Thread: E & O INSURERS- WHICH ARE GOOD OR BAD??

I have just realized that my LLC does not protect me from Professional Liability. Guess I should have guessed this, Doctors get sued, if a Corp or LLC could protect them, they would just do that.

I have read the negatives that having E & O attracting suits just for financial gain, and that the Insurer has an incentive to just settle for an amount equal to your deductible, which results in you paying for the settlement. But, despite never even having a complaint in 9 years- I am very thorough in both Inspection and Report writing, I do have a fair amount of assets.

I also know that there are some Realty offices who won't recommend me because I lack E & O- just their policy, one major one has asked me almost every year about it, they want to put me on their list of area Inspectors. It could be, since the cost now is so low compared to when I was starting, that I may get both the Insurance protection and access to some new high end clients.

So, I am getting quotes, and obviously I will pay attention to rates. But, I was hoping maybe some of my fellow Inspectors might want to pass on their Good and Bad experiences with various E & O insurers. If any of you feel you have been screwed, here is a good chance to get even!!

Thank You, JDP

I've been with Capital Special Risks for several years. They have been great. A few years ago I had a complaint that I thought might get the the lawsuit stage, so I contacted them (as required). I worked with a staff attorney on trying to reach an agreement before it went to legal action.
My clients were not willing to accept the return of their fee (per my contract). I brought in a structural engineer and a contractor to tell them that the issue was not likely there when I did the inspection.

In the end, I settled with them for more than my inspection fee, but less than my deductible. I was told that any money that I paid out for consultants would have applied to my deductible. The attorney even helped me draft letters to my clients trying to work out a solution.

I have been with MGM Elite now for two years and I will renew again, prior I used CSR, BRP and FREIA. Ben Garrison with MGM will help you select what fits best for you.. CSR folks were great as well, but MGM I felt offered a better product at a lower price. When I say a lower price, it is all relative to what you are use to spending with E&O.. Heck, it's cheaper than my health insurance!

I have had license mandated E&O for about 14 years and I can honestly say that it is not a target like many folks say it is. Those that say it is a target for lawsuits normally do not have E&O coverage and from my experience say it is just to make themselves feel better for not having it.

Remember that E&O is for your protection! You should never advertise that you have it or use it as a marketing tool or ploy. IMVHO, folks that advertise they have E&O are fools and are inviting folks to sue them if they are not happy.. The coverage is to protect you if you are named in a lawsuit or if you do screwup and miss that rotting floor joist and sill plate on the other side of the crawlspace that looked fine from the other side and was just too far to crawl...

Have been with Allen Insurance for over 20 years and still satisfied

John,

You must be a new business owner. All successful inspectors work daily on managing risk and mitigating liability. If you don't have a course of action for when you get that call-back or the "letter" then you need to stop - do some research on this board and put a plan together. All active inspectors have them occur 1-3 times (or more) a year. It happens, its not a pleasant experience but it is part of the business. If you encounter a client who is more prepared than you, then you will get your ass handed to you and it will cost you $$$. BTW -- when you look at E+O keep in mind that the first dollars spent in any claim are out of your deductible. So if your deductible is $5K and a claim comes in any expenses up to $5K are out of your pocket.


I have Crawford and am very satisfied with them. Good rates and recently when I had a client who wanted to contact my insurer directly they worked with me to help enforce my contract. There only stipulation was to have copies of the correspondence.

My only complaint was that over the 14 months of correspondence that I had 4 different adjusters watching the "potential claim"

//Rick

Minor quibble with the above - the referenced companies are insurance agents or brokers (Capital, BRP, FREA, Allen, Crawford, etc.) not insurance carriers (AIG / Lexington, Philadelphia Group, Hartford, etc.). If you don't know who your carrier is, you probably don't know what your coverage is. Spend some time when your agent delivers the policy to know what is and what is not covered - "the big print giveth and the small print taketh away." Don't just buy price.

Most "miscellaneous" errors & omissions or "professional liability" policies will cover an HIs professional errors regardless of when they (allegedly) happened, usually subject to some specific past date ("prior acts date") - an "occurrence" policy. Other policies (claims-made) will only cover claims that are are actually made during the policy period and reported to the insurer within a specified time. The second policy is usually less expensive up front, however, you have to obtain successive policies until retirement and then buy another policy to cover claims that aren't reported until after you retired.

