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  1. #1
    Kyle Meadows's Avatar
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    Default How important is E&O insurance?

    Hi all,
    I'm not an inspector but am considering it. Looks like E&O insurance is one of the biggest start-up costs. Not required in KY (I think), but how many of you think it's important enough to warrant the cost?
    I don't want to be foolish, but would love to save the $ if advisable.
    Thanks,
    Kyle

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  2. #2
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    Default Re: How important is E&O insurance?

    It's like any other insurance, a bargain if you need it, a waste of money if you don't use it.

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

  3. #3
    Kyle Meadows's Avatar
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    Default Re: How important is E&O insurance?

    Which is it for you?


  4. #4
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    Default Re: How important is E&O insurance?

    "Which is it for you?"

    It's like I said, a bargain if I need it, a waste of money if I don't use it.

    But if you are asking do I have E&O, then no.

    Your need for insurance should be determined not by "do I have it?",
    but by "Do you need it?"
    Your needs may be different than my needs.

    Some things to keep in mind when considering E&O coverage are:
    Your ability to cover a loss
    Your net worth, future earnings
    Capability of performing the job
    Experience
    Customer expectations
    Reporting, communication (written and verbal)
    Contract
    Customer expectations
    Conflict avoidance and conflict resolution ability
    Customer expectations
    and
    Luck.
    Did I mention customer expectations?

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

  5. #5
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    Default Re: How important is E&O insurance?

    I carried E&O for several years - I thought it was a prudent thing to do for running a reputable business. Then I had two nasty claims - both way out of bounds and a clear efforts to "get something for free." I then dropped the coverage and joined the ranks of inspectors who felt that the insurance was a target on your back. So it was not the cost of the insurance that got me, it was scheming people trying to take you to the bank solely for their financial gain.

    Eric Barker, ACI
    Lake Barrington, IL

  6. #6
    Kyle Meadows's Avatar
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    Default Re: How important is E&O insurance?

    Thanks Rick and Eric. Very interesting comments. I have plenty to think about!


  7. #7
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    Default Re: How important is E&O insurance?

    On the other side of the coin, I am in Pennsylvania where E&O is required for home inspectors so I have no choice in the matter. Given the choice, I probably would still carry it. I look at it as a necessary expense of doing business.

    "It takes a big man to cry. It takes an even bigger man to laugh at that man". - Jack Handey

  8. #8
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    Default Re: How important is E&O insurance?

    I do not carry E&O simply because of the litany of payouts by insurers who find it economically feasible to settle rather than spend significant dollars on defence. Been there done that.

    Then the insurer turns around and will not renew your policy, or jack the rates up, paint the inspector as high risk.

    E&O appears to be nothing but an expensive warranty program.

    I can only imagine that claims have gone up substantially where mandatory insurance is required for licencing?


  9. #9
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    Default Re: How important is E&O insurance?

    Quote Originally Posted by Raymond Wand View Post

    I can only imagine that claims have gone up substantially where mandatory insurance is required for licencing?
    That has not been the case in BC, but it has only been 2 years.
    I won't brag about CAHPI(BC) to you, Raymond. But we are mostly happy campers out here, and we keep a lawyer on a retainer who keeps the trigger-happy clients in order.
    Mandatory E+O does eliminate some parttime and fly-by-night home inspectors, because it requires that commitment of cash up front every year. This forces prices to go up a bit.

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

  10. #10
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    Default Re: How important is E&O insurance?

    Quote Originally Posted by Nick Ostrowski View Post
    I look at it as a necessary expense of doing business.
    Yes, but in taking into account that expense, you should not only figure in your premiums but also what you could pay out in deductibles. The last client that my insurance paid thought that the claim wouldn't cost me anything since the carrier was doing the paying. Her contractor also told her that insurance would pay for everything. He too wanted a piece of the insurance pie so of course he was pushing for her to go after me.

    Insurance carriers aren't stupid. They know that bogus claims are going to happen and that paying out is cheaper than fighting. These costs are all figured into your premiums. The end result is that they still make money.

    Now, I have an arbitration clause in my contract. But reality comes down to this. You don't know how the arbitrator will rule. He could have a soft heart for the "poor" client, he could have a grudge against inspectors. The point is, even with good supporting evidence for my position there can still be the potential of losing. My last payout became a business decision - fight the claim and risk a $7,500 payout or pay the $2,500.00 deductible and control my losses. Believe me, the process pissed me off to no end. I do not intend to go through that a third time.

    Eric Barker, ACI
    Lake Barrington, IL

  11. #11
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    Default Re: How important is E&O insurance?

