Thread: Texas Atty. General Renders Opinion about Liability Insurance

Hey folks,

Just found out the AG rendered his opinion on the insurance debacle we've been facing. I'm wading through the opinion now (I need smarter people around me).

Anyway, here is the link.

http://www.oag.state.tx.us/opinions/...tt/ga-0581.htm

Happy reading.

Bruce

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Here's the summary. From what I am understanding, the original is vague enough; but the word "intentional" will indicate that we should have E&O.

Thoughts?

S U M M A R Y

The Eightieth Legislature amended Occupations Code sections 1102.114 and 1102.203 to require liability insurance coverage for persons applying for a real estate inspector's license or renewal of such license. The insurance must have a minimum limit of $100,000 per occurrence to protect the public against negligence or incompetence in violation of chapter 1102, subchapter G. The insurance requirement does not apply to intentional acts.
If a real estate inspector has more than one insurance policy applicable to the same occurrence, a combined coverage of $100,000 for that occurrence under all policies would comply with section 1102.114(c).

"protect the public against negligence or incompetence"

That sounds like E&O coverage to me.

rick

Originally Posted by JB Thompson

The insurance requirement does not apply to intentional acts.

To my knowledge, *neither* GL nor E&O applies to "intentional" acts, both apply to unintentional acts.


This, however ...

to protect the public against negligence or incompetence

... could include GL and E&O as "negligence and incompetence" would apply to 'an accident in which you damaged/broke something at the seller's home' (GL) or 'something which you missed for your buyer' (E&O). Right?

Jerry, did you read the opinion? I don't have the time or energy to read it right now but I would be interested in others "take" on the AG's position.
Thanks,
Jim

Originally Posted by Jim Luttrall

Jerry, did you read the opinion?

I, too, tried to read it. Then went down to the summary to sort through the gobbly-gook.

Originally Posted by Jerry Peck

To my knowledge, *neither* GL nor E&O applies to "intentional" acts, both apply to unintentional acts.


This, however ...



... could include GL and E&O as "negligence and incompetence" would apply to 'an accident in which you damaged/broke something at the seller's home' (GL) or 'something which you missed for your buyer' (E&O). Right?

Exactly. The question from the commission about the insurance requirement being unenforceable led the AG to discuss the negligent aspect of it. We may be incompetent but not intentionally (my personal favorite).

The rest of the waist-high marshy, gobbeldy-gook basically states we should have E&O. Apparently the insurance-selling representative from Plano who tacked this very vague, few-worded amendment on at the last minute knew what he was doing after all.

Bruce

Texas Boys,

I actually read the whole thing. From what I got out of it,

Paragraph above the Summary States the commission Ruled insurance was E & O from a June 4, 2007 meeting.


Quote from AG of Texas in opinion.

we can not determine as a matter of law whether section 38 and 39 of Senate Bill 914 requires real estate inspectors to have a "general liability policy" or an "errors or omissions policy"

Sentence above the Summary AG opinion states,

We reiterate that the insurance policy,regardless of its name must provide coverage for non-intentional acts,particularly acts performed in a negligent or incompetent manner..

Sorry but sounds like E & O

The way I read it the AG is saying insurance has different names and the law couldn't hope to know all of the names insurance providers label differing policies. Therefore, ere to wit, notwithstanding, et cetera, et cetera, et cetera...we must have insurance that covers us if we're negligent or incompetent. Dropping a ladder on your client's car may be negligent or incompetent -- or maybe just an accident and requires an insurance for "jes such an emergency" (In my best Foghorn Leghorn voice).

But performing an inspection in a negligent manner -- needs an insurance that covers such.

Viva E&O!!

I bought mine last month thinking the AG might rule like this.

Oh, well. I guess my prices will have reflect the additional expense as Gov. Perry stated when he mentioned that the consumer would ultimately have to pay for this increase.

Bruce

Boys and girls, this still did not clarify a danm thing...

