Don’t Inspect for Pests – Sued Anyway
Even if your inspection specifically excludes wood-destroying insects/organisms (WDI/WDO), that does not stop an irate homeowner from suing you if a problem arises. That’s why it is good to have a clear scope of work, a signed inspection agreement and a broad errors and omissions insurance policy — just in case.
“We see new homeowners move in and begin to remodel only to find termite damage that was hidden behind a wall — so it was unseen and unreported by the inspector,” said David Brauner, senior broker at insurance provider orep.org. “Their first instinct is to try to recover some of the expense from the home inspector. The inspector responds with his scope of work and agreement, signed by both parties, which specifically excludes wood-destroying insects/wood-destroying organisms (wdi/wdo) or pest inspections, and is limited to what is visible. That’s great, but if that does not stop the homeowner, the inspector may have to be prepared to prove his/her case in court, and it may be without the help of his or her insurance carrier if he or she did not purchase that specific coverage.”
According to Brauner, most inspectors who don’t inspect for wdi/wdo think they don’t need to purchase the coverage. So, if a problem arises, they may be left on their own. Brauner says that orep’s e&o policy provides what is known as “incidental” coverage for pests and other services for when a problem like this arises. “That’s why a broad policy form is so important,” said Brauner. He recommends asking your agent when you’re shopping insurance about what is and isn’t covered in the base policy — whether you specifically inspect for it or not — just in case.
“Obviously, if you perform pest inspections, and it’s not included in your base coverage, like with the OREP policy, it is necessary to purchase that coverage. But if you don’t inspect for it, you should be aware whether or not ‘incidental’ coverage is in place in case the unexpected happens,” says Brauner. “Unfortunately, the unexpected is not so unusual in this business. Insurance, more than anything, is about peace of mind and having coverage when you need it.”
Another important coverage that every inspector should have is Bodily Injury/Property Damage or premises coverage for when the inspector is at the job site, in the event he or she knocks over a vase (property damage) or causes bodily injury to someone present. Some insurance programs include this coverage in the minimum premium, according to Brauner; others can add it for additional premium.
Some inspectors believe that having insurance and/or expanded coverage just puts a bigger target on their back. Brauner says this is one of those questions that can’t be answered definitively either way.
“As an agent, I never try to sell anyone on whether or not to invest in insurance, just how to choose wisely if they do want it — which means getting the most coverage for best rate,” he said. “Inspectors without insurance get sued. The fact that an inspector does not have insurance does not stop people from suing. I also know it can be devastating emotionally and financially for those who go through it without insurance.
With insurance, you minimize the loss to your deductible and, even if the worst happens, in most cases you can recover — it’s not catastrophic. You are still in business. Insurance seems like a waste of money until you need it. But if you decide insurance is worth the cost, you should get the most coverage you can for the best price. Insurance for home inspectors is very competitive now — there are a lot of choices. Choose wisely. Shop. Pick a company with a long track record of service to the industry and with broad coverage and affordable rates.”
Isaac Peck is the assistant editor of Working RE Magazine and marketing coordinator at OREP.org, a leading provider of E&O Insurance for appraisers, inspectors and other real estate professionals in 49 states. He can be contacted at Isaac@orep.org or 888-347-5273.
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