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  1. #1
    Steve Boyer's Avatar
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    Default Operating without E and O insurance....

    As a survey, how many of you home inspectors operate without E and O insurance. It seems a properly constructed LLC could protect the inspector from having to buy...what appears to be....a racket in insurance. A properly worded pre-inspection contract would ice it. I am just getting my business off the ground and of course will carry liability, but the E and O seems to be in the same catagory as buying the extended warrenty on the stereo you just bought....great for the ones selling the insurance.

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  2. #2
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    Default Re: Operating without E and O insurance....

    No question here, required by the state now. I never had it until the requirement came about. But as they say, you never need insurance... until you need it...
    I still think my best liability reduction technique is to be very thorough; plus it helps me sleep better knowing I did the best job possible for my clients.

    Jim Luttrall
    www.MrInspector.net
    Plano, Texas

  3. #3
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    Default Re: Operating without E and O insurance....

    The problem is that if you are sued, you are stuck with the costs of defense no matter how ridiculous the basis - the classic example is the HI who was named in a suit (along with many others) involving an accident at a pool that was installed months AFTER the inspection.

    Also, I have been advised by two attorneys that (at least in my state) forming an LLC or a Corp. does not limit your personal liability for professional negligence if you personally perform the inspection.

    Finally, keep this in mind: your first 200 inspections, and especially your first 50, are the riskiest you will perform - every candid inspector I know will admit that they missed some potentially high-liability defects while they were finding their feet in the business.

    Michael Thomas
    Paragon Property Services Inc., Chicago IL
    http://paragoninspects.com

  4. #4
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    Default Re: Operating without E and O insurance....

    Many licensed States require E&O, so, like it or not, you have to have it.

    Calling E&O insurance a racket is really a stretch. After all, you could call, all insurance policies a racket: car, life, health, etc. You pay a bunch of premiums and may never get to collect.

    That is the fundamental concept of insurance. The company offers to cover you a really high amount, for a relatively small premium. They are taking the chance of NOT having to pay anything out. That's how they make their money.

    IF you are not required to have E&O in your State, you can always self insure. Just have enough cash on hand to handle any and all claims that might come your way. Probably most claims brought against home inspectors could be settled for less than $10K. You would be good to go, UNLESS, something really bad happened at the house, and possibly an occupant was seriously injured or killed as a result of a defect that could be linked to the inspection. In that event you would be seriously screwed.

    A house in Knoxville was blown off the face of the earth by a gas explosion. Two of the occupants were blown out of the house and landed in the back yard, they were seriously injured. Their son, was in the basement and was killed. This was a very high bracket house, and someone died. It also knocked the two adjacent homes off their foundations. I can't imagine the dollar amounts that will be attached to these lawsuits.

    Do you drive a car without insurance? Why would you want to drive a business that has a high liability risk without coverage just to save a few dollars.

    On a side note.....While I don't usually buy the extended warranty on most things, I do buy them on my computers. I just had the mother board and a couple other things go out on my 2 year old computer. That repair alone was more than the premium I paid for the coverage.

    Side note #2. I once took a guy on a few ride alongs so he could get a feel for the inspection business. At the last one, he was telling me he had his first job the next day, but he didn't have enough money to buy a good flashlight yet, so he was going to use a drop light and a long extension cord. THIS GUY WAS AN IDIOT!!!!!!! To go ahead and start working before he was fully prepared was foolish.


  5. #5
    Doug Haglund's Avatar
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    Default Re: Operating without E and O insurance....

    I have been inspecting for 14 years & I will admit I have never had E & O insurance. I have only had one complaint, hole in sheetrock wall in garage, talked with client & explained to him it was not a safty concern because it was not on firewall. I hope it never comes (requirement) in my State WI.


  6. #6
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    Default Re: Operating without E and O insurance....

    I've given some though to the "self insurance" option, especially since the courts in my state (IL) have recently rules that a properly drawn contract can limit recovery for economic damages to the cost of the inspection, so in most cases my major exposure would be the cost of defense until dismissal if a plaintiff sought more.

    The BIG joker in that deck, as Jack notes, is the possibility of a personal injury suit based on alleged personal professional negligence - pretty hard to self-insure against that, even for legal costs that lead to dismissal, let along an unfavorable outcome.

    Michael Thomas
    Paragon Property Services Inc., Chicago IL
    http://paragoninspects.com

  7. #7
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    Default Re: Operating without E and O insurance....

    I just saved a ton of money on my car insurance by fleeing the scene of an accident.

    rick


  8. #8
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    Default Re: Operating without E and O insurance....