Quote:
Your predecessor also asked how to interpret the $100,000 per occurrence requirement if inspectors are required to have both general liability insurance and professional liability insurance; that is, whether the bill required a minimum of $100,000 per occurrence for each policy, or $100,000 combined coverage for both policies. See Thorburn Letter, supra note 1, at 1. Section 1102.114(c) requires real estate inspectors to "carry liability insurance with a minimum limit of $100,000 per occurrence," not per insurance policy. Act of May 21, 2007, 80th Leg., R.S., ch. 1411, § 38, 2007 Tex. Sess. Law Serv. 4825, 4834-35 (codified at Tex. Occ. Code Ann. § 1102.114(c) (Vernon Supp. 2007) (emphasis added)). Thus, assuming that a real estate inspector has more than one policy applicable to the same occurrence, a combined coverage of $100,000 for that occurrence under the policies would comply with section 1102.114(c).
We have been informed that the Commission, at a meeting on June 4, 2007, issued an interim policy statement defining "liability insurance" in sections 38 and 39 to mean professional liability insurance, also known as errors and omissions insurance, until this office issues an opinion about the new requirements. See DeHay Letter, supra note 2, at 2. We reiterate that the insurance policy, regardless of its name, must provide coverage for non-intentional acts, particularly acts performed in a negligent or incompetent manner within chapter 1102, subchapter G.

Now, correct me if I'm wrong... but the term "until this office issues an opinion" just happened. Since "This Office" just rendered it's oppinion, then the interim policy statement defining general liability as "professional liability" just expired!!

Now, since the interim policy has expired and the court ruled that we must have coverage (no matter what you call it) of $100,000 per occurrance, then you can ALSO say that acts, such as; UN-INTENTIONAL, NEGLIGENT OR UN-PROFESSIONAL can be *also* covered by general liability (i.e.; I did not secure my ladder and that sucker fell thru a window and caused extensive damage to a china cabinet and some heirlooms)... this could be *both* un-intentional and negligent (i.e.; falls under general liability).

On the other hand, if you have a claim agains you for (somehow) missing a jacked-up roof, that would fall under the E&O...

So, we are back to square one. Right where we started... No freakin definition other than it appears both areas of insurance requirements (general liability and professional liability) have to be covered.

RR

RR

"The insurance requirement does not apply to intentional acts." How about stupid acts, evil acts, and unintententional acts? That may take the cake for an all time dumb piece of legislation. The writers must be from CA.

I could be wrong, but I interpreted this line:


We have been informed that the Commission, at a meeting on June 4, 2007, issued an interim policy statement defining "liability insurance" in sections 38 and 39 to mean professional liability insurance, also known as errors and omissions insurance, until this office issues an opinion about the new requirements

in this way. We, the AG office, know that TREC (on 6/4) issued an interim policy until we (this office) issue an opinion.

The opinion is in the rest of the letter.

Originally Posted by Richard Rushing

Boys and girls, this still did not clarify a damn thing ... Quote:

So, we are back to square one. Right where we started... No freakin definition other than it appears both areas of in$urance requirements (general liability and professional liability) have to be covered.

RR

As I was trying to enjoy the evening between "Dancing With the Stars" and "Hannity & Colmes" I was digging through the AG's legalese ... Damn ... what a bunch of . I guess they get paid by the printed word on the pages with tons of references to Lord knows what suit they can refer to.

Anyway ... I've bolded a portion or Rich's statement in that I also took away from the AG's Opinion that we are now "required" to carry GL along with E&O.

I hope I'm off base on what I read ... not that it makes any difference as in$urance is a personal business decision and I strongly think that is the way it should be handled. My view (for my business) is that I feel it is important for me to have both GL and E&O and that is and should be my decision. I do carry both ... again my business decision.

What irritates the heck out of me is the sleight of hand mandate that came about with E&O and now an AG opinion that may also "require" both GL & E&O ??

