Thread: E and O insurance in Texas

I need to renew my license by 12/31/07. Started shopping around for E and O insurance which is required in Texas as of 9/1/07.

Contacted Landy insurance company so far.

Looking for the best price. Can anybody help me?

Thanks,

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Matt:

Give me a call and I'll let know the different options through FREA. I can be reached at 1-800-882-4410 ext. 104. Hope all is well!

Regards,
Ben Garrison

Matt,

Check w/your local State Farm agent. He can't directly write the coverage as such policies have to come from a corporate office.

After reviewing six different companies, State Farm was the best that worked for me.

Some local agents are not even aware they offer same. If that would be your case ... e-mail me off-line and I can put in you contact with my agent located in Spring, TX.

I also have State Farm. Policy is offered through their Specialty Products division.

Hi - this is David Brauner Senior Broker at OREP.

To the guys who have State Farm - I'm just curious what kind of coverages they offer and at what premium range(s): do they provide free prior acts if you qualify; do they include free referring party coverage, coverage for incidental pest/radon, commercial, code, and such or do you pay for all that? Do they charge extra for multiple inspectors? Do you have to have a home owner's policy with them?

You guys are an informed bunch so I'm sure you've scrutinized the policy. Would you mind sharing with an insurance provider?

Thanks,
David B. (Appraisers Errors & Omissions Insurance - Real Estate Home Inspectors Liability E&O Insurance)

Originally Posted by David Brauner

Hi - this is David Brauner Senior Broker at OREP.
Would you mind sharing with an insurance provider?

At least He ain't a Broker.

Billy - I'm not sure what you comment means but I do remember that joke "..might have choked Artie..." from the Little Rascals - from maybe 40 years ago. Amazing! (I'm an insurance broker.)

David,

What's your location?

Sorry but your post looks like a sales pitch if thats the case we would welcome your AD.

In your advertisement could you describe the benefits of your service?

I'd say most of us have E&O and GL. along with the other standard insurance needs.

No pitch. I just want to know what they (the inspectors) are getting or not getting to evaluate the competition. I called my own State Farm agent and he never heard of it so I could not get my questions answered. Thanks.

David

Originally Posted by David Brauner

No pitch. I just want to know what they (the inspectors) are getting or not getting to evaluate the competition.

David

David,

I guess I got miss lead by the link to your Business Site.

(Smiling) The link doesn't go to MY site.

Originally Posted by David Brauner

Hi - this is David Brauner Senior Broker at OREP.
)

David Brauner,

Click on link, Scroll to Last Paragraph,click on Home Inspectors E&O Insurance:Market
Softens/Price Drop click scroll to bottom.

About the Author David Brauner is Senior Broker at OREP.

Must be the other Senior Broker David Brauner's site.

I stand corrected.

Matt,
Check out this company North American Professional Liability Insurance Agency - Errors & Omissions Insurance this is the lowest cost E&O insurance I have found.

Originally Posted by David Brauner

... I called my own State Farm agent and he never heard of it so I could not get my questions answered. Thanks. ...
David

State Farm handles this out of a central corporate location. It is likely that a lot of agents may not have a clue.

As a client you have to push the agent to learn about the offering.

Look into NACHI.org

I found the best prices.

Rolland Pruner

Don't forget to add your NACHI membership fee.

Larry,

Why don't you contact Brian Hannigan regarding a Paid banner for your business.

Its not much fair for those who do pay for such for you to expect the free advertising.

rick

Speaking of Texas E&O, does totally omitting coverage of damage due to termites sound correct on a standard policy? I don't do WDI reports, but I don't want to be left holding the bag if I get sued for missing structural damage that happens to be termite related.
Any body familiar with this exclusion?

Exclusions:
Claims arising directly or indirectly out of damage caused by insects, including but not limited to termites

Originally Posted by Jim Luttrall

Speaking of Texas E&O, does totally omitting coverage of damage due to termites sound correct on a standard policy? I don't do WDI reports, but I don't want to be left holding the bag if I get sued for missing structural damage that happens to be termite related.
Any body familiar with this exclusion?

