued. Do you honestly think that the insurance companies would sell a product that would increase the likelihood of them having to payout on a claim? This folklore is spread around by folks who are trying to fight home inspector legislation and mandatory E&O and do not have it now. Having E&O does not stop a lawsuit, it just lessens the impact.


    I have had E&O for about 13 years and have held a license in states that require E&O since 2001 and I have not seen or heard of inspector getting sued simply because they had E&O. If you don't screw-up and you are not negligent than it is very very unlikely that you will get sued for doing nothing wrong.

    Having done a good amount of EW work over the years for plaintiffs and defendants involving home inspectors I have found that about 95% of the time the home inspector did in fact screw up. Either doing the inspection or writing the report.

    Bottom line is that it is a business decision for some and others do not have this choice. I personally would not go without it, even if it was not required.

    The rates have come down over the past couple of years, and most offer monthly payment plans to make it easier. I would go with no more than $500K and I would get the highest deductible that you can get. I have a 5K deductible.

    Last edited by Scott Patterson; 02-13-2009 at 08:16 AM.
    Scott Patterson, ACI
    Spring Hill, TN
    www.traceinspections.com

  4. #4
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    Default Re: E and O Insurance

    Whats the point in having the insurance if insurers are going to settle out of court, then possibly drop you or increase the rates?

    I was sued for a latent defect and the insurers paid out because it was cheaper to pay than to defend.

    Don't comprehend having a large deductible if insurers are willing to settle without a fight?
    Having said that, it would seem that insurance makes you an easy mark if the result is based purely on economics.


  5. #5
    Mike Truss Guy's Avatar
    Mike Truss Guy Guest

    Red face Re: E and O Insurance

    I once had a financial adviser tell me that you could go two ways. Pay for a whole bunch of insurance or hide all your assets in offshore corporations.


  6. #6
    Ted Menelly's Avatar
    Ted Menelly Guest

    Default Re: E and O Insurance

    Quote Originally Posted by Mike Truss Guy View Post
    I once had a financial adviser tell me that you could go two ways. Pay for a whole bunch of insurance or hide all your assets in offshore corporations.

    If my financial adviser was talking about me going 2 ways I think I would have to slap him.


  7. #7
    Mike Truss Guy's Avatar
    Mike Truss Guy Guest

    Talking Re: E and O Insurance

    When you put it that way, so would I.


  8. #8
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    Default Re: E and O Insurance

    Quote Originally Posted by Raymond Wand View Post
    Whats the point in having the insurance if insurers are going to settle out of court, then possibly drop you or increase the rates?

    I was sued for a latent defect and the insurers paid out because it was cheaper to pay than to defend.

    Don't comprehend having a large deductible if insurers are willing to settle without a fight?
    Having said that, it would seem that insurance makes you an easy mark if the result is based purely on economics.
    I don't know about Canada, but in the States it is cheaper to settle if the claim is under $10K. Right or wrong, it boils down to economics.

    The insurance companies are not rolling over like they use to do, this is true with all forms of insurance not just with E&O. They tend to fight a little more than they use to do.

    With a higher deductible, I'm paying about 30% less a year for the same coverage. I also know that if I have a claim and it is my fault or if I just want to make it go away I know what my upper dollar limit is going to be.

    The wrong way to look at E&O is that if you miss something in an inspection that it is going to pay for it. That is not what E&O is for. E&O is to protect your assets in the event that you are named in a lawsuit.

    As for latent defects, that is a the difficult one. But, in two of the States that I hold a home inspector license in; Latent defects are covered under the law. Simply stated, home inspectors are not liable for latent defects. If it is written in the law, it has no weight in a lawsuit.

    Scott Patterson, ACI
    Spring Hill, TN
    www.traceinspections.com

  9. #9
    Ted Menelly's Avatar
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    Default Re: E and O Insurance

    "The wrong way to look at E&O is that if you miss something in an inspection that it is going to pay for it. That is not what E&O is for. E&O is to protect your assets in the event that you are named in a lawsuit."

    Well if not settling before it gets to a lawyer or court as in someone calling you and you did miss something and you pay for it upfront you don't need insurance. If you are denying responcibility then of course you will be named in a lawsuit and that is what E&O is for, In case you miss something!!!!!!!!!!!!!!!!!!!!!!

    No matter how you look at it. Someone says you miss something, you deny it , there is a lawsuit. I can play ring around the rosy all day. E&O is in case you miss something or are accused of missing something. Missing something is the key word. Protecting your assetts in case you miss something or accused of.


  10. #10
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    Default Re: E and O Insurance

    Scott,

    That's part of the problem with insurance at least from an Ontario POV. It boils down to economics rather than legalities of the facts.