It may just be me reading far more into the gobbledy-gook opinion that I find hard to fathom. I may have my attorney in Houston review and put it in "plain english" for me.

I'm off my soapbox now

Originally Posted by Richard Rushing

We have been informed that the Commission, at a meeting on June 4, 2007, issued an interim policy statement defining "liability insurance" in sections 38 and 39 to mean professional liability insurance, also known as errors and omissions insurance, until this office issues an opinion about the new requirements. See DeHay Letter, supra note 2, at 2. We reiterate that the insurance policy, regardless of its name, must provide coverage for non-intentional acts, particularly acts performed in a negligent or incompetent manner within chapter 1102, subchapter G.

Actually, what it says is ... go back and read Chapter 1102, Subchapter G and git what it says to git. Now git and go git it.

Anyone of you Texas inspectors have that to post again?

Here is what TREC (I assume TREC Legal) has posted on the TREC website concerning the AG's Opinion. It is saying what Jerry said. I'll try to post that portion referred to.


Updated Nov. 26, 2007 OAG Opinion on Home Inspector Liability Insurance - Attorney General Greg Abbott issued opinion number GA-0581 regarding liability insurance requirements for home inspectors under Texas Occupations Code Chapter 1102. The opinion clarifies that the insurance requirement does not apply to intentional acts, such as fraud. No legal opinion was expressed as to whether the law requires a general liability policy, an errors and omissions policy, or both because the nature of the coverage is a matter of the policy language, which is contractual in nature; the title or name of a particular policy is not controlling. The opinion concludes that regardless of the name of the policy, the insurance must protect the public against negligence or incompetence in violation of chapter 1102, subchapter G.

The AG is as ball-less as the rest of them in taking a stand and making a clear cut decision and has said nothing except the ball is now back in your court, deal with it until another case take precedence.

If you read all the way to the bottom, this ruling sends everything back to TREC to use previous actions as guidance.

Alas their Holy Grail.

We all know what that means as they made their decision back in June and these cases will also be able to be filed under the rules of the recovery fund, Double Jeopardy.

6) The Commission may find guidance for its decision about liability insurance coverage in actions it has taken in connection with negligent or incompetent conduct described in subsection G. The Commission may also find guidance in judicial orders about claims against the real estate inspection recovery fund, which is maintained "to reimburse aggrieved persons who suffer actual damages from an inspector's act in violation of Subchapter G." Tex. Occ. Code Ann. § 1102.351 (Vernon 2004). Judicial orders for payment from the real estate recovery fund based on an inspector's negligence or incompetence under subchapter G should shed light on the acts covered by this provision.

TREC 1102 SubChapter G:

SUBCHAPTER G. PROHIBITED ACTS
Sec. 1102.301. NEGLIGENCE OR INCOMPETENCE.
An inspector may not perform a real estate
inspection in a negligent or incompetent manner.

(V.A.C.S. Art. 6573a, Sec. 23(l) (part).)

Sec. 1102.302. AGREEMENT FOR SPECIFIC
REPORT; DISHONESTY. An inspector may not:
(1) accept an assignment for real estate
inspection if the employment or a fee is contingent
on the reporting of:
(A) a specific, predetermined condition of
the improvements to real property; or
(B) specific findings other than those that
the inspector knows to be true when the assignment
is accepted; or
(2) act in a manner or engage in a practice
that:
(A) is dishonest or fraudulent; or
(B) involves deceit or misrepresentation.

(V.A.C.S. Art. 6573a, Sec. 23(l) (part).)

Sec. 1102.303. ACTING IN CONFLICTING
CAPACITIES. An inspector may not act in a
transaction in the dual capacity of inspector and:
(1) undisclosed principal; or

40

(2) broker or salesperson.

(V.A.C.S. Art. 6573a, Sec. 23(l) (part).)