    Steve

    I am organized under LLC and carry E&O and GL insurance

    Randy Mayo, P.E.
    Residential Engineering & Inspection Services
    http://www.rlmengineers.com

  9. #9
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    Default Re: Operating without E and O insurance....

    Its a simple formula........

    If you are broke and expect to always be, forget the E&O.

    If you have some assets and want to keep them, get E&O.

    I can't imagine any buyer hiring an inspector without E&O but money does not come with instructions.

    Some buyers ask inspectors "do you have insurance?" and get "yes" for an answer but do not realize that the inspector probably only has GL which is basically useless to the buyer.

    Bruce King, B.A. King Home Inspections, LLC
    www.BAKingHomeInspections.com
    Certified Master Inspector, Independent Inspectorwww.IndependentInspectors.org

  10. #10
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    Default Re: Operating without E and O insurance....

    I am currently in the midst of a suit against me, the agents, the sellers, the dog, and the cat. Buyer had buyer's remorse and went after everyone. I got included for reasons that serve no purpose to go into. Suffice it to say that my documentation is in order. I just got sucked into the vortex. A year later, it was thrown out of district court. Now he's pursuing us in Federal Ct. That too will be dismissed on grounds that no criteria was met for a federal suit.
    Bottom line: I've had E&O for 12 years. Never used it. Got caught in a frivolous suit. I paid the deductible-$2500.00 for the first round that the attorneys billed at $2535.00. So my insurance carrier shouldered $35.00.
    They immediately upped my premium 20% for claim activity.
    After the Federal suit was filed, The insurance carrier cancelled me despite being fully aware of the frivolous nature of the suit.
    I don't mind saying the carrier was State Farm and I'm in the process of severing my 40 year relationship with that company. But the moral of the story is that you don't have to do anything. You can just be standing in the wrong place at the wrong time. And math says that the more work you do, the closer you come to that very result.

    JLMathis


  11. #11
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    Default Re: Operating without E and O insurance....

    It can be a big problem when someone is so convinced that they are right that they will go out-of-pocket to pursue a losing case in court, and you are on the other side.

    Michael Thomas
    Paragon Property Services Inc., Chicago IL
    http://paragoninspects.com

  12. #12
    Ron Bibler's Avatar
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    Default Re: Operating without E and O insurance....

    it's a jungle out there...

    Pay to play... Just hope that you bring in more then you pay out is the name of the game.

    One inspector i known had a suit. not his fault. Insurance Co. settled and them up his paymemts...

    Pay to play...

    Best

    Ron


  13. #13
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    Default Re: Operating without E and O insurance....

    If you really want to have a survey, let try this.
    Who, if anyone, has had more claims paid by the ins co than they have paid in preminums to the ins co?

    My guess is that anyone that has E&O for 3 years or longer will have paid more in premiums than they will ever have in claims.

    If you were to take that same $2500-$3000 per year in premiums and put it in a savings account. At the end of three years you have $10-$12K

    Thats 10-12K in real assets, not receipts.
    Assets to can do something with

    After 10 years, WOW

    I believe the Ins co are the driving force that makes States require E&O

    I think it would be just as good maybe even better to INVEST your money at the Casinos in Lost Vegas.
    You would have better odds.

    ' correct a wise man and you gain a friend... correct a fool and he'll bloody your nose'.

  14. #14
    Ted Menelly's Avatar
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    Default Re: Operating without E and O insurance....

    After all the hurricanes, tornadoes, floods, 911, every insurance company still has billions in profit.

    Some small insurance carriers go out of business all the time. The mother companies boast huge profits decade after decade after decade. Not little profits. Monster profits.

    I think our deductible should be zero. Anyone that sends an email as a threat of legal action we are suppose to file a claim with the insurance company. It immediately goes to the klegal department and the fees start piling up.

    Yes, I find a problem with having no say what so ever about carrying any type of insurance. We just had an official in our state put in for the E+O demand to be repealed. Lets see where that goes.

    If the insurance companies want their legal department on every single case before it becomes a case then take our deductible away and see what happens. They will not get involved until it actually becomes a court case or at least a hearing.

    I am also for anyone filing a claim and losing that they have to pay all legal fees for the other party and themselves. I GUARANTEE THAT MOST CASES WOULD NEVER BECOME A CASE AT ALL.


  15. #15
    Steve Boyer's Avatar
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    Default Re: Operating without E and O insurance....