    I don't know how many times I hear other inspectors referring to E&O insurance as protection for the buyer. As both you and Ted have alluded to, this is erroneous. As we all know E&O is protection for the inspector from financial ruin. Disgruntled clients must remember they are not automatically given compensation, nor should they consider it any form of warranty, they must justifiably prove their case for loss.

    As for latent defects I was sued for a latent defect and the insurer rolled over and paid out, and when I questioned it, the insurer was on record as stating, "the vendors are elderly and cannot afford to defend themselves or pay the purchaser for the defects"! The law firm hired to represent the insurer were a joke and a disappointment, having said they would defend me vigorously!

    On another related point, I cannot stress enough how important it is for inspectors to respond quickly to complaints. Of the cases I have been involved in as a former Discipline Chair of an association many of the cases could have been resolved amicably had the inspector returned and dealt with the issues, rather than being dismissive, and arrogant. Some will even steadfastly and ignorantly tell the client to sue them! Bad, bad, bad...

    Cheers,


  11. #11
    Ted Menelly's Avatar
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    Default Re: E and O Insurance

    Raymond

    As for what ypou think my post was about, either I really screwed up in trying to convey my point or you just read it wrong.

    E&O IS ultimately for my protection. Yes the client and attorney get money if they prove I am at fault so yes it pads their pockets as well.

    I think you might want to read my post again. If you still think the same I will rewrite it.

    Personally I hate the fact I have to have E&O.

    I have never needed it and am one to lean toward the thinking of lawyers in "he has E&O and we can get a pretty good paycheck out of this. I chose when finally decided we had to get it by our state to get the minimum. I will not pad the pockets of a home owner or lawyer with a million or better because they baffled and confused a jury.

    Their entire home in our area for a midrange price for knocking it down and rebuilding it is under a couple hundred thousand, maybe more but not in a million range. The fact is even if I blew it and went thru an inspection with my eyes closed the total for repairs would not be 20,000.00 I will be dambed for some ass to get a million for a 200,000 home when repairs are a couple thousand. Complete pier job inside and out, what, under 20,000.00. As far as me, go for it. they are certainly not getting that out of me. I for one know where to put things and know how to protect things. Shoot. I don't own anything. Or do I ??????????????


  12. #12
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    Default Re: E and O Insurance

    Ted,

    Thanks for pointing out my misread. I agree with you, and further I no longer carry E&O having seen (again from an Ontario POV) the quickness at which insurers are to eager to pay out without so much as a fight. They too quickly label the inspection profession as a bad risk while they bare the responsibility for not defending vigorously defendable claims.

    No need to rewrite your post!

    Cheers,


  13. #13
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    Default Re: E and O Insurance

    This message has been deleted.

    Last edited by Randy King; 10-13-2011 at 05:20 PM. Reason: Please delete

  14. #14
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    Default Re: E and O Insurance

    Randy,

    Don't think for a moment that hiding behind a LLC or filing as a corporation will protect your personal assets.

    Any smart attorney will jump through that hoop in a heartbeat. As soon as he pulls in your financial records and finds that you bought any one item for your personal use, your home, your children, with a business credit card or check you have just made all your assets accessible.

    Doesn't really matter though. Your goint to pay what the court decides anyway.

    Rick


  15. #15
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    Default Re: E and O Insurance

    I think the courts could also order garnishment of any future earnings?


  16. #16
    Brandon Chew's Avatar
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    Default Re: E and O Insurance

    Quote Originally Posted by Randy King View Post
    For all you guys who have been in lawsuits or know more about it then I do, if you have your business set up as an LLC or Corporation, doesnt that prevent someone from suing you personally including your assets? As home inspectors we are service providers and I dont think many of us have all too much for assets. Say for instance your state doesnt require E&O and you have your biz as a LLC or Inc. and you are sued and the person/homeowner etc. wins and your company (LLC or Inc.) is supposed to pay $4,000.00 technically couldnt you as the business owner say sorry I am not going to pay, and there is no effect on your personal credit or assets? Just curious, I have always though that the best way to protect yourself is to be a LLC or Inc. Anyone know more about this? Thanks!

    The problem with your scenario is that as the service provider you will be sued personally for negligence along with your company.

    Think about this for a minute. If a service provider could, for a couple hundred dollars, hide behind their business structure and be forever protected from negligence suits, there would be no market at all for malpractice (E&O) insurance -- everyone would know about this and would be doing it.

    With an LLC or Inc, if you are the owner of a multi-inspector firm and one of your inspectors screws up, they can go after him personally, they can go after your company assets, but your personal assets would be protected .... IF the attorney couldn't "pierce the corporate veil" as Rick posted (and you can bet they will try really hard to do so!). This is one way an LLC or corporation limits your liability.

    I'm not a lawyer and I don't play one on TV. You really need to ask these questions to an attorney who is familiar with the laws in your state.


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