Sec. 1102.304. REPAIRS AND MAINTENANCE.
An inspector may not perform or agree to
perform repairs or maintenance in connection with a
real estate inspection under an earnest money
contract, lease, or exchange of real property.

(V.A.C.S. Art. 6573a, Sec. 23(l) (part).)

Sec. 1102.305. VIOLATION OF LAW. An
inspector may not violate this chapter or a rule
adopted by the commission.
(V.A.C.S. Art. 6573a, Sec. 23(l) (part).)

[Sections 1102.306-1102.350 reserved for expansion]

All I can say as a non Texas inspector is:

You poor ba***rds

Originally Posted by Nolan Kienitz

TREC 1102 SubChapter G:

SUBCHAPTER G. PROHIBITED ACTS

Sec. 1102.301. NEGLIGENCE OR INCOMPETENCE.
An inspector may not perform a real estate
inspection in a negligent or incompetent manner.
(V.A.C.S. Art. 6573a, Sec. 23(l) (part).)

By its own statement ... an inspector "may not" perform an inspection "in a negligent or incompetent manner", thus, regardless of how incompetent and negligent you perform your inspection, the inspection *IS NOT*, therefore, done in a "negligent or incompetent manner" - says so right there.

COOL!

I agree with Nolan. It should be a personal, business decision. I probably would have purchased it anyway (?) but I didn't particularly want to be told to buy it.

It really galls me the way this was done. Even more than that, the fact that no one else is this industry (agents, appraisers, etc..) is required to purchase E&O. Heck, are physicians REQUIRED by law to purchase malpractice insurance? I don't know; but I doubt it.

As far as the AG being spineless, I say not. They had absolutely nothing to work with. The amendment was so poorly worded from the beginning; it created a "make it what you want it to be" for TREC.

OK...think happy thoughts....down boy down....

Originally Posted by Jerry Peck

By its own statement ... an inspector "may not" perform an inspection "in a negligent or incompetent manner", thus, regardless of how incompetent and negligent you perform your inspection, the inspection *IS NOT*, therefore, done in a "negligent or incompetent manner" - says so right there.

COOL!

It does say "may not." But what if I WANT to perform an inspection in a negligent manner. Dang. They're telling me what to do again.

Calming down....

Ok, I finished my report. I read everybodys posts and I am just as confused as ever. Ya'll need to get this figured out, I have to renew on 10/2008.

Yup... me too Jimbo. Same month. I might have somthing worked out by then

rr

Here is some additional input I received from Devon with TREC Legal this morning (11-27-07):


==========================================
Mr. Kienitz:

The Attorney General opinion, GA-0581, confirms that in$urance policies cannot be obtained to cover intentional acts, such as fraud. It also clarifies that the coverage must be on a per oc-currence basis. No legal opinion was expressed as to whether the law requires a "general liability" policy, a "professional liability"/"errors & omissions" policy, or both because the nature of the coverage is a matter of the policy language, rather than what a particular policy is called. Because the statutory requirement is simply that the policy cover the public against violations of Subchapter G (excluding those violations that would be intentional in nature), we believe that the rule that has been proposed and will be up for final adoption comports with this view. That rule says that the requirement is for "professional liability or any other in$urance that provides coverage for violations of Subchapter G of Chapter 1102." Essentially, TREC requires proof of in$urance that offers coverage for negligence in the performance of your professional duties - the type of coverage that we have come to think of as "professional liability" (or "errors and omissions"), although the policy does not need to bear that label.

Devon V. Bijansky
Staff Attorney
Enforcement Division
=============================================

It sounds like someone with some deep pockets (not me) needs to challenge this in court and get the law struck down due to its ambiguous and unenforceable language. Of course, I doubt anyone will do it since we don't have NAR or TAR or their deep pockets to fight for us.
This reminds me of the definition of politics I heard this morning.
Politics comes from Poly - which comes from the Latin meaning "many" and tics - which is a small blood sucking creature.