    I thank all who have given their take on this. I am unsure why a well written contract could not be part of your insurance. I do drive a couple of my older cars with just liability...nothing else. I still have a felling that E+O insurance simply allows you to sleep better at night, but really isn't total protection. Many have said what happens after a claim...it not there for you anymore. Getting started in the actual business side of it is a quandry. You will only have a few inspections here and there and will simply be working for the insurance company. This time period is also when you have the greatest chance of missing something.

    I have gotten hands on training from AHIT, I have passed the National Home Inspector exam, and I have aquired all the necessary tools and instruments. But, as I look at the E+O racket, I see an insurance that has probably caused more lawsuits to be filed because "he has insurance" type mentality. If your state requires it, there are probably more lawsuits against HIs in that state would be my guess. That is what lawyers do.

    I am unsure what direction to go because all points argued are valid. I definitly need liability insurance for obvious reasons, but to a beginning HI, the cost of this insurance is not "just a couple of bucks", it is almost all the cash flow...


  16. #16
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    Default Re: Operating without E and O insurance....

    Quote Originally Posted by Jeffrey L. Mathis View Post
    I am currently in the midst of a suit against me, the agents, the sellers, the dog, and the cat. Buyer had buyer's remorse and went after everyone. I got included for reasons that serve no purpose to go into. Suffice it to say that my documentation is in order. I just got sucked into the vortex. A year later, it was thrown out of district court. Now he's pursuing us in Federal Ct. That too will be dismissed on grounds that no criteria was met for a federal suit.
    Bottom line: I've had E&O for 12 years. Never used it. Got caught in a frivolous suit. I paid the deductible-$2500.00 for the first round that the attorneys billed at $2535.00. So my insurance carrier shouldered $35.00.
    They immediately upped my premium 20% for claim activity.
    After the Federal suit was filed, The insurance carrier cancelled me despite being fully aware of the frivolous nature of the suit.
    I don't mind saying the carrier was State Farm and I'm in the process of severing my 40 year relationship with that company. But the moral of the story is that you don't have to do anything. You can just be standing in the wrong place at the wrong time. And math says that the more work you do, the closer you come to that very result.

    JLMathis
    They still have to cover that claim right?

    I think SF is one of the ones that jumped into this market without having any experienced attorneys to handle a claim. I have heard that those companies dabbling in it will cancel in a heartbeat.

    I bet that client came via an agent too.

    Why was your deductible so high?

    Bruce King, B.A. King Home Inspections, LLC
    www.BAKingHomeInspections.com
    Certified Master Inspector, Independent Inspectorwww.IndependentInspectors.org

  17. #17
    Ted Menelly's Avatar
    Ted Menelly Guest

    Default Re: Operating without E and O insurance....

    Quote Originally Posted by Steve Boyer View Post
    I thank all who have given their take on this. I am unsure why a well written contract could not be part of your insurance. I do drive a couple of my older cars with just liability...nothing else. I still have a felling that E+O insurance simply allows you to sleep better at night, but really isn't total protection. Many have said what happens after a claim...it not there for you anymore. Getting started in the actual business side of it is a quandry. You will only have a few inspections here and there and will simply be working for the insurance company. This time period is also when you have the greatest chance of missing something.

    I have gotten hands on training from AHIT, I have passed the National Home Inspector exam, and I have aquired all the necessary tools and instruments. But, as I look at the E+O racket, I see an insurance that has probably caused more lawsuits to be filed because "he has insurance" type mentality. If your state requires it, there are probably more lawsuits against HIs in that state would be my guess. That is what lawyers do.

    I am unsure what direction to go because all points argued are valid. I definitly need liability insurance for obvious reasons, but to a beginning HI, the cost of this insurance is not "just a couple of bucks", it is almost all the cash flow...
    Our state does require E+O and there are really little to no complaints against inspectors. Considering the size of the state and the thousands of inspectors and the tens of thousands of inspections a year.....there are really no law suits if you consider the totals.

    Lets say there are 4000 inspectors in Texas. Let's say that all are only paying a thousand a year for the very basic E+O that is required (100,000.00) That would be 4,000,000.00 a year payed in and practically nothing payed out every year considering the deductible is not met on most instances. Of course many carry a million in E+O.

    Lets say the average is only 2,000 a year paid out per inspector from the min to the max, under estimated for sure, that is 8,000,000.00 a year intake and several thousand paid out. I wonder what the real pay out is on suits against home inspectors in Texas is. I would venture very, very, very little.

    Yeah, insurance is a racket. If it were not for medical insurance Doctors rates would be less than half of what they are. The most they get paid from the insurance companies is 40 to 60% of what they bill. Also if it were not for insurance the doctors rates would be much lower due to law suit insurance. Then we could pay out of pocket when the need arrises.