    The true value of E&O can only be realized when you need it or wish you had it! All in all I feel it should be a personal business decision, but in two of the states I hold a license in it is required so that option has been removed for me.

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

  12. #12
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    Default Re: How important is E&O insurance?

    I've had E&O almost since I started in business. Since its required in TN, I now must have it. I just considered it a part of being in business and budget accordingly. Since it only costs me a few dollars per inspection, I view it as a small price to pay for reduced stress.


  13. #13
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    Default Re: How important is E&O insurance?

    In Texas it is required for the moment. Recently I had the opportunity to speak to 2 agents and an insurance adjuster about the number of claims logged against inspectors before and after E&O insurance became mandatory here. All three said that claims had spiked up sharply in Texas after it became mandatory. Immediately after it became mandatory I had several clients who told me their agents had explained it as a type of home warranty policy that protected them (the buyers) against things we missed or things we identified as operating that later failed, etc.

    I can also vouch that the insurance agencies (including one who is a sponsor of this site) are looking for any reason to move an inspector into a high risk category to increase premiums or cancel coverage. This has been the practice of the industry for years. I speak from the experience of having a father who was an insurance adjuster for 30 years and an aunt who owned an insurance agency for 40 years.

    The bottom line is a well written report is the best way to avoid getting sued whether you are insured or not.


  14. #14
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    Default Re: How important is E&O insurance?

    Interesting to say the least.

    Try and get claims data from the insurers.

    If and when one has a claim, and you are paying ~ $3000 per year or more for the policy, then you have an incident and pay your deductible ($5000) on a twenty thousand dollar claim by plaintiff that is a $8000 payout in one year or more!

    Then your rates will most likely increase, or you policy will be cancelled or not renewed.
    Then you carry a blemish around every time you apply for insurance.


  15. #15
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    Default Re: How important is E&O insurance?

    Quote Originally Posted by Justin Foster View Post
    In Texas it is required for the moment. Recently I had the opportunity to speak to 2 agents and an insurance adjuster about the number of claims logged against inspectors before and after E&O insurance became mandatory here. All three said that claims had spiked up sharply in Texas after it became mandatory. Immediately after it became mandatory I had several clients who told me their agents had explained it as a type of home warranty policy that protected them (the buyers) against things we missed or things we identified as operating that later failed, etc.

    I can also vouch that the insurance agencies (including one who is a sponsor of this site) are looking for any reason to move an inspector into a high risk category to increase premiums or cancel coverage. This has been the practice of the industry for years. I speak from the experience of having a father who was an insurance adjuster for 30 years and an aunt who owned an insurance agency for 40 years.

    The bottom line is a well written report is the best way to avoid getting sued whether you are insured or not.
    Maybe it is a Texas thing..... I have worked under state mandated E&O since 2001 and I have not seen an increase in claims, nor have I felt like a target has been placed on me.

    I don't see how an insurance adjuster would have any idea of the number of claims because adjusters do not get involved in E&O matters. Adjusters deal only with P&C claims.

    Now what I have seen are inspectors who become complacent because they know that if they screw-up they have their E&O to fall back on to pay for their screw-up!

    I average about 10+ EW cases a year working for a defendant home inspector or the plaintiff on cases that involve home inspectors. I cover about 5 states and two of those states have mandated E&O. The vast majority of the cases (75%) the inspector has screwed up and the others the plaintiff names everyone in the lawsuit (shotgun lawsuit) that was involved in the transaction. Many of those lawsuits are bogus...

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

  16. #16
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    Default Re: How important is E&O insurance?

    Up here the adjuster has been involved the minute a claim is filed.

    The insurer appoints a lawyer either on staff or from a roster of non staff lawyers.

    The inspector meets with the adjuster and lawyer.

    From there the parties meet with the lawyers at examination for discovery in an attempt to settle the matters before tying up the courts time.

    If there is no leeway by the parties and it goes to court it's past the point of the insurer paying out at significant reduced settlement cost.

    Of course the real issue is whether the stats from insures prove otherwise. In my experience and from others going to court is the last resort and not many claimants make it to court whic can take two to three years!


  17. #17

    Default Re: How important is E&O insurance?

    Quote Originally Posted by Raymond Wand View Post
    Up here the adjuster has been involved the minute a claim is filed.

    The insurer appoints a lawyer either on staff or from a roster of non staff lawyers.

    The inspector meets with the adjuster and lawyer.

    From there the parties meet with the lawyers at examination for discovery in an attempt to settle the matters before tying up the courts time.

    If there is no leeway by the parties and it goes to court it's past the point of the insurer paying out at significant reduced settlement cost.

