Protection Starts on Paper

Note: The Managing Risk column with InspectorPro Insurance provides home inspectors with tips to protect their businesses against insurance claims

The following is a real home inspector’s errors and omissions insurance claim from InspectorPro’s archives. To protect the insured’s identity, all identifiable characteristics—including names, associations, and locations—have been altered or removed.

Shortly after moving into their abode, two new homeowners were anything but happy. Improperly installed windows, shower pan and tile installation issues, and visible cracks in the brick veneer led them to believe they could have negotiated a better deal on their house. They also felt frustrated and emotionally distressed about paying for repairs on the property so soon after buying it.

Who was to blame? Their home inspector, of course.

“Defendant had duties. Defendant breached its duties. Defendant’s breach of duties was both reckless and wanton. As direct and proximate result of Defendant’s breaches, Plaintiffs have suffered,” read the court summons hand-delivered to the inspector a few months later.

In addition to accusing him of “negligence and wantonness,” the homebuyers were filing for gross negligence and breach of contract. The price for the inspector’s alleged errors and omissions? A whopping $100,000—more than 100 times what the clients paid for their inspection.

As much as the clients wanted their inspector to pay for everything and the kitchen sink, this negligence claim wouldn’t be so simple. This inspector had a trial-tested risk management tool at his disposal: InspectorPro’s pre-inspection model service agreement.

How did the model service agreement help this inspector’s case?

InspectorPro’s home inspection pre-inspection agreement is a legally vetted and courtroom-tested service contract for home inspectors. By incorporating state-specific legislation and case law with key provisions they’ve utilized in close to two decades of inspector claims handling, InspectorPro’s home inspection contracts offer robust protection at no additional charge to InspectorPro’s insureds.

With InspectorPro’s model agreement signed by his clients before the inspection started, this home inspector had the best chance of a favorable resolution. 

1. Outlined the inspector’s standard of practice, scope, and limitations.

A quick call to his broker got InspectorPro’s claims team involved. As soon as they had copies of his inspection report, signed model service agreement, and court summons, they sprung into action. 

One initial observation that worked in the inspector’s favor was that InspectorPro’s agreement clearly outlined his standard of practice, including his scope and limitations. This made it easy to refute several alleged errors that were outside his scope. Some things they observed:

The shower pan wasn’t visible at the time of the inspection.

The inspector’s scope said he wasn’t required to verify proper installation of components like windows and shower tile.

Photos from the inspection did not show visible brick damage or damage surrounding the windows and shower, meaning they occurred after the inspection.

InspectorPro’s claims team got in touch with the claimants’ attorney and summarized the defense. They highlighted how InspectorPro’s home inspection agreement indemnified the inspector by stating his limitations and cautioning that his responsibility ended with what was visible on inspection day.

2. It set service agreement terms for dispute resolution.

Even after InspectorPro’s team argued that the shower and brick defects were out of scope, the lawyer still thought his clients had a case. They said they’d take the inspector to court. 

InspectorPro’s model service agreement leapt to the inspector’s defense again, this time with its arbitration clause. The arbitration clause is a type of dispute resolution provision that mandates an issue go to an arbitrator instead of a courtroom. By limiting time in court, service agreement terms like arbitration inspection clauses can save both parties time and money. 

Begrudgingly, the claimants met the inspector in front of the arbitrator InspectorPro chose. The result:

“The inspection agreement was agreed to by both parties. The home inspector performed his responsibilities as outlined in the inspection agreement and per the standards of practice,” said the arbitrator. “In this matter, it is found that the defendant home inspector is NOT grossly negligent or even negligent in this matter.”

The Outcome

The arbitrator ruled that the inspector owed his clients nothing. InspectorPro closed his insurance claim at no cost to him. He didn’t even have to pay his deductible. 