    Yes, insurance is a racket.


  18. #18
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    Default Re: Operating without E and O insurance....

    Quote Originally Posted by Ron Bibler View Post
    One inspector i known had a suit. not his fault. Insurance Co. settled and them up his paymemts...
    Gee, I wonder who that could be.

    Steve,

    Yes, if you have insurance, you are a more attractive target for an attorney (you can't get blood from a turnip). However, even if you do not have insurance, you can be sued. And if you don't have insurance, it is easier for the "corporate veil" to be pierced. With insurance, you show a court that you are not just evading responsibility with the corporation.

    With insurance, you are responsible for the deductible. Yes, they may cancel you, but you were protected by the insurance.

    If you choose to work without insurance, you run the risk of losing your assets if you are involved in a large lawsuit.

    Jerry McCarthy once made a statement to me in reference to protecting yourself and your assets without E&O insurance - Sign over all of your assets to your wife and rent your half of the bed from her.

    Department of Redundancy Department
    http://www.FullCircleInspect.com/

  19. #19
    Ron Bibler's Avatar
    Ron Bibler Guest

    Default Re: Operating without E and O insurance....

    Quote Originally Posted by Steve Boyer View Post
    I am unsure what direction to go because all points argued are valid. I definitly need liability insurance for obvious reasons, but to a beginning HI, the cost of this insurance is not "just a couple of bucks", it is almost all the cash flow...
    Put everything you own. House, cars, Boats in your wifes name and then put the cash in the bank as Rick stated...

    Best

    Ron


  20. #20
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    Default Re: Operating without E and O insurance....

    Yes, SF is paying. This is considered on-going. I have no beef with the attorney. He's kept me well apprised of activities. I do muse over the years of premiums paid, but having the policy was a major selling point for me. I made money on my insurance. If I can't acquire reasonably priced insurnace in the future I expect it to be an impediment going forward. I actually am contemplating action against the plaintiff and his attorney. Or at least discussing it with an attorney friend next week. I don't subscribe to the nonsense that lawyers are the bane of our existence.

    JLMathis


  21. #21
    Ron Bibler's Avatar
    Ron Bibler Guest

    Default Re: Operating without E and O insurance....

    Quote Originally Posted by Gunnar Alquist View Post
    Gee, I wonder who that could be.

    L.O.L. L.O.L. L.O.L. BOOM L.O.L. L.O.L. L.O.L. BOOM

    Jerry McCarthy once made a statement to me in reference to protecting yourself and your assets without E&O insurance - Sign over all of your assets to your wife and rent your half of the bed from her.

    And then be very nice to your wife for she now has you by the ?

    Best

    Ron


  22. #22
    Ted Menelly's Avatar
    Ted Menelly Guest

    Default Re: Operating without E and O insurance....

    Quote Originally Posted by Ron Bibler View Post
    Put everything you own. House, cars, Boats in your wifes name and then put the cash in the bank as Rick stated...

    Best

    Ron
    Cash never goes in the bank. Cash has countless places to go besides a bank were it is protected at the very least or actually making money some where else. Cash is the biggest target anyone has if it is listed somewhere as being liquid.


  23. #23
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    Default Re: Operating without E and O insurance....

    If you think a contract (well written or not) will keep a person from suing you then I have a section of beach front property for sale in New Mexico!

    A contract is just a challenge to a good attorney, and then you have the judge who can toss a contract out if he/she does not like it. So you really can not depend on a contract keeping the wolves at bay.

    I look at my contract as a written bluff that might or might not work if a person wants to pursue a lawsuit.

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

  24. #24
    Ted Menelly's Avatar
    Ted Menelly Guest

    Default Re: Operating without E and O insurance....

    Quote Originally Posted by Scott Patterson View Post
    If you think a contract (well written or not) will keep a person from suing you then I have a section of beach front property for sale in New Mexico!

    A contract is just a challenge to a good attorney, and then you have the judge who can toss a contract out if he/she does not like it. So you really can not depend on a contract keeping the wolves at bay.

    I look at my contract as a written bluff that might or might not work if a person wants to pursue a lawsuit.
    Amen, I have been telling folks that for years. A contract means absolutely nothing to a lawyer or a judge. Most are completely unreasonable as in the only amount someone can get is 1 or 2 times the inspection fee. A judge laughs at that and as you say a lawyer likes the challenge because he makes money challenging it whether he wins or not.


  25. #25
    Ron Bibler's Avatar
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    Default Re: Operating without E and O insurance....