    Of course the real issue is whether the stats from insures prove otherwise. In my experience and from others going to court is the last resort and not many claimants make it to court whic can take two to three years!
    Not all insurance companies operate exactly the same. Some will actively defend while others are quick to settle but it's mostly circumstantial.

    What I seldom hear inspectors talk about are instances where they actually messed up and insurance served it's purpose in protecting you as well as your client. I got news for you... it happens all the time and I get calls frequently on it.

    I know this sounds crazy.... but some claims DO have merit.


  18. #18
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    Default Re: How important is E&O insurance?

    Quote Originally Posted by Kyle Meadows View Post
    Hi all,
    I'm not an inspector but am considering it. Looks like E&O insurance is one of the biggest start-up costs. Not required in KY (I think), but how many of you think it's important enough to warrant the cost?
    I don't want to be foolish, but would love to save the $ if advisable.
    Thanks,
    Kyle
    Give my insurance guy a call he saved me a ton on my general liability and E&O his name is Chad Wengal and I am pretty sure he writes in the 48 continuous States 801-272-8900


  19. #19
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    Default Re: How important is E&O insurance?

    Quote Originally Posted by Ben Garrison View Post
    Not all insurance companies operate exactly the same. Some will actively defend while others are quick to settle but it's mostly circumstantial.

    What I seldom hear inspectors talk about are instances where they actually messed up and insurance served it's purpose in protecting you as well as your client. I got news for you... it happens all the time and I get calls frequently on it.

    I know this sounds crazy.... but some claims DO have merit.
    What happens to those cases which have merit? Is the policy renewed or can the inspector expect a higher premium come renewal?

    Care to release any claims data?


  20. #20
    Kyle Meadows's Avatar
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    Default Re: How important is E&O insurance?

    Thanks to all for the continued conversation. I am learning a lot about the issue.
    I appreciate your time and effort to post.
    Kyle


  21. #21
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    Default Re: How important is E&O insurance?

    I guess I'm glad I have my E&O.
    I'm still waiting for the trip to Federal Court brought on by the client who sued me in Circuit court and lost and carried it on the Federal Court.
    He can't win. It is frivolous, it has cost me my deductible. But from here on, I don't care. It's all the insurance co's dime.
    Up until then, I made money on my E&O. It isn't required in North Carolina and most don't carry it. I use it as a marketing tool and charge more for the inspection. I think it's been a good buy.
    Here's a mathematical fact you can't escape: The more work you do, the more likely you'll piss off some one or someone else will piss them off while you're standing near by (my case). Also, the more you do, the more chance you'll make a real mistake that you have to own up to.
    jlmathis


  22. #22
    Nolan Kienitz's Avatar
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    Default Re: How important is E&O insurance?

    Quote Originally Posted by Justin Foster View Post
    In Texas it is required for the moment. Recently I had the opportunity to speak to 2 agents and an insurance adjuster about the number of claims logged against inspectors before and after E&O insurance became mandatory here. All three said that claims had spiked up sharply in Texas after it became mandatory.
    Justin,

    Can you back up your comments with actual data points and documentation? Anecdotal information from zoids and an adjuster are not what i would call real stable sources of actual fact when it comes to the number of E&O claims made in TX since the state legislature mandated it.

    You also noted "for now" ... I'm assuming you are likely hoping that the proposed SB and HB in the current legislature will pass and thus remove the E&O mandate. If you look at the TX Legislature website you will find that neither of those two bills have moved an inch since the day there were entered into the log.

    Now ... goes without saying that anything can happen and our legislature has until the the end of this month to act. Like the original E&O it was slid in at the 11th hour and it could happen again, but I'm certainly not holding my breath.

    What concerns me as well is the potential increase in the Inspector's Recovery Fund at TREC that may be increased and that we will also have to fund that with additional fees and likely still have the E&O requirement.

    Again ... do you have solid data for your E&O increase claims?


  23. #23
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    Default Re: How important is E&O insurance?

    Nolan,

    Earlier this year one of my inspection clients sued the seller of the home I inspected for failure to disclose known defects. My report was reviewed by my client's (the buyer) attorney and he found no basis for a case against me but, as required by my policy, I notified my insurance carrier. They immediately opened a claim on my policy even though I was not being sued. During my conversations with the adjuster he volunteered that claims against inspectors had increased significantly since Texas mandated E&O insurance for inspectors. He did not provide any numbers to me, just that the number of claims he handled for this type of activity had increased since the requirement went into effect.