Considering that you are not suppose to say that there are wood destroying insect doing damage to the home I would say you are covered. Of course mentioning there is damage to the structure is fine but the WDI folks are the liable ones for that.
Always recommend the termite folks if you see something and that takes your liability away anyway.

Let me know how you make out Jim. I still have not gotten mine yet.

Jim,

Its hard to find a carrier that will cover you for structural damages (termite) unless your actively in the treatment business.

Thats why I've always preached against home inspectors doing WDI reports. Its way too much liability for the 75. bucks you might get.

rick

Yeah Rick, I don't do WDI and disclaim it in my reports, but it would be nice to have the coverage to defend against any lawsuits in that vein.
As they say, people can sue for anything, they may not win, but that is several thousand dollars worth of legal expenses down the road. I can understand not providing coverage as a pest control guy, but if a beam collapses due to termite damage that I don't catch... I'm on the hook until I prove I could not see it or report on it.
Kind of a catch-22.

It is not unusual for WDO/WDI not to be covered in your basic policy. Most insurance policies have basic coverage that have exclusions. Most HI E&O polices exclude things like WDO/WDI, radon, lead, mold.... You can add in the coverage if you need to, for an additional cost if that coverage is offered by the insurance carrier.

John Remark
First Indemnity Insurance
Home Inspector Liability-Save 10%-30% on Professional Liability

US Risk, ACE and IPSI include coverage vor WDI/WDO.

States continue passing laws requiring various professions to carry general liability or professional liability insurance. Twenty-two states require home inspectors to carry insurance. Texas and Kansas are the most recent to require E&O for home inspectors. Similar laws will be passed in other States this year.

The purpose of any insurance policy, whether it is auto liability, homeowner’s liability, commercial general liability, or E&O, is to protect the assets owned by the insured, and protect the insured against the uncertainty of financial loss, or the financial loss sustained from an insured peril. Very few assets are protected by law. The Texas Constitution lays the foundation for protection of your homestead, (including up to 200 adjacent acres) and even cites specifically, how many chickens, cows, pigs, and horses are protected. The tools of your trade are protected. However, in the event of a judgment rendered in a lawsuit, rental properties, investments, weekend homes, non-adjacent land, savings accounts, checking accounts, furniture, and possibly annuities, are not protected. One might think, “My heirs will inherit my homestead when I die.” Not the case, when we are gone, that property is no longer a homestead, and is no longer protected. The judgment needs only to be renewed every 10 years.

There are approximately seven insurance companies offering E&O insurance to home inspectors. The premiums vary widely. The coverages (limits and deductibles) and exclusions (the most important part of the policy to read) vary even more widely. The policy language can be difficult to understand. According to TREC, an attorney can only tell you, “While I am not able to definitively interpret any provision of that policy (that would be for a court to do), it appears that the exclusion provision that refers to….” It is equally difficult to get a definitive answer from an underwriter.

Some companies are lowering pure premiums. US Risk lowered their premium by $250 in January 2008. Others are raising pure premiums. Ace American was quoting as little as $500 last November. Their sister company, Ace Westchester was quoting $750. Ace American rose to $750 in December, then both companies raised premiums to $1250 in January to be competitive with other carriers. From an underwriting standpoint, such low premiums cannot support the claims. Ace American quit writing this business and referred all to Ace Westchester in January. Another company, James River, started out in 2008 with a $1000 premium, and was out of business by July. FREA lost almost 8% of their home inspector business last year, partly due to exclusions in the AIG policy.

Insurance agents and carriers are constantly competing for the E&O business by lowering premiums. This simply means they must decrease coverages (by way of exclusions) and subsequently reduce claims exposures. There are at least two companies offering bare bones coverage, by increasing the number of exclusions (what is NOT covered by the policy).

