While I understand the inherent value in liablility insurance, I have spoken to several "seasoned" inspectors that tell me that because their pre-inspection agreement is so "tight" in their liability limiting language, that they have never purchased E&O. (Limiting to the extent of the report's cost).

Any thoughts on this subject anyone ??

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My thought on this is that most "seasoned" inspectors feel they perform a through enough inspection, that their liability is lessened thus the expense of E&O is not warrantied.

If you stay in this business long enough, you will be sued. That is just a fact in our suit happy type society we live in.

A newbie in the business just doesn't have all the experience in recognizing defects and is at a higher risk thus he'd should by all means carry E&O in my opinion.

All the inspectors I personally know that have been sued and paid out judgments it was within their first few years of business. Thats one of the reasons the drop out rate in this business is high.

As for as a "tight" agreement, none of them basically hold up in court and are just a smoke screen to your client to think twice of going to court. Keep in mind that the courts usually look out after the consumer more than the business.

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Rick Hurst_Home Works Inspection Co_Rockwall TX
In the words of Mike Tyson.... "Everyone has a plan until they get hit inda mouf"

I'm certainly no legal expert but let me ask you a question. If an inspection agreement could be "air-tight" under ALL circumstances, why would insurance companies exist?

Hospitals, and the medical profession in general, have been around a long time and probably have access to some of the best lawyers around. Go in for surgery and you get to sign the best waivers they have been able to produce. But still, how many hospitals and doctors don't have liability insurance?

In our case, yes, if you can prove that you performed the inspection to normal standards, then the agreement might hold up. But, if there's enough at stake, particularly an injury or death, even if caused by something you had no way of catching, the plaintiffs lawyer is going to be trying very hard to suggest you didn't do your job and that the "contract" should be thrown out or at least put aside while the case is argued.

It's a gamble some are willing to take. The rest consider it part of the cost of doing business and include it the fees. In my case, SWMBO is very protective of our "nest-egg" and insists on insurance.

(She Who Must Be Obeyed)

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Richard Moore
Rest Assured Inspection Services - www.rainspect.com
Seattle, Washington

Bob:

I, too, have asked serveral inspectors in my area and all have said the cost of E & O insurance is prohibitive, not to mention the ridiculous deductable amount. I know that all it takes is one lawsuit to validate the monthly premiums, but the cost for new inspectors, like me, is just simply too expensive.

I consulted an attorney about how "tight" an inspection agreement was and he said any attorney worth his salt could tear it apart in court. Until I get enought business to support the insurance premiums, I'm taking my chances with my own agreement.

Bill
Closer Look Inspections
Sorrento, Florida

I read somewhere (maybe here) statistics say that you are 200% more likely to be sued if you have E&O as opposed to not having it. So my state does not require it and I am INC. so I'm taking my chances.

Ask an attorney about suing a home inspector who has no, or limited, assets, and he will advise you to 'try to work something out', and that if you use his services, your cost will be in the thousands, possibly even higher than what is ultimately awarded ... you make the call if you want to proceed.

However, if there is E&O insurance, one letter and the THREAT of legal action, and the E&O will typically pay up to the deductible without much fight (the insurance company will have the home inspector write a check for that amount), now, if the deductible is high enough (most are), the attorney may suggest 'going for it, even if I take 30%, you still get some free money' (not necessarily in those words, but that's the meaning behind them).

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Jerry Peck, Construction / Litigation Consultant
Construction Litigation Consultants, LLC ( www.ConstructionLitigationConsultants.com )

Boy, talk about limited assets ! So, some of you say, tighten up the agreement and set sail, while others say, "I know it's expensive but get it anyway." I appreciate the comment about 'one lawsuit and the premiums are validated......."

What to do, what to do......

I tend to agree with Jerry. I had E&O my first year but dropped it after that.

First: Is the cost.

Second: Is the fact that it means there are *deep pockets* for an attorney to sue for.

Third: Most in_surance companies have a high deductible that they will offer to resolve the claim without even fighting it.

Since Florida does not require E&O I will not carry it until it does. I know that there are plenty of folks on here that would not do business with out it.

I look at it this way. If I get sued, the client will most likely contact an attorney that will intern contact me. When I tell him that I do not have E&O in_surance and that they signed the *agreement* (for what that's worth) and that I am incorporated and all of the legal stuff that goes with it is up to date and that my company assets equal less than $500.00 in the company bank account and that I have some used tools and a few nice brochure holders they could have, I don't think I will hear back from them. Nothing there to collect.

Also, in my state my home that I live in is *homesteaded* meaning no one can sue you and take it away from you (except the tax man if you don't pay him )

So the way I see it, my risk is minimal. I put the money I would have payed for the in_surance into a saving account. This way if I do have a legitimate problem I can make some kind of offer to settle.

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Tim Moreira
Suncoast Home Inspections
Suncoasthomeinspections@yahoo.com

Tim,
Thanks for the response! Good food for thought. (I 'knew' this was an excellent site to be part of !) As far as requirements are concerned, E & O is not required here either. I's funny that I wouldn't be caught dead without auto insurance while driving down the interstate, but with E & O, it's really a judgment call I suppose. The expense vs. assets (...or lack thereof) And, as you say, put those monies into a savings account to access in the event settlement is required..... with E & O in place, regardless of the outcome of a claim, I'd still be bound to pay the deductible anyway.
Thanks again! I'll chew on that for a while !!