    Quote Originally Posted by Ted Menelly View Post
    Cash never goes in the bank. Cash has countless places to go besides a bank were it is protected at the very least or actually making money some where else. Cash is the biggest target anyone has if it is listed somewhere as being liquid.
    This is correct... I STAND CORRECTED...Put the cash in a sock and give it to your wife and then be very nice to her.

    Best

    Ron


  26. #26

    Default Re: Operating without E and O insurance....

    To me, the scariest thing is that once you stop renewing your yearly policy, you loose E&O coverage for all of the inspections you have done up to that point!!

    My policy has the wording "claims made basis", this means that once you let your policy lapse, you no longer have coverage for any of the previous inspections you have performed. I would encourage everyone to investigate their policy closely if this is of concern to you.

    I'm really surprised that this topic isn't more widly known and discussed. I guess it's just not that big of a concern for most inspectors???? Nothing we can do about it anyway, seems like one of the best kept secrets in the insurance game.

    Rick Strand, CPI, CAHPI Associate - Strand Home Inspections Inc.
    Home Inspection Calgary Calgary, Airdrie
    Calgary Home Inspectors Okotoks, Cochrane, Chestermere

  27. #27
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    Default Re: Operating without E and O insurance....

    To me, the scariest thing is that once you stop renewing your yearly policy, you loose E&O coverage for all of the inspections you have done up to that point!!

    Hence my pursuit of the attorney that advised the plaintiff to sue me over mold in the crawl space then they included my report as evidence showing the pictures of the mold in the crawl space and my caution to have it tested and remediated by a qualified contractor.

    JLMathis


  28. #28
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    Default Re: Operating without E and O insurance....

    Quote Originally Posted by Rick Strand View Post
    To me, the scariest thing is that once you stop renewing your yearly policy, you loose E&O coverage for all of the inspections you have done up to that point!!

    My policy has the wording "claims made basis", this means that once you let your policy lapse, you no longer have coverage for any of the previous inspections you have performed. I would encourage everyone to investigate their policy closely if this is of concern to you.

    I'm really surprised that this topic isn't more widly known and discussed. I guess it's just not that big of a concern for most inspectors???? Nothing we can do about it anyway, seems like one of the best kept secrets in the insurance game.
    I think that just about all of the E&O that is on the market is now "Claims Made". Occurrence coverage is just too expensive, from what I recall it is about double the cost. Marion Allen Insurance was the last one I knew of offering occurrence coverage.

    If not having E&O coverage after you get out of the business is a concern then most offer "tail" coverage that you can purchase; it will cover you for X number of years after you get out of the business or stop the coverage.

    Me? When I close the doors the company will be gone, the phone number either sold or disconnected and I will be hard to find up on my little mountain fishing in the trout stream! I will not have tail coverage in other words.....

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

  29. #29

    Default Re: Operating without E and O insurance....

    I ran a multi inspector firm for over 25 years and would not even think of not having E&O. Just take this one example and think about it. I offered a certified termite inspection along with my HI. Did a house and one of my guys missed an active infestation but said there was old evidence. Got sued. The suit included a bunch of other stuff that they decided to include. I offered to pay the cost of treating the house, $2,500. Owner turned it down. The suit was for hi six figures which included asbestos removal which we said she had. Went to a jury trial for six days. I had two attys, she had two for 3 days then brought in a third for the remainder of the trial. The jury awarded her $2,500.00. She appealed to the state supremes. She lost on appeal. Now, how much out of pocket would it have cost you for six days of jury trial for an attorney(s)? Then how much for them to represent you in an appeal? I always slept well and considered the cost just a cost of doing business.

    Not having insurance was best described by Forrest Gump: "Stupid is as stupid does". Or better yet, "stuff happens".


  30. #30
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    Default Re: Operating without E and O insurance....

    Quote Originally Posted by Scott Patterson View Post
    Me? When I close the doors the company will be gone, the phone number either sold or disconnected and I will be hard to find up on my little mountain fishing in the trout stream! I will not have tail coverage in other words.....
    What about that tracking device they implanted under you skin? Oh, you thought that was just a boil?

    A thousand inspectors in Texas and you guys don't have your own insurance plan set up?
    That is a service provided by my association, CAHPI(BC). 200 members. We have $1mill E+O plus a lawyer on retainer. As the funds grow, our premiums go down.

    John Kogel, RHI, BC HI Lic #47455
    www.allsafehome.ca

  31. #31
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    Default Re: Operating without E and O insurance....

    What are your annual premiums now? Hopefully you didn't conventiently forget to tell us.
    The premise sounds intriguing.

    JLMathis


  32. #32
    Ted Menelly's Avatar
    Ted Menelly Guest

    Default Re: Operating without E and O insurance....