    At renewal time for my policy my carrier put me into a higher risk category because they had not closed the claim file. In my discussions with them attempting to correct their error they conveyed the same thing, i.e. claims against inspectors in Texas had jumped after the mandatory requirement went into effect. After finding my carrier inflexible about my status I went with another carrier who told me the same thing about the number of claims field against Texas inspectors. No one has given me any statistics about the activity, just that they had seen an increase in the claim activity.

    As for it being anecdotal, I guess you could say the same thing about an inspector saying the real estate industry is in a slump. All of the inspectors I know say they are performing fewer inspections now but none of them give me any figures to back it up, I just take them at their word. Also as I stated in my original post I had multiple customers tell me their real estate agents had told them that inspector's E&O insurance was like a home warranty policy and all they had to do was file a claim if something went wrong after they took possession of the house. With that type of information being put out by the agents guess what happened? I still have agents who think it is no big deal for me to file a claim saying I missed something to help out their buyers because they didn't read my report.


  24. #24
    Nolan Kienitz's Avatar
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    Default Re: How important is E&O insurance?

    Justin,

    That sucks about the situation you were blessed with.

    I've talked with many folks and none have been willing to discuss any actual numbers of legal events against TX HIs since the mandated E&O came about. Maybe some 'offhand' comments, but that is about it.

    The comments by the zoids tends to be a cheap shot in my view and the whole process of managing the clients (both buyers and sellers) can be difficult these days as our society has become so "file a lawsuit" or "file an insurance claim" crazy.

    Seems like so many folks simply can't accept responsibility and also grasp the understanding that things are not "perfect".

    I had a client recently who was upset with me about a few things in the home he was purchasing on a short sale. He sent me a rather terse e-mail about 3-months after the HI and noted some things that he felt were wrong. In reviewing his e-mail and the items noted I went through the report I had done and each and every one of the items he noted were in my report.

    Turns out he had not truly read or understood the report ... AND, I had gone over everything with him personally at the site after the inspection and showed him the noted items.

    The e-mail went to ask me about how I was going to cover/protect/warrant any future items that mail fail in the home for him. He even went to the point of asking if I was going to be responsible for replacing and maintaining his light bulbs.

    I had a signed IA from him as well that very clearly states "no warranty" and on and on.

    After another day of 3-hours with the client going over the report, yet again, and in person (again). He finally "got it". At least I hope.

    I did another letter that I had him sign indicating I had answered all his questions (again) and that he acknowledged having signed/understood (supposedly) the IA and so on.

    All I can say is that they are all around us and we just can't always predict what someone (buyer, seller or agent) may do.

    HIs are the easy target to throw under the bus.


  25. #25

    Default Re: How important is E&O insurance?

    Quote Originally Posted by Raymond Wand View Post
    What happens to those cases which have merit? Is the policy renewed or can the inspector expect a higher premium come renewal?

    Care to release any claims data?
    I can't speak for my competitors, but we have NEVER raised rates on an individual for excessive claims, meritless or not. It's been like that for at least the last 6 years however I might start trying to place some inspectors in sub-standard risk categories if they continue to have claims filed against them. Something wrong with that? I don't think so as long as it's done in a fair manner. But try telling a person he has to pay more and see if he views it as "fair" regardless of the situation.

    There is one inspector I insure who has had 6 claims in the last 8 years and he recently said to me, "I should be paying more premium than the other inspectors as I do a TON more business than your average guy." So realistically, he is a greater risk and therefore should be charged accordingly.

    As for data and raw statistics, I don't have a database with that information and honestly I'm not a market analyst. Yes, yes... go ahead... tell me I'm being evasive and witholding information... typical of anyone to assume that who does not know me personally. I wish some of you could sit in my office with me for a day and see the number of calls that come in with inspectors who are being sued.

    The appraiser side of the business is even worse now...


  26. #26
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    Default Re: How important is E&O insurance?

    Ben

    From your previous post, I'm confident that you are as "straight talking", "open", and "up front" as your employment allows you to be.
    Notice, I said "allowed to be".
    Oil companies and Insurance companies have the much deserved reputation of withholding information, and manipulation. This is in part due to necessity and in part to keep profits high.

    BTW
    No way would I want to sit at your desk.
    But I am glad you are there, there for us.

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

  27. #27

    Default Re: How important is E&O insurance?

    Quote Originally Posted by Nolan Kienitz View Post
    Justin,

    That sucks about the situation you were blessed with.

    I've talked with many folks and none have been willing to discuss any actual numbers of legal events against TX HIs since the mandated E&O came about. Maybe some 'offhand' comments, but that is about it.