Each policy has advantages and disadvantages. At a minimum you should know (1) your insurer's name, (2) your agent's name, (3) coverage "trigger" - claims-made or occurrence, (4) effective date(s), (4) limits, (5) exclusions, (6) deductible(s), (7) policy number. Price will vary depending on limits purchased, deductible(s), policy type, territory (state) and your history / experience (past claims).

HIs should also consider a "commercial general liability" (CGL) policy which covers things other than your professional errors - like accidentally putting your foot through a client's ceiling or blowing a well pump by reattaching a loose wire. Those are certainly errors, but they are not "professional" errors covered by E&O. CGL policies are virtually all occurrence-based.

Also consider a "limitation of liability" clause in your inspection contract, restricting your exposure to the amount of your inspection fee. Most states will accept this limitation as long as your actions aren't "grossly or willfully" negligent. You can always waive this limitation if you believe the situation warrants (large, repeat customer, etc.) or specify some higher threshold.

Lastly, HIs should never operate "bare" - without insurance, unless they have no asserts of consequence. To paraphrase Tony Baretta - if you can't afford the insurance, you can't afford to be an HI. If you are just starting out or perform a limited number of inspections, there are carriers who offer a "per inspection" premium.

Originally Posted by JOHN PAVAN

I have just realized that my LLC does not protect me from Professional Liability. Guess I should have guessed this, Doctors get sued, if a Corp or LLC could protect them, they would just do that.

I have read the negatives that having E & O attracting suits just for financial gain, and that the Insurer has an incentive to just settle for an amount equal to your deductible, which results in you paying for the settlement. But, despite never even having a complaint in 9 years- I am very thorough in both Inspection and Report writing, I do have a fair amount of assets.

I also know that there are some Realty offices who won't recommend me because I lack E & O- just their policy, one major one has asked me almost every year about it, they want to put me on their list of area Inspectors. It could be, since the cost now is so low compared to when I was starting, that I may get both the Insurance protection and access to some new high end clients.

So, I am getting quotes, and obviously I will pay attention to rates. But, I was hoping maybe some of my fellow Inspectors might want to pass on their Good and Bad experiences with various E & O insurers. If any of you feel you have been screwed, here is a good chance to get even!!

Thank You, JDP

I am not a consultant or professional in this kind of thing but from what I understand:
I would look at "other means" of asset protection. Certain kinds of trusts and other methods corporations or other protection can reduce "attachable" assets. While you are considering this aspect, remember that there are time limits on some kinds of protection, the asset may need seasoning for say 6 months to a year to be protected. There are also trusts within trusts available, that may further protect.

Also review what is an asset and what is a liability. Cars, boats etc are all LIABILITIES, not assets int he realm you are approaching. never place a car in a Trust, you dont want anything to do with that liability where assets are.

Consider corporations for a moment:
Any corporation that has all the same members and percentages ownership may be "alter egos" (the same corporation under different names).
Any corporation that has different members from another corporation are different and separate completely as entities. It is very hard to attack them under the same action if they both did not participate in the activity.

I hope this thought process helps you in figuring this out, I say leave nothing in your compay and nothing attachable by normal processes. This means that E&O is all there is.

Originally Posted by Endicott69

Minor quibble with the above - the referenced companies are insurance agents or brokers (Capital, BRP, FREA, Allen, Crawford, etc.) not insurance carriers (AIG / Lexington, Philadelphia Group, Hartford, etc.). If you don't know who your carrier is, you probably don't know what your coverage is. Spend some time when your agent delivers the policy to know what is and what is not covered - "the big print giveth and the small print taketh away." Don't just buy price.

Most "miscellaneous" errors & omissions or "professional liability" policies will cover an HIs professional errors regardless of when they (allegedly) happened, usually subject to some specific past date ("prior acts date") - an "occurrence" policy. Other policies (claims-made) will only cover claims that are are actually made during the policy period and reported to the insurer within a specified time. The second policy is usually less expensive up front, however, you have to obtain successive policies until retirement and then buy another policy to cover claims that aren't reported until after you retired.

Each policy has advantages and disadvantages. At a minimum you should know (1) your insurer's name, (2) your agent's name, (3) coverage "trigger" - claims-made or occurrence, (4) effective date(s), (4) limits, (5) exclusions, (6) deductible(s), (7) policy number. Price will vary depending on limits purchased, deductible(s), policy type, territory (state) and your history / experience (past claims).