Prime Insurance started out in 2008, by excluding: code compliance; commercial; failure to detect natural gases; WDI and WDO; private or public waste disposal systems; septic systems; FEMA inspections; punitive or exemplary or multiplied damages; and bodily injury and property damage; to mention a few. Neither the original agent, nor the original surplus lines agent, is writing this policy today through Prime Insurance. It is now written as a very similar policy through Lloyds, offering an advertised premium of $891.00. It is recommended the inspector read this type of policy thoroughly to make sure it satisfies your needs.

Lexington excludes: punitive or exemplary or multiplied damages; WDI or other pests; code compliance; swimming pool, hot tub, whirl pool, sauna, steam room, or similar apparatus; waste disposal system, septic tanks; bodily injury and property damage; and security systems.

This month, Ace Westchester is offering, in addition to their current policy, a new restrictive coverage policy, excluding: punitive or exemplary or multiplied damages; code compliance; swimming pool, hot tub, whirl pool, sauna, steam room, or similar apparatus; waste disposal system, septic tanks; bodily injury and property damage; and security systems. Ace includes coverage for WDI visual inspections. The pure premium is only $750 plus fees. TREC has stated, despite the exclusions, this policy does meet the TREC insurance requirement.

In some policies there is the exclusion regarding: any claim alleging, based upon, arising out of, or attributable to any actual or alleged warranty or guarantee as to the integrity, adequacy, or performance of any structure, fixture, system, or appliance, or any of their components or parts. That sounds pretty scary unless, of course, your inspection agreement specifically states you offer no warranties or guarantees.

An exclusion included in most policies eliminates coverage for a very important peril, Contingent Bodily Injury and Property Damage. Contingent BI/PD covers damage to the home or injury to the occupant caused from an error on the inspection. i.e. 1. The inspector misses a leak in a gas line. The gas caused the baby to get sick and go to the hospital or the home explodes. 2. Overlooking a faulty wiring issue involving properly sized breakers and adequate electrical service and the house burned to the ground. 3. The homeowner moved in, it rained, and water comes through the roof into the home. The inspector had not identified the nails used on the recently installed roof did not have washers. The leak caused additional damage to the home. 4. A WDI inspector missed termites and more damage was caused over the next year. With this exclusion, the repairs for the error oversight will be covered (if the specific peril is not also excluded), however, the subsequent damages caused from the error, are not covered. Can your assets afford to pay for these types of damages, which are not covered by your policy?

Contingent BI/PD is offered by both US Risk Brokers and International Placement Services, Inc. (IPSI) for a nominal fee. US Risk has a large presence in Texas, writing about $2,000,000 in premium from home inspectors. This class is second only to insurance agents for US Risk. IPSI has more stringent underwriting guidelines and caters to the more educated and experienced home inspector (5 or more years) with no claims history, thus offering very competitive premiums. US Risk and IPSI also include coverage for new construction and code compliance, necessary for TRCC inspections or code compliance issues that may arrive with a home inspection.

What happens if the inspector leaves the water running in the house and is not aware there is a drainage problem. The sink overflows and floods the home. What if the inspector falls through the ceiling into the living room? E&O does not cover this peril. Any unintentional act by the inspector, which causes bodily injury or property damage, is only covered under a general liability policy, which is available from some companies for about $500. After considerable negotiations, this agent is permitted to write a Business Owners Policy for home inspectors, through Farmers Insurance, which will include $1,000,000 general liability, and coverage for your tools and business computers (not covered under a homeowners policy), even if they are stolen out of your vehicle. The premium is only $600.

Cleary, this agent is not an attorney, nor interpreting law, however examines closely the policy language and offers only an opinion. The bottom line is simple. Examine your operations. Read all of the exclusions in the middle and at the end of the policy. Make sure you are covered for every aspect of your inspections and have liability limits high enough to protect your assets, and the value of the home or business you are inspecting.

Should you have any specific questions about the US Risk, IPSI, or two Ace Westchester policies, with regards to which policy will better satisfy your business operations needs, please feel free to contact this agent at any time (903) 723-3202 or LBATTAR@ATTGLOBAL.NET.