    The comments by the zoids tends to be a cheap shot in my view and the whole process of managing the clients (both buyers and sellers) can be difficult these days as our society has become so "file a lawsuit" or "file an insurance claim" crazy.

    Seems like so many folks simply can't accept responsibility and also grasp the understanding that things are not "perfect".

    I had a client recently who was upset with me about a few things in the home he was purchasing on a short sale. He sent me a rather terse e-mail about 3-months after the HI and noted some things that he felt were wrong. In reviewing his e-mail and the items noted I went through the report I had done and each and every one of the items he noted were in my report.

    Turns out he had not truly read or understood the report ... AND, I had gone over everything with him personally at the site after the inspection and showed him the noted items.

    The e-mail went to ask me about how I was going to cover/protect/warrant any future items that mail fail in the home for him. He even went to the point of asking if I was going to be responsible for replacing and maintaining his light bulbs.

    I had a signed IA from him as well that very clearly states "no warranty" and on and on.

    After another day of 3-hours with the client going over the report, yet again, and in person (again). He finally "got it". At least I hope.

    I did another letter that I had him sign indicating I had answered all his questions (again) and that he acknowledged having signed/understood (supposedly) the IA and so on.

    All I can say is that they are all around us and we just can't always predict what someone (buyer, seller or agent) may do.

    HIs are the easy target to throw under the bus.
    Great post. I'm convinced that a lot of claims are a direct result the home buyer not TRULY understanding what you're there to do and what you're NOT there to do more importantly. And of course any time you have a contractor come in the house after you have inspected it, they are the FIRST to throw you under the bus. Then put in reverse and back over you again. "Oh your home inspector DEFINITELY should've seen that!" Easy for a specialist to say that when he's reviewing a generalist's work...


  28. #28

    Default Re: How important is E&O insurance?

    Quote Originally Posted by Rick Cantrell View Post
    Ben

    From your previous post, I'm confident that you are as "straight talking", "open", and "up front" as your employment allows you to be.
    Notice, I said "allowed to be".
    Oil companies and Insurance companies have the much deserved reputation of withholding information, and manipulation. This is in part due to necessity and in part to keep profits high.

    BTW
    No way would I want to sit at your desk.
    But I am glad you are there, there for us.
    Thanks Rick... I'm a no b.s straight shooter, tell it how it is kind of guy. And sometimes that gets me in a world of trouble.

    Here's an interesting statistic for you... in one of our bad years, we paid out $1.20 in claims for every 1 dollar we collected in premium. How's THAT for a good business model?

    Sometimes the house wins, sometimes the house loses... at the end of the day, though, I do my best to take care of my clients and help the industry in any way I can.


  29. #29
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    Default Re: How important is E&O insurance?

    Ben

    Thank you for your candid feedback. I can appreciate your side of the discussion.


  30. #30

    Default Re: How important is E&O insurance?

    Quote Originally Posted by Raymond Wand View Post
    Ben

    Thank you for your candid feedback. I can appreciate your side of the discussion.
    I appreciate being appreciated. I'm always glad to help answer any questions anyone has.


  31. #31
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    Default Re: How important is E&O insurance?

    "I'm always glad to help answer any questions anyone has."


    Why are taxes so high?
    Why is gas so high?
    How do you make a woman happy?
    What is the meaning of life?
    Where does the other sock go in the dryer?

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

  32. #32

    Default Re: How important is E&O insurance?

    Quote Originally Posted by Rick Cantrell View Post
    "I'm always glad to help answer any questions anyone has."


    Why are taxes so high?
    Why is gas so high?
    How do you make a woman happy?
    What is the meaning of life?
    Where does the other sock go in the dryer?
    Follow the money.... that's a good start.


  33. #33
    Kyle Meadows's Avatar
    Kyle Meadows Guest

    Default Re: How important is E&O insurance?

    I am really grateful for all of the replies. I guess E & O insurance is a hot topic!
    Perhaps I should make this next question into another thread, but since it's related, here goes:
    After seeing many references to claims and lawsuits, I am curious as to what percentage of your inspections lead to such difficulties. 1 in 10? 1 in 20? 1 in 100? What's your experience?
    Thanks so much,
    Kyle

    Last edited by Kyle Meadows; 05-25-2011 at 10:00 PM. Reason: clarity

  34. #34
    Ted Menelly's Avatar
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    Default Re: How important is E&O insurance?

    I have followed claims against inspectors since I moved to Texas almost 7 years ago. No I did not take notes but the visual did not spike in the slightest with claims against inspectors since the mandatory E& O

    As far as notifying your insurance company if a client goes after a seller? you do not have to bring that up to your insurance company. Now if someone sends you a letter stating they are taking action against you or start asking or legal demanding copies of what ever then you do have to bring it to your insurance companies attention.