    Quote Originally Posted by John Kogel View Post
    What about that tracking device they implanted under you skin? Oh, you thought that was just a boil?

    A thousand inspectors in Texas and you guys don't have your own insurance plan set up?
    That is a service provided by my association, CAHPI(BC). 200 members. We have $1mill E+O plus a lawyer on retainer. As the funds grow, our premiums go down.

    You probably did not mean Texas but Tennessee. In Texas there are THOUSANDS of Home Inspectors. Yes. Thousands and thousands. Many of them heard that you folks are light on inspectors and a couple thousand are on the way.


  33. #33

    Default Re: Operating without E and O insurance....

    I ran a multi inspector firm for over 25 years and would not even think of not having E&O.
    John,

    What do you think would have happened if you had limited business assets, and no E&O insurance? Would the plaintiff's attorneys have taken the case knowing they wouldn't gain much?


  34. #34
    Steve Boyer's Avatar
    Steve Boyer Guest

    Default Re: Operating without E and O insurance....

    Ouch...my head hurts. I can see reasons to have it and then see that it is very expensive for the risk they take off your back. It is hard to justify for someone not already spun up into a good full time business.

    I guess I am going to seek some legal advise on this...if I can contain most of the risk inside the LLC, then I will probably go without until the state requires it...under pressure from the insurance lobby.


  35. #35
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    Default Re: Operating without E and O insurance....

    I'm willing to bet that the overwhelming majority of inspectors do not have insurance. It is expensive. 2-3K a year and most of the things you miss will be paid out of pocket any way just to stay away from the claims process.
    I know most if the HIs in my area just don't do enough work to justify it. I'm lucky, I do. Or should I qualify that to I did.
    Like anything in life, it's a gamble and a math equation. You can mitigate the gamble by slowing down and doing a better job, but as in my instance, you can't control the math equation that leave a specific opening for things you can never control. The more you do, the closer you come to that client you wish you'd never met.
    I will be adding a line in my contract form that states "In case of legal proceedings, loser pays".

    JLMathis


  36. #36

    Default Re: Operating without E and O insurance....

    Quote Originally Posted by Brandon Whitmore View Post
    John,

    What do you think would have happened if you had limited business assets, and no E&O insurance? Would the plaintiff's attorneys have taken the case knowing they wouldn't gain much?
    She had more money than the guy in the sky and would have driven me out of business with a smile on her face. The first thing she did when she refused the offer to pay for treatment was take me to court for a "PJR (pre-judgement remedy) for $75k which she assumed would cover at least part of what she was going to win from me - but the judge denied her motion. She made Leona Helmsley, (the queen of mean) look like a nun. The plaintiff's attorney did not take the case on any basis other than what she paid them for their time. The third atty she brought into the case was a female specialist who normally billed big bucks per hr (on trial for 3 days at that rate).

    I applauded my carrier and my rates didn't go up. (my deductible did). There is no such thing as limited business assets because you could end up doing monthly payments for the rest of your days. Good lawyers break the veil very easily and will clean you out.


  37. #37
    Join Date
    Mar 2007
    Location
    Columbus GA
    Posts
    3,746

    Default Re: Operating without E and O insurance....

    With multi-inspector companies, it is much more important to carry insurance than with a single inspector. Somehow people seem to make more mistakes as an employee than they do as a single operator.

    John
    Thank you for sharing this with us.
    Would you also tell us:
    Did the employee testify?
    Overall, did the employees testimony help or hurt your defense?

    ' correct a wise man and you gain a friend... correct a fool and he'll bloody your nose'.

  38. #38
    Join Date
    Mar 2007
    Location
    Spring Hill (Nashville), TN
    Posts
    5,847

    Default Re: Operating without E and O insurance....

    Quote Originally Posted by Steve Boyer View Post
    Ouch...my head hurts. I can see reasons to have it and then see that it is very expensive for the risk they take off your back. It is hard to justify for someone not already spun up into a good full time business.

    I guess I am going to seek some legal advise on this...if I can contain most of the risk inside the LLC, then I will probably go without until the state requires it...under pressure from the insurance lobby.
    I can not see any attorney advising you not to have professional liability insurance. If they did, I would be looking for a new attorney!

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

  39. #39

    Default Re: Operating without E and O insurance....

    John Ghent,

    Thank you.


  40. #40
    Join Date
    Mar 2007
    Location
    Chicago, IL
    Posts
    2,797

    Default Re: Operating without E and O insurance....

    Quote Originally Posted by John Ghent View Post
    I applauded my carrier and my rates didn't go up. (my deductible did).
    Who was the carrier?