Model Service Agreement Tips and More

1. Photos help end arguments.

Nothing stops a “he said, she said” debate like a photo. When you have an image of the alleged defect from inspection day, there’s no more contending. What is (or isn’t) there in the photograph defines what was (or wasn’t) there during your inspection.

In this claim’s case, it’s about what wasn’t there in the photos. Photos of the brick veneer, the windows, the shower, and the adjacent walls all showed the same thing: No damage.

InspectorPro’s model service agreement explicitly stated the inspector would only document the defects present during his inspection. It also explained that inspections are not warranties, and the inspector couldn’t predict future damage to the property. So any damage caused during the move or that appeared after the claimants began living there wasn’t the inspector’s responsibility.

The lesson to learn: Take lots of photos. Get more guidance on the types of things to photograph during your inspection. And remember to always review your photos after the inspection so you don’t miss anything, like the first-year home inspector we wrote about in a recent issue of the Reporter.

2. Your scope is your sentinel.

Like a sentinel stands watch to protect his fellow soldiers, so your scope vigilantly guards you. 

Your inspection scope defines the purpose and intent of your inspection. By describing your inspection standards and how you test major systems and appliances, you help clients understand what they’re getting, which leads to more customer satisfaction and less customer complaints.

InspectorPro’s model service agreement tells your clients which standard of practice (SOP) you’re using and where to find it. It also dispels common misconceptions. For this inspector, an important part of his defense was that his scope excluded verifying proper window and tile installation. InspectorPro’s home inspection pre-inspection agreement also underscored the visual nature of inspections,
which supported his inability to examine the shower pan.

Check out the article called “Your Pre-Inspection Agreement: Scope” on the InspectorPro blog for help understanding what should be in your inspection scope, including important exclusions.

3. Your contract impacts your bottom line.

All the service agreement terms and provisions add up. Have a weak or unprofessional home inspection contract and your provisions amount to very little defense. But arm yourself with a rigorous and refined model service agreement like InspectorPro’s, and you’ve got great protection.

In this inspector’s case, a few of InspectorPro’s provisions really helped:

The limitation of liability capped his financial obligation to the client to two times his inspection fee. So even if the arbitrator had found him at fault, he likely would not have owed the large sum the claimants were after.

Offering a comprehensive inspection gave his clients a way to go beyond his standard inspection’s limitations and exclusions.
By not electing to get a comprehensive inspection, his clients further accepted his standard inspection’s terms.

The arbitration provision saved the inspector precious time, money, and privacy he could have lost in court.

Now before you say, “Great! I’ll just add those provisions myself,” it isn’t so simple. Frankensteining your contract together from parts of other agreements is a horror film waiting to happen. 

A provision you add to your agreement may not abide by the laws in your state. Different parts of your contract may disagree with each other. Or you may add a provision that’s great now but becomes outdated later. The result may be an agreement that lacks legal compliance and clarity, resulting in it not providing you the defense you need when a claim arises.

That’s why our last takeaway for risk-averse inspectors like you is to utilize InspectorPro’s model pre-inspection agreement. 

As an InspectorPro insured, you get free access to their model service agreements and necessary updates. And they make the deal even sweeter by giving you $1,500 off your deductible for any claims you receive while using it. Scan the QR code to learn more and get your copy of InspectorPro’s model pre-inspection agreement.

Stephanie Jaynes is the Marketing Director for InspectorPro Insurance, which offers ASHI members exclusive benefits through its program: InspectorPro with the ASHI Advantage. Through risk management articles in the ASHI Reporter and on the InspectorPro website, InspectorPro helps inspectors protect their livelihood and avoid unnecessary risk. Get peace of mind and better protection with InspectorPro’s pre-claims assistance and straightforward coverage. Learn more at inspectorproinsurance.com/ashi-advantage.

Opinions or statements of authors are solely their own and do not necessarily represent the opinions or positions of ASHI, its agents, or editors. Always check with your local governmental agency and independently verify for accuracy, completeness, and reliability.