    As far as people leaving the field due to E&O well I believe that may be true for some part timers but I think the slow down removed more inspectors from the field but does not appear that the inspectors taking courses to make millions in the inspection field have been deterred.

    For the life of me I have no idea why anyone would get into a particular field of work where the amount of work has been cut in half for most even after a lot of folks left the field due to the slow down.They ask. They are told. They still venture forth. Kind of like their forefathers that looked out into the endless prairie with out a prayer of getting to the end of it and say"what the heck, lets do it". The fortunes are there for the taking.


  35. #35
    Ted Menelly's Avatar
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    Default Re: How important is E&O insurance?

    Quote Originally Posted by Kyle Meadows View Post
    I am really grateful for all of the replies. I guess E & O insurance is a hot topic!
    Perhaps I should make this next question into another thread, but since it's related, here goes:
    After seeing many references to claims and lawsuits, I am curious as to what percentage of your inspections lead to such difficulties. 1 in 10? 1 in 20? 1 in 100? What's your experience?
    Thanks so much,
    Kyle
    If it were 1 in 10, 20 or even a hundred or 200 I would not be in the business. I have never had anyone come after me for anything real or got sued for anything not real ........ ever. I have had idiots looking for a couple hundred dollars because a stem seal started leaking after the inspection even though I take pictures of every faucet and under every sink at the time of the inspection. I guess they think that I am just walking into a room and turning the water on, taking the time to line up a shot and in all that effort I do not see a leak. Yeah right, and the answer to your next question? Do I pay such foolish claims? Never!


  36. #36
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    Default Re: How important is E&O insurance?

    Justin,
    I would expect the number of claims to increase when the number of insured increase. The real question is the percentage increase and correlation with the demographics of the insured.

    Ben,
    Just a small boo-ho on a bad year. A bad year in every business happens. But in the insurance world the companies will play with the numbers to justify many actions on their part. Fraud, no; manipulation, yes. By example, insured HI is calls and tells of a suite between buyer and seller on non disclosure, HI not listed in suite. The HI insured tells the company of the suite because he was told (or believes) that he needed to inform ins comp of any suits and the company opens a claims case folder. Statics will now show an increase in claim cases. Which the insurance company will use in justifying rate increases along with many other things.

    Paid out $1.2 on every $1.00 taken in, just give me a creative accountant and I cold make it look even worse. Or, maybe that is how they arrived at those numbers.

    Ted and those of you in Texas,
    I looked at your required forms and law briefly. I would recommend those not from Texas to look over their system and requirements. Then compare to what your state or territory requires. I found it interesting.

    Kyle,
    Life is all about risk/reward.


  37. #37
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    Default Re: How important is E&O insurance?

    I agree with the observation of the number of claims increasing with the number insured. My statement about the number of claims increasing was a statement of what I was told by the insurance industry reps and no assumption was attached to it beyond the statement that the numbers increased when insurance became mandatory in Texas.

    Not all E&O insurance policies are the same and it pays to read them. You may be surprised what is required of you for reporting if you expect to have the insurance represent you in a suit. Also you may not be covered by your policy for the basis of the suit against you. 2 years ago an attorney who represented home inspectors addressed a local inspector group and told us most suits against inspectors were filed using the Deceptive Trade Practices Act and usually alleged one of three reasons for the suit: fraud, breach of contract or negligence. He pointed not all E&O policies cover all of these and he had been involved in cases in which the insurance company pleaded their insured inspector out of the allegation and into one of the other categories that was not covered by the E&O policy. For instance if you are sued for negligence and your E&O policy covers you for negligence but does not cover you for fraud or breach of contract the insurance may negotiate out of the negligence claim and into a breach of contract claim that they do not cover, leaving you to defend yourself. YOU NEED TO READ THE FINE PRINT IN YOUR POLICY. Blanket statements about what is required by a policy for reporting or defense will not be accurate in all instances.


  38. #38
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    Default Re: How important is E&O insurance?

    I just received an email from one of the Texas inspector organizations regarding the mandatory E&O insurance requirement with the news that the requirement will not be repealed in this legislative session. The repeal was opposed principally by 2 groups, the insurance companies and the Texas Trial Lawyers. Why would trial lawyers oppose this repeal you ask? Perhaps because it keeps a money target on the backs of the inspectors and makes it profitable to sue us. As stated in an earlier post "Follow the money". I'll leave it open to each inspector for their own interpretation.