HIs should also consider a "commercial general liability" (CGL) policy which covers things other than your professional errors - like accidentally putting your foot through a client's ceiling or blowing a well pump by reattaching a loose wire. Those are certainly errors, but they are not "professional" errors covered by E&O. CGL policies are virtually all occurrence-based.

Also consider a "limitation of liability" clause in your inspection contract, restricting your exposure to the amount of your inspection fee. Most states will accept this limitation as long as your actions aren't "grossly or willfully" negligent. You can always waive this limitation if you believe the situation warrants (large, repeat customer, etc.) or specify some higher threshold.

Lastly, HIs should never operate "bare" - without insurance, unless they have no asserts of consequence. To paraphrase Tony Baretta - if you can't afford the insurance, you can't afford to be an HI. If you are just starting out or perform a limited number of inspections, there are carriers who offer a "per inspection" premium.

There is 1 carrier that offers a pay-per-inspection type program, Allen Insurance, but do your research to find out if that is best for you. Read the fine print so you understand exactly how coverage applies and for how long.

Second, be careful with a limitation of liability clause if you're in a licensed state with an E&O requirement. We had one instance in New Jersey where an attorney representing a plaintiff tried to start a class action suit against an inspector for limiting his liability to the cost of the fee. The attorney basically tried to argue if the state requires you to carry 500K of E&O and you attempt to limit your liability to the cost of the inspection, that is somewhat of a conflict.

- - - Updated - - -

Originally Posted by Endicott69

Minor quibble with the above - the referenced companies are insurance agents or brokers (Capital, BRP, FREA, Allen, Crawford, etc.) not insurance carriers (AIG / Lexington, Philadelphia Group, Hartford, etc.). If you don't know who your carrier is, you probably don't know what your coverage is. Spend some time when your agent delivers the policy to know what is and what is not covered - "the big print giveth and the small print taketh away." Don't just buy price.

Most "miscellaneous" errors & omissions or "professional liability" policies will cover an HIs professional errors regardless of when they (allegedly) happened, usually subject to some specific past date ("prior acts date") - an "occurrence" policy. Other policies (claims-made) will only cover claims that are are actually made during the policy period and reported to the insurer within a specified time. The second policy is usually less expensive up front, however, you have to obtain successive policies until retirement and then buy another policy to cover claims that aren't reported until after you retired.

Each policy has advantages and disadvantages. At a minimum you should know (1) your insurer's name, (2) your agent's name, (3) coverage "trigger" - claims-made or occurrence, (4) effective date(s), (4) limits, (5) exclusions, (6) deductible(s), (7) policy number. Price will vary depending on limits purchased, deductible(s), policy type, territory (state) and your history / experience (past claims).

HIs should also consider a "commercial general liability" (CGL) policy which covers things other than your professional errors - like accidentally putting your foot through a client's ceiling or blowing a well pump by reattaching a loose wire. Those are certainly errors, but they are not "professional" errors covered by E&O. CGL policies are virtually all occurrence-based.

Also consider a "limitation of liability" clause in your inspection contract, restricting your exposure to the amount of your inspection fee. Most states will accept this limitation as long as your actions aren't "grossly or willfully" negligent. You can always waive this limitation if you believe the situation warrants (large, repeat customer, etc.) or specify some higher threshold.

Lastly, HIs should never operate "bare" - without insurance, unless they have no asserts of consequence. To paraphrase Tony Baretta - if you can't afford the insurance, you can't afford to be an HI. If you are just starting out or perform a limited number of inspections, there are carriers who offer a "per inspection" premium.

There is 1 carrier that offers a pay-per-inspection type program, Allen Insurance, but do your research to find out if that is best for you. Read the fine print so you understand exactly how coverage applies and for how long.

Second, be careful with a limitation of liability clause if you're in a licensed state with an E&O requirement. We had one instance in New Jersey where an attorney representing a plaintiff tried to start a class action suit against an inspector for limiting his liability to the cost of the fee. The attorney basically tried to argue if the state requires you to carry 500K of E&O and you attempt to limit your liability to the cost of the inspection, that is somewhat of a conflict.

