Protect Yourself By Preserving Defenses
Risk Management Bulletin from Business Risk Partners, ASHI’s endorsed E&O insurance provider
There’s a lot of speculation about how the current economic climate is impacting different types of businesses. Unfortunately one of the apparent effects is an increased number of claims and lawsuits against professionals, especially home inspectors. Therefore it is most important to insulate yourself from claims and lawsuits and preserve as many defenses as possible in the event of a claim or lawsuit.
As home inspectors know, the importance of obtaining a signed pre-inspection agreement is paramount. Furthermore, it is even more important to ensure that the pre-inspection agreement contains provisions that will provide sufficient bases to stave off litigation before it starts. Such provisions include a limitation of liability clause. In some cases we’ve handled, the limitation of liability provision has meant the difference between quick resolution of a claim via a return of the inspection fee and protracted litigation.
For example, we are presently handling a matter in which the home inspector did not obtain signed agreement because he had been misinformed that the limitation of liability provision was not enforceable in his jurisdiction. Although the home inspector provided a thorough report, which contained references to all of the problem conditions that were allegedly missed, the lack of a signed pre-inspection agreement containing a limitation of liability clause has made resolution of the matter problematic.
Another claim that was made in the same jurisdiction was withdrawn and the inspection fee returned based on the limitation of liability clause. Fortunately, the home inspector’s report was also detailed and comprehensive; therefore the matter was already defensible. However, the claim was easily resolved because of the existence of the limitation of liability provision.
Accordingly, it seems prudent for all home inspectors to verify with an attorney or the home inspector’s corporate headquarters whether a limitation of liability clause is enforceable in each jurisdiction, and whether the provision must contain specific elements to be enforceable. For example, we have had considerable success obtaining resolution of claims and dismissal of lawsuits in Connecticut, Maryland and Ohio based on the limitation of liability clause. We note that Maryland specifically requires that the limitation be in writing to be enforceable. Additionally, in New Jersey and Pennsylvania, the limitation of liability clause is enforceable provided that the provision specifies that the type of liability being limited is negligence. In Pennsylvania, by statute, a home inspector cannot limit his liability with respect to gross negligence, however.
As a result, it is clear that the difference between forestalling unnecessarily prolonged claims or lawsuit and becoming embroiled in a claim or legal action that could consume considerable amounts of time lies in obtaining a signed pre-inspection
agreement, which contains a limitation of liability clause that is enforceable in your jurisdiction.
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