What is the % of people that put the money into a savings account and keep it there?? Anyone that doesn't have the proper amount of money in there savings (which should be a lot of $) or have insurance is not right. Why would anyone think that if they did not properly inspect something especially when the home inspector knows that he missed it, that he should have the attitude that he cannot be touched since there is nothing to touch.

For those that do not have the funds available when you do make a mistake, I hope you don't hurt that family too bad. I know you wouldn't want to be hurt in that way.

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I say lets merge all the home inspection organizations into one.

Seepaluce

Well, that's sorta of true. Your home can't be taken but if you have any equity in it that can be taken. You could be forced to either sell or take a second mortgage out to settle a judgement, it just takes longer to get this done. One reason that OJ is renting his house.

You don't want a court ordered judgement on your credit record.

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Scott Patterson
Spring Hill, TN
http://www.traceinspections.com

Kevin,

What I think you are missing is that if there is a problem, take care of it, with the difference being:

a) You take care of it and it costs $1,000 (probably less, a lot less).

b) You have E&O and the attorney goes for $500,000. Your insurance settles and you pay your deductible - $5,000, of which the attorney gets 30% ($1,500 plus expenses, so lets say $2,500) and the client gets the rest - $2,500.

E&O did not 'solve' anything.

E&O just made it worthwhile for the attorney to become involved, which costs $$$$$$$.

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Jerry Peck, Construction / Litigation Consultant
Construction Litigation Consultants, LLC ( www.ConstructionLitigationConsultants.com )

I think it needs to be told that in many cases, there is a lot more to the work/repair than just the problem itself. It's suprising sometimes what has to be removed to get to that problem and fix it properly; then those items need to be re-installed/built. When that person has to pay a contractor which has operating expense himself, the cost for repairs can easily go over $1000.00.

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I say lets merge all the home inspection organizations into one.

Seepaluce

Kevin,

Are you saying that E&O 'does not' bring in the sharks even when the water is shallow?

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Jerry Peck, Construction / Litigation Consultant
Construction Litigation Consultants, LLC ( www.ConstructionLitigationConsultants.com )

No, I'm not saying that at all. I just feel this is something we have to deal with, just like most others that have insurance.

The bigger picture is protecting ourselves but also being financally responsible when mistakes are clearly made by a home inspector.

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I say lets merge all the home inspection organizations into one.

Seepaluce

Good, something we can agree on in the end.

Choosing NOT TO have E&O does not make one an irresponsible inspector anymore than choosing TO have E&O makes for a responsible inspector.

There are good and bad inspectors in both camps.

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Jerry Peck, Construction / Litigation Consultant
Construction Litigation Consultants, LLC ( www.ConstructionLitigationConsultants.com )

E&O: To insure or not to insure, that is the question. By not insuring, you run the risk of losing it all potentially. By insuring, at least if you lose, it's the insurance company's money, minus your deductible and premiums. There are good arguments supporting both sides on this thread. When it comes to your pre-inspection agreement and Rick is right about them not really holding up in court. Even if they did hold up, you would still pay a good amount of money for an attorney to establish that your agreement limits your liability. The lawyers are making the money here.

Bob
An Insurance company has two obligations (a least it's supposed to).
1 To make a profit for the stockholders
2 To protect the public by paying for damages caused by the insured

Look at auto insurance
Georgia requires you to have auto insurance, not for your benefit or protection but for the benefit and protection of the public.
If someone causes injury or damage to property of another, the insurance will pay compensation for the injury/damage, thus protecting the public.
It further protects the public; by increasing the rates of people that are at a higher risk (Someone with a DUI, Speeding, or other claims), or by refusing to insure them. Increasing the rates on these high risk people, will (in theory) cause them to drive more carefully, thereby protecting the public even further (and increase profits).
It makes a profit by:
(I could go on about this, but I make it short)
1 Increase your rates
2 Deny your claims
3 Make someone else pay the claim

As for insurance protecting you, that is insurance company marketing hype. Protecting you would be: Investigating deeper, mediation more often, and defending you against all claims.
You ARE NOT what the insurance company is protecting.

In many cases, one would be better to save the money that would be paid for the insurance AND deductible, and pay the claim himself or hire a better attorney, after all $5-6K still buys a decent attorney.

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Rick Cantrell
Columbus GA

Rick,

You raise many good points. If rates for insureds were not increased for a higher risk on the basis of claims or prior incidents, insurance companies would probably not be in business. I would like to think that having one claim, or perhaps one DUI, would preclude someone from future wrong doing. In my opinion, that's not the reality all the time.

What I find interesting is now insurance companies are using credit scores as a means to determine rates. Apparently, there's data that suggests that lower your credit score, the more likely you are to get in a car accident??? In some ways, it's a shame because there are reasons, beyond people's control, that result in a low credit score. Especially with the emergence of identity theft.

Your thoughts???

Ben