Originally Posted by Endicott69

Minor quibble with the above - the referenced companies are insurance agents or brokers (Capital, BRP, FREA, Allen, Crawford, etc.) not insurance carriers (AIG / Lexington, Philadelphia Group, Hartford, etc.). If you don't know who your carrier is, you probably don't know what your coverage is. Spend some time when your agent delivers the policy to know what is and what is not covered - "the big print giveth and the small print taketh away." Don't just buy price.

Most "miscellaneous" errors & omissions or "professional liability" policies will cover an HIs professional errors regardless of when they (allegedly) happened, usually subject to some specific past date ("prior acts date") - an "occurrence" policy. Other policies (claims-made) will only cover claims that are are actually made during the policy period and reported to the insurer within a specified time. The second policy is usually less expensive up front, however, you have to obtain successive policies until retirement and then buy another policy to cover claims that aren't reported until after you retired.

Each policy has advantages and disadvantages. At a minimum you should know (1) your insurer's name, (2) your agent's name, (3) coverage "trigger" - claims-made or occurrence, (4) effective date(s), (4) limits, (5) exclusions, (6) deductible(s), (7) policy number. Price will vary depending on limits purchased, deductible(s), policy type, territory (state) and your history / experience (past claims).

HIs should also consider a "commercial general liability" (CGL) policy which covers things other than your professional errors - like accidentally putting your foot through a client's ceiling or blowing a well pump by reattaching a loose wire. Those are certainly errors, but they are not "professional" errors covered by E&O. CGL policies are virtually all occurrence-based.

Also consider a "limitation of liability" clause in your inspection contract, restricting your exposure to the amount of your inspection fee. Most states will accept this limitation as long as your actions aren't "grossly or willfully" negligent. You can always waive this limitation if you believe the situation warrants (large, repeat customer, etc.) or specify some higher threshold.

Lastly, HIs should never operate "bare" - without insurance, unless they have no asserts of consequence. To paraphrase Tony Baretta - if you can't afford the insurance, you can't afford to be an HI. If you are just starting out or perform a limited number of inspections, there are carriers who offer a "per inspection" premium.

There is 1 carrier that offers a pay-per-inspection type program, Allen Insurance, but do your research to find out if that is best for you. Read the fine print so you understand exactly how coverage applies and for how long.

Second, be careful with a limitation of liability clause if you're in a licensed state with an E&O requirement. We had one instance in New Jersey where an attorney representing a plaintiff tried to start a class action suit against an inspector for limiting his liability to the cost of the fee. The attorney basically tried to argue if the state requires you to carry 500K of E&O and you attempt to limit your liability to the cost of the inspection, that is somewhat of a conflict.

Originally Posted by Ben Garrison

There is 1 carrier that offers a pay-per-inspection type program, Allen Insurance, but do your research to find out if that is best for you. Read the fine print so you understand exactly how coverage applies and for how long.

Second, be careful with a limitation of liability clause if you're in a licensed state with an E&O requirement. We had one instance in New Jersey where an attorney representing a plaintiff tried to start a class action suit against an inspector for limiting his liability to the cost of the fee. The attorney basically tried to argue if the state requires you to carry 500K of E&O and you attempt to limit your liability to the cost of the inspection, that is somewhat of a conflict.

Ben,
I am wondering if you have a follow up as to that case? Was it heard and adjudicated? Was it settled? Did the company involved have a history of poor and sloppy inspection reporting?
There is a huge difference between adjudicated and settled and even whether a case was appealed and who won on appeal. Attorneys "make law" by appeal process and having a case published by the court.
I am unsure that the attorney filing the action was correct. A state law requiring a minumum insurance would not in itself seem to prevent a contract term that is different or further limiting. In case of "gross or willful negligence" the full insurance could still be attacked but in normal circumstances the contracted limit would apply.

I had a real estate license and when many property values locally fell far below 100K (many as low as 25-40K), I found that several agents were sued under thier E&O. Some claims were made as to failure to disclose and similar claims. Even though the agent had copies of E-mails and or faxes proving disclosures, the E&O paid out (remember that the insurance company decides whether to fight and they ALWAYS minimize thier risk). The bottom line is that the Agents were billed the $5,000 deductible and the insurance settled instantly, even though proof was available that there was no cause of action. One agent I know was pushed over the brink to Bankruptcy partly due to his E&O deductible when he had proof the claim was false. The short of the story is that I voluntarily turned in my real estate license, a $5K risk for a $1200-1500 commission less expenses, advertising, overhead, E&O, desk fees and broker fees made NO sense to me at all. After all it isn't like a real estate agent usually sells 5 or 10 houses a month!

Another issue with the Pay as You Go coverage is that many if not of the licensed states that require coverage will not accept this type of policy to satisfy the mandatory E&O coverage. I know TN and MS do not.

Originally Posted by Dirk Jeanis

Ben,
I am wondering if you have a follow up as to that case? Was it heard and adjudicated? Was it settled? Did the company involved have a history of poor and sloppy inspection reporting?
There is a huge difference between adjudicated and settled and even whether a case was appealed and who won on appeal. Attorneys "make law" by appeal process and having a case published by the court.
I am unsure that the attorney filing the action was correct. A state law requiring a minumum insurance would not in itself seem to prevent a contract term that is different or further limiting. In case of "gross or willful negligence" the full insurance could still be attacked but in normal circumstances the contracted limit would apply.

I had a real estate license and when many property values locally fell far below 100K (many as low as 25-40K), I found that several agents were sued under thier E&O. Some claims were made as to failure to disclose and similar claims. Even though the agent had copies of E-mails and or faxes proving disclosures, the E&O paid out (remember that the insurance company decides whether to fight and they ALWAYS minimize thier risk). The bottom line is that the Agents were billed the $5,000 deductible and the insurance settled instantly, even though proof was available that there was no cause of action. One agent I know was pushed over the brink to Bankruptcy partly due to his E&O deductible when he had proof the claim was false. The short of the story is that I voluntarily turned in my real estate license, a $5K risk for a $1200-1500 commission less expenses, advertising, overhead, E&O, desk fees and broker fees made NO sense to me at all. After all it isn't like a real estate agent usually sells 5 or 10 houses a month!

Joe Denneler, the attorney who handled the case, had the class action stricken after the plaintiff tried to add it. Obviously that was good for us but it still costs money to deal with. As far as limitation of liability clauses being void, reference Lucier vs. Williams which addresses this.

Originally Posted by Scott Patterson

Another issue with the Pay as You Go coverage is that many if not of the licensed states that require coverage will not accept this type of policy to satisfy the mandatory E&O coverage. I know TN and MS do not.

I am unsure how those states can refuse pay per contract as long as there is a basic annual fee as well. Pay a basic premium for say 10 inspections and per inspection thereafter. This is so standard in contrators policies as well as real estate agencies and even attorneys! Many are pay as a percentage of contract price or a prix fix by the value range of the property or service rendered.

The justification is that some given business may do 500K a year and others 4M per year. The only way to make that work is very costly, to audit quarterly or annually and adjust premiums. Makes no sense to anyone.

- - - Updated - - -

Originally Posted by Scott Patterson

Another issue with the Pay as You Go coverage is that many if not of the licensed states that require coverage will not accept this type of policy to satisfy the mandatory E&O coverage. I know TN and MS do not.

I am unsure how those states can refuse pay per contract as long as there is a basic annual fee as well. Pay a basic premium for say 10 inspections and per inspection thereafter. This is so standard in contrators policies as well as real estate agencies and even attorneys! Many are pay as a percentage of contract price or a prix fix by the value range of the property or service rendered.

The justification is that some given business may do 500K a year and others 4M per year. The only way to make that work is very costly, to audit quarterly or annually and adjust premiums. Makes no sense to anyone.

Originally Posted by Dirk Jeanis

I am unsure how those states can refuse pay per contract as long as there is a basic annual fee as well. Pay a basic premium for say 10 inspections and per inspection thereafter. This is so standard in contrators policies as well as real estate agencies and even attorneys! Many are pay as a percentage of contract price or a prix fix by the value range of the property or service rendered.

The justification is that some given business may do 500K a year and others 4M per year. The only way to make that work is very costly, to audit quarterly or annually and adjust premiums. Makes no sense to anyone.

- - - Updated - - -


I am unsure how those states can refuse pay per contract as long as there is a basic annual fee as well. Pay a basic premium for say 10 inspections and per inspection thereafter. This is so standard in contrators policies as well as real estate agencies and even attorneys! Many are pay as a percentage of contract price or a prix fix by the value range of the property or service rendered.

The justification is that some given business may do 500K a year and others 4M per year. The only way to make that work is very costly, to audit quarterly or annually and adjust premiums. Makes no sense to anyone.

Because the fine print says those inspection reports are only insured for 1 year.