Reducing Liability Through Accurate Reporting

Note: This personal perspective is based upon experience and should not be relied upon to prevent claims or construed to be legal advice.  

In our litigious society, nearly anyone in business for the long haul eventually gets sued and that included me. The first time was in small claims court, and I represented myself. After the home inspection was performed and the buyer took ownership, he found that a breaker tripped whenever a plug-in skillet and toaster were used at the same time in the kitchen. The buyer thought I should pay for an electrical upgrade. I won that case only because I took another home inspector with me as an expert witness.

The second time I was sued, the plaintiffs wanted big money. I had to hire an attorney. I was sued for not disclosing the possibility of asbestos
 in a water-damaged ceiling. The ceiling was not a popcorn ceiling; it was smooth plaster from the 1930s. It was obvious that the ceiling had to be replaced. Although environmental issues were excluded by contract, it was alleged that “a competent engineer would have advised the client about the need for testing.” Thus, I was sued as a third party, not for failing to disclose the possibility of asbestos, but for negligence in not directing the client to go the next step. Again, I was fortunate to be vindicated. Yet, even when vindicated, the emotional and financial expense of
complaints and lawsuits can be high.

Contracts viewed as “Rules of Engagement”

Over the years, I have changed my think-ing on contracts. I now view them as “Rules of Engagement,” rather than as a sure defense to quash complaints. Lawyers are exceptionally good at breaking contracts and finding weak points in contract language. Nevertheless, I have yet to find a lawyer who was able to expunge or erase a written report issued by a defendant home inspector. Also, I’ve observed that although clients rarely read a contract, most read the entire report. Therefore, it would seem to quash complaints and lawsuits, a home inspector should do as follows:

• First, perform a good inspection,

• Second, write an accurate report.

 The report should include findings, plus comments on the limitations, obstructions and impedances (LOIs) that affected the findings. I have evaluated many inspection reports, including those written by other experts, and a large number of them have gaping holes.

Historically, inspectors rely upon their contracts to provide reasonable lists of LOIs, while doing a poor job of reporting where the LOIs occur. If LOIs are not addressed in the body of the report, then there may be grounds for claiming misrepresentation or negligence. Here are four examples of how I address them in my reports:

• Unless noted otherwise, the house exterior was inspected from the ground.

• A limited roof covering inspection was performed by walking/climbing onto the roof [or from a ladder, etc].

• After describing the wall cladding and condition, I always include this sentence: “A board-by-board search was not performed and is beyond the scope of this inspection.”

• The garage [basement or bedroom] could not be fully inspected because of excessive storage [or clutter].

Including LOIs within reports can defuse false expectations, claims, and even prevent claims from turning into lawsuits. Attorneys call LOIs exculpatory language, homeowners call them weasel words, but I call them necessary for accurate reporting.

No one report style ensures accuracy  

I once saw a home inspector pay $25,000 to settle a claim for checking the wrong box on a report. He checked the “public sewer” box instead of the “private sewer” box, and the septic system failed. Reporting that a sewage disposal system is public or private can be a costly mistake. This selection should be removed from check-box report forms. If this item must be in a report, I recommend there be a box for “not determined.”  If you report public or private, be sure to include notes on who provided that information or how that determination was made. Equally remiss, check-box forms usually do not include a disclaimer indicating that underground sewage disposal systems are not evaluated. If this disclaimer is not included in a report, then a client might erroneously assume that it was inspected, but there were no problems to report. Even when sewage disposal systems are excluded by contract, accurate reporting requires stating in the report that the sewage disposal system was not inspected.  

Narrative reports have many of the same disadvantages as check-box reports. A template and menu list does not prevent inspectors from selecting the wrong text. Also, failing to proofread reports can cause inaccurate reporting. Sometimes, inspectors omit pertinent information from the report because a unique problem is not one of the choices on the menu.

It’s the accