Arbitration–A Positive Approach to Dispute Resolution

Q. What five words is a home inspector most likely to hear while dressed in a three-piece suit?

A. “Will the defendant please rise.”

Actually, lawsuits are never funny. To avoid them, some home inspectors state in their contracts that any dispute will be settled through binding arbitration. Many of these contracts include the phrase “panel member to include a certified ASHI inspector with more than five years experience.” Unfortunately there are only a few arbitrators so qualified.

After my first lawsuit, I realized there was value in alternative processes for dispute resolution. I became a member of the American Arbitration Association (AAA) in 1995, my sixth year as a home inspector. Defense lawyers have been known to criticize the arbitration process, and some criticism may be justified; nevertheless I am a fan of the process.

In 1992 there were 2,250 construction arbitrators in the Philadelphia office. In 2000 that number dropped to 230 because AAA changed the continuing education requirements. Currently, I am the only home inspection specialist in the group.

Today, the AAA seeks individuals with a minimum of 10 years experience, expertise and leadership in their field, plus membership in professional associations, and, of course, dispute resolution training. The AAA also encourages potential arbitrators to submit letters of recommendation from state and federal judges, an attorney who served as opposing counsel, a former employer and past clients.

I don’t make my living as an arbitrator. I make my living as a home inspector. I know the ASHI Standards of Practice inside and out. I climb on roofs every day, open electrical panels, look for cracks in heat exchangers, clean spider webs out of crawl spaces, dance with real estate agents, joust with sellers and debate with contractors.

I firmly believe if you are having a dispute, you want someone like me – someone who walks in your shoes – to arbitrate. Judges may know the law, but they know squat about home inspections.

Arbitration offers a way to resolve complaints that is faster, cheaper and more private than a court case. When I was included in a lawsuit regarding a bad septic, the judge fined me more than he fined the septic inspector. Go figure. In my report, I noted in three places to have the septic system inspected by a professional septic inspector prior to settlement. I still lost. I lost big time.

I’m convinced had this dispute been heard in arbitration by an ASHI Member with five years of experience, the outcome would have been different. I don’t and didn’t check the septic. Septic inspections are separate from home inspections. Yet, I lost. I lost more than money. I lost a lot of faith in the judicial process.

An arbitrator is not a judge. I know little about the law. An arbitrator is a neutral. I know a lot about home inspections. I have inspected approximately 6,500 homes in my career, and I know the parameters of our business.  

An arbitrator who is also a home inspector can easily determine if another inspector has done the job. The arbitrator knows how to read an inspection report. On the other hand, if someone has not performed the inspection correctly, I am the last person he or she wants to see sitting at the head of the table.

A neutral manages a hearing process and offers a thorough, impartial evaluation. An arbitrator doesn’t decide guilt. No one goes to jail. Money is awarded based on the list of claims.

I distinctly dislike “sitting in judgment of my peers.” It is uncomfortable to see them at the next ASHI meeting. They may not have agreed with my decision, but I believe they at least give me credit for being fair and for understanding their point of view.

In one case involving an inspector who was not a Member of ASHI, the buyer entered into evidence the home inspector’s phone directory advertisement. It said, “I climb all roofs,” clearly advertising this advantage over the competition. I was shocked to hear his defense. “Well, the ASHI Standards say an inspector doesn’t have to climb the roof,” he said. He wasn’t an ASHI Member and his report wasn’t done to our Standards. I don’t think either the buyer or I was confused by the slogan, “I climb all roofs.” I didn’t rule in this inspector’s favor. The ad changed the next year.

Attorneys can represent clients in arbitration, and I encourage this. We are home inspectors. What do we know about entering evidence or testimony? Consider adding a clause to your contract that “in the event of an unsubstantiated dispute, you want to be reimbursed for all legal fees.” Initiate a counterclaim, if you feel justified.

Remember, arbitrators don’t assess guilt, they award money. If you don’t have a counterclaim, your best scenario is a zero loss. The worst is to lose the entire claim. In a frivolous lawsuit, the inspector may be awarded all or part of the legal fees, as well as the hearing costs.

Arbitration is faster and cheaper than a court case. I was asked to be a witness in a home inspection case. A week before trial someone requested a continuance. The new hearing was set for a year later! This won’t happen with me as your arbitrator.

I hated the slow, glacial pace of my lawsuit. I detested the monthly check to the lawyer. There is no discovery process in arbitration. The case can be resolved where the inspection occurred, rather than in a distant court. The conditions can be observed. Associated reports, such as a termite inspection, appraisal, listing sheet, disclosure form or relocation company’s home inspection report, can be entered as evidence.

It’s easier to enter evidence at arbitration than it is to enter it in court. Also, the proceedings are more informal.  

Lastly, arbitration is quiet. There is no public record. You can go to the courthouse and look up the case against me. With arbitration, neutrals are the only ones who know about the complaint, and our lips are sealed.

By the way, if you look up the case against me at the courthouse, which a lawyer did recently, you’d learn the buyers were awarded $30,000 for the bad septic. However, they never installed a new one. They simply kept the money, pumped the system regularly, and eventually sold the house without disclosing it. Of course, it failed shortly after the settlement, and the new buyer sued my past clients.

The latest buyer did not have the home inspected when he bought it, so at least one of us wasn’t being sued again. Regrettably, he represented himself in court, and lost his case. Once again, I believe arbitration would have yielded a different outcome.
I believe arbitration has merit, and it can be an important element in home inspectors’ defense and dispute resolution.