    Michael Thomas
    Paragon Property Services Inc., Chicago IL
    http://paragoninspects.com

  41. #41
    Join Date
    Mar 2007
    Location
    New Mexico
    Posts
    1,258

    Default Re: Operating without E and O insurance....

    I carry it. However, when I had to sue a guy a while back (it never got that far) I asked the attorney about piercing the veil, and he said forget it unless we can prove some type of fraud had occurred. That was a C corp, so it might be a little different, but at least in our state it's not cut and dried that the veil will be tossed out immediately.

    Jim Robinson
    New Mexico, USA

  42. #42

    Default Re: Operating without E and O insurance....

    Quote Originally Posted by Brandon Whitmore View Post
    John,

    What do you think would have happened if you had limited business assets, and no E&O insurance? Would the plaintiff's attorneys have taken the case knowing they wouldn't gain much?
    Quote Originally Posted by Rick Cantrell View Post
    With multi-inspector companies, it is much more important to carry insurance than with a single inspector. Somehow people seem to make more mistakes as an employee than they do as a single operator.

    John
    Thank you for sharing this with us.
    Would you also tell us:
    Did the employee testify?
    Overall, did the employees testimony help or hurt your defense?
    The strategy was for me (the company) to testify to the report. I was the only witness on my side, she had a few contractors and the termite guy on her side. The termite guy (her witness) agreed that I offered to pay the treatment cost. One of the hangups was that the asbestos had to be removed before the termite guy would treat, but we told her she had asbestos. She had no sympathy with the Jury but if she happened to be a looker with some brains rather than a non looker seeking vengeance she could have made a case with the jury. (p.s. I am a licensed pest guy)


  43. #43

    Default Re: Operating without E and O insurance....

    Quote Originally Posted by Scott Patterson View Post
    I think that just about all of the E&O that is on the market is now "Claims Made". Occurrence coverage is just too expensive, from what I recall it is about double the cost. Marion Allen Insurance was the last one I knew of offering occurrence coverage.

    If not having E&O coverage after you get out of the business is a concern then most offer "tail" coverage that you can purchase; it will cover you for X number of years after you get out of the business or stop the coverage.

    Me? When I close the doors the company will be gone, the phone number either sold or disconnected and I will be hard to find up on my little mountain fishing in the trout stream! I will not have tail coverage in other words.....
    Scott is right. Almost all the policies are written on a "claims made" basis these days. Occurrence is simply too much money up front. What you need to pay attention to is what kind of tail policy options your insurance providers offer. I can tell you that FREA probably has the best deal in town on that. 1 year for 35% and 4 years for 75%.

    A lot of inspectors think claims made policies are some kind of "secret," and I beg to differ. I can tell you on our application it clearly states the definition of "claims made." It also explains what it means in the policy itself. So is it a secret or do people not read the contract? As inspectors, you expect your clients to read and agree to your pre-inspection agreement, right? Well, the insurance company expects you to read your application and policy as well.

    Interesting story for you guys... last week I had one of my insureds call me regarding a possible claim. Long story short, he did an inspection and the buyers were not terribly pleased with it since he failed to note some defects. He went back and had a very amicable conversation with them and offered them the refund of the fee and they signed a very well written settlement and release form.

    This form states that by accepting this money, the inspector is further absolved from ANY liability/issues with this house. Buyer cashes the check, no big deal. Contractors come in there to do work and notice all sorts of other issues. The buyer of the house calls me and while she's very nice and pleasant in her tone, she expressed her discontent. I said, "while I understand your frustration, the concern I have is that you signed this settlement and release form and got your money back."

    Her reply was, "oh, you mean when I signed that release form under duress? It was the day before Thanksgiving." I nearly started laughing. Pre Thanksgiving duress? You've gotta be $hitting me... Clearly, her quick response was one that was a result of being coached by a plaintiff's attorney. She (her attorney) expected me to bring up the release form and prepared a quick answer. But to legitimately claim "duress," my inspector would've had to be holding her kids hostage in exchange for her signature and release.

    Release form notwithstanding, she is going to go after my inspector with a vengeance. After all, to pay for the remediation she and her husband have to tap their 401K which will incur penalties given they are not of age to do that. And they want to hold us/inspector liable for that. While i'm sympathetic to their situation, she doesn't want to agree to the terms and conditions of the release form once it became unfavorable to her.

    Moral of the story is that no matter how good your contract is, no matter if you have a release form signed, dated, refund check cashed, no matter how good of an inspector you are, you can get sued and it will likely cost you money. It's just a matter of how much....