  39. #39
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    Default Re: How important is E&O insurance?

    Try defending yourself without it!


  40. #40
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    Default Re: How important is E&O insurance?

    In Texas it has been upheld that an inspector is only liable for the amount of the inspection fee if it is so stated in the inspection contract. Most of the inspectors I know have such a statement in their contracts. Obviously the trial lawyers don't like such statements because it leaves them without recourse. Who is going to pay an attorney several thousand dollars to get a judgement for a few hundred dollars?


  41. #41
    Ted Menelly's Avatar
    Ted Menelly Guest

    Default Re: How important is E&O insurance?

    Quote Originally Posted by Justin Foster View Post
    In Texas it has been upheld that an inspector is only liable for the amount of the inspection fee if it is so stated in the inspection contract. Most of the inspectors I know have such a statement in their contracts. Obviously the trial lawyers don't like such statements because it leaves them without recourse. Who is going to pay an attorney several thousand dollars to get a judgement for a few hundred dollars?

    Plain and simple. Having a statement in your contract that says that you can only be held liable for the inspection fee will get one no where. I don't like to dispute anyone on what they say but if in fact this was upheld the judge found good cause. If someone blatantly misses something and walks right by it and it is something he was suppose to report on there is no "I can only be held liable for." You will pay. Any lawyer can get around such a clause. If in fact it could be upheld then there would be no argument for E&O insurance. It would have died before it hit the floor.

    The E&O would be foolish to put out there for the protection of the client or yourself for that matter. I am sorry for missing those electric wires hanging down in the garage with bare ends and power running to them. It is too bad your little girl grabbed a hold of them and fried but you see, I have this clause right here that states I am only liable for my inspection fee.

    Some how I don't think a judge would buy that. There would be no law suit against any inspector for anything.

    If a judge upheld that clause just on the bassis that it was there and someone signed on the dotted line then there is no longer protection for anyone and there is no legal cause to force inspectors to get E&O and the first time it was contested E&O would be thrown under the bus.


  42. #42
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    Default Re: How important is E&O insurance?

    I don't understand why inspectors should not be able to limit damages via a contract.

    Insurers limit their risks via their contract provisions, I don't see any government entity via legislation requiring insurers to remove limitations from their policy coverages.

    I don't see lawyers having clients sign contracts either.

    If you ask me its about who has the lobbying powers with government legislators.


  43. #43
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    Default Re: How important is E&O insurance?

    Ted,

    Is your post a statement of opinion or fact based on actual litigation? My post is based on actual litigation.


  44. #44
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    Mar 2007
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    Greenville, N.C.
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    Default Re: How important is E&O insurance?

    I think you can limit your liability by defining the length of time you are liable in your contract. Unless otherwise stated, in North Carolina we are liable for a 3 year period. But I believe we can word our contract and reduce that to one year.
    Of course, that won't carry much weight once a suit is filed. You'll still have expense answering it.
    Oddly,I came in for lunch today and found an email from my attorney that the Federal court had dismissed the suit against me and all parties. All in all, the insurance was an emotional comfort as well as a financial OK. Now let's hope the ass hole is done.

    JLMathis


  45. #45
    Ted Menelly's Avatar
    Ted Menelly Guest

    Default Re: How important is E&O insurance?

    Quote Originally Posted by Jeffrey L. Mathis View Post
    I think you can limit your liability by defining the length of time you are liable in your contract. Unless otherwise stated, in North Carolina we are liable for a 3 year period. But I believe we can word our contract and reduce that to one year.
    Of course, that won't carry much weight once a suit is filed. You'll still have expense answering it.
    Oddly,I came in for lunch today and found an email from my attorney that the Federal court had dismissed the suit against me and all parties. All in all, the insurance was an emotional comfort as well as a financial OK. Now let's hope the ass hole is done.

    JLMathis
    Federal court????


  46. #46
    Ted Menelly's Avatar
    Ted Menelly Guest

    Default Re: How important is E&O insurance?

    Quote Originally Posted by Justin Foster View Post
    Ted,

    Is your post a statement of opinion or fact based on actual litigation? My post is based on actual litigation.
    Actually it is not just my opinion but a statement due to the fact that the E&O cannot and has not been kicked out all together. No I have no case numbers or actual cases. I guess my question to you is. Do you have any actual cases where it was held up. If so you should stop paying your E&O and when they try to pull your license then you can take them to court with the actual cases in hand stating that you or any inspector does not need E&O because nothing will be paid out. You also have this clause stating that judge so and so backed up what you said about not having to pay out more than your inspection fee because you had Ned and Elvira Fud sign you inspection agreement limiting any liability to your inspection fee even thought you walked thru the home and missed have the items of concern or just that 20,000 in foundation repairs.

    No Justin. I do not know that for a fact but please ..... think about it. We inspect based on the SOPs and Ethics of Texas which we must at the least adhere to or be fined very heavily and possibly lose our license. So, why would a judge limit your liability to your inspection fee for being a complete screw up (figuratively).

    Please think about that. This is of the utmost importants. Please send me a copy of one Texas Judge releasing an inspector from all liability based on his contract (only his contract) other than his inspection fee. I will pay you for that ... seriously.


  47. #47
    Richard Anderson's Avatar
    Richard Anderson Guest

    Default Re: How important is E&O insurance?

    In Alberta, very easily put about having E&O insurance.
    Do you like your stuff (property,house,money) then have E&O insurance.
    It is law, yes it sucks to pay out one inspection a month for insurance, what about the customer that just bought a home and you missed something and they don't have the cash too cover your mistake, put yourself in there shoes. To think every customer is out to get you, makes you a better inspector! but to not have any insurance is just a very bad business decision, we are not perfect but when we do miss something, is it not nice to look at your family and know your not going to lose your house or bank account?

    Last edited by Richard Anderson; 05-28-2011 at 03:15 PM.

  48. #48
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    Default Re: How important is E&O insurance?

    For those of you who were following the limit of liability clause discussion the cases tried in Texas in which such clauses were upheld were Mireles v. Tejas Appraisal and Inspection Co. and US Inspect verses Head. Both went through the appeals courts and the limit of liability clauses were found to be enforceable.


  49. #49
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    Default Re: How important is E&O insurance?

    You can read an article published in Tierra Grande, the R.E. Center at TAMU quarterly newsletter at: Head vs US Inspect.pdf - DivShare

    And a recap of the Mireles vs Drapela lawsuit here: Mireles vs Drapela.pdf - DivShare


  50. #50
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    Default Re: How important is E&O insurance?

    Thanks Mike and Justin!


  51. #51
    Ted Menelly's Avatar
    Ted Menelly Guest

    Default Re: How important is E&O insurance?

    As I said earlier. If you read the reasons Mireles or whomever did not win anything is because there was a lack of evidence such as even an article that PB piping was known to and does go bad and cause damage to the home . There are a few other areas where the proof ijn the pudding was not presented properly in such a way to prove negligence and such.

    No gents. The 250.00 limits of liability were not just taken to force because they were there. The attorney that was representing Mireles appears to have been very poorly readied for the case thinking it would be a cake walk.

    Those cases are not cases to have E&O thrown away. Those case are cases where there was a very poor showing by the folks or the folks attorney bringing the case forth.

    If it were the case that limits to liability were as simple as stating there are limits then there in fact would be no need at all for ordering inspectors or anyone else for that matter to get E&O

    Limits of Liability

    I limit my liability to zero for anything missed during this inspection or stating something was that is not at the time of the inspection or even if you die by my gross negligence. Now please remember this. No matter how bad I do at this inspection, even if I miss half of everything, I will owe you nothing because I am a schmuck and really do not give a damn and I limit my liability to zero dollars and zero cents ..... Got it?

    Now, that sounds pretty silly but pretty much sums it up.






    You would not need all the other word filling to express anything.


  52. #52
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    Default Re: How important is E&O insurance?

    Limiting liability is just all a matter what a judge would consider as a reasonable limitation. Why is 3 years in North Carolina considered appropriate? Why not 2 or 1? You can control that to some degree in a contract.
    And yes. We were sued in Federal Court.
    It was thrown out and he re-filed.
    You don't have to do anything wrong. Just meet the wrong person.
    They have the right to file anything anywhere and you have to answer it.
    But I'm in the Alfred E Newman state of mind now: What! Me worry?. I've got an attorney and an insurance company paying the tab from here on out. Pass the chips and salsa.
    JLMathis


  53. #53
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    Default Re: How important is E&O insurance?

    [

    Limits of Liability

    I limit my liability to zero for anything missed during this inspection or stating something was that is not at the time of the inspection or even if you die by my gross negligence. Now please remember this. No matter how bad I do at this inspection, even if I miss half of everything, I will owe you nothing because I am a schmuck and really do not give a damn and I limit my liability to zero dollars and zero cents ..... Got it?



    Ted,
    You may have come up with the exact wording to use. If a client were to take you to court, the Judge after reading this in the contract would throw the case out. The client knew up front what they were actually getting. Succinct and to the point.


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