  44. #44
    Steve Boyer's Avatar
    Steve Boyer Guest

    Default Re: Operating without E and O insurance....

    Good example, and thanks. I take it to heart. It seems it is not safe to step foot outside your house anymore.


  45. #45
    dave koloskee's Avatar
    dave koloskee Guest

    Default Re: Operating without E and O insurance....

    Steve,

    Great thread to start! I've learned quite a bit from the responses.
    My state (PA), does not license HI's, but says that we should carry E&O.
    For all the reasons previously well stated, I wouldn't sleep much if operating my HI business w/o it. I recently switched my carrier to Citadel. My yearly premium (less than $2k) is now about half what it used to be and the deductible is $1,500. To me, that's a reasonable cost of doing business if they're there for me should I need them.
    Dave


  46. #46
    Steve Boyer's Avatar
    Steve Boyer Guest

    Default Re: Operating without E and O insurance....

    That is at least getting closer to reasonable. Do they have higher deductable...such as $5000?


  47. #47
    Gilles Larin's Avatar
    Gilles Larin Guest

    Default Re: Operating without E and O insurance....

    A word of wisdom: get E&O Insurance! Last July, I was hit as a co-defendant in a lawsuit for an inspection done over 3 yrs ago (just under the legal limitation..) by an ambulance chaser. I never even received a phone call from the client or any complaint and the litigating parties have been exchanging default letters for 3 years and all this had nothing to do with me or my inspection. At the time, I had no E&O Insurance and this little episode has so far cost me close to $10,000 and we are not even into the proposed out of court settlement as yet! If we settle out of court - and this seems to be the cheapest way to settle - I then abandon all recourse against this purely unfounded claim against me!

    Get E & O insurance!


  48. #48
    Join Date
    Feb 2008
    Location
    Caledon, Ontario
    Posts
    5,005

    Default Re: Operating without E and O insurance....

    Do these litigants know you do not have insurance?

    Chances are they will drop the action against you. No guarantee but have heard anecdotal evidence to that effect.


  49. #49
    Gilles Larin's Avatar
    Gilles Larin Guest

    Default Re: Operating without E and O insurance....

    I believe not but this will be stated very clearly when we meet to atempt to reach a settlement. As well, I'm the only defendant (out of 4) who has hired an expert to prove their claims against me are completely bogus!


  50. #50
    Steve Boyer's Avatar
    Steve Boyer Guest

    Default Re: Operating without E and O insurance....

    I see NAPLIA has a 5000 deductable option. Does anyone have experience with them? I would think GL tied with E+O with a big deductable is what I would be looking for. Only provide for the monster law suit that would ruin your business.


  51. #51
    Join Date
    Apr 2007
    Location
    WESTMINSTER CO
    Posts
    1,088

    Default Re: Operating without E and O insurance....

    i have NAPLIA--with a $2500 deduct--how good are they--don't know have never had to use them--so until i do --they are just as good as all the other--but they do answer phone and give advice

    cvf


  52. #52
    Steve Boyer's Avatar
    Steve Boyer Guest

    Default Re: Operating without E and O insurance....

    Thank you, I will be filling out an app for them tomorrow to get a rate quote. We shall see...


  53. #53
    Ken Bates's Avatar
    Ken Bates Guest

    Default Re: Operating without E and O insurance....

    Insurance is good to have if you forget to turn the heating system on if you have shut it down.

    If you think you could screw up then get it. If you have Swiss or Nordic competencies then take your chances.


  54. #54

    Default Re: Operating without E and O insurance....

    Michele Dineen with NAPLIA is reputable. Mind you, she is my competition but I have the deceny to give credit where credit is due.


  55. #55
    Join Date
    Mar 2007
    Location
    Greenville, N.C.
    Posts
    254

    Default Re: Operating without E and O insurance....

    I'm not so much a fan of a really big deductible. As in my case, I was not at any fault and it is purely firvolous. But my $2500.00 deductible is painful enough and the premium change for a big deductible was not that great.
    Find a reasonable medium.

    JLMathis


  56. #56

    Default Re: Operating without E and O insurance....

    This is where insurance becomes legalized gambling... it's impossible to tell whether or not you'll get burnt going with a higher deductible for a marginal savings. I just dealt with that for my health insurance and I concluded that the savings was not big enough should I actually use the policy.


  57. #57
    Steve Boyer's Avatar
    Steve Boyer Guest

    Default Re: Operating without E and O insurance....

    I have sent in a couple of apps... I will see what quotes I get. It is hard spending that kind of money when you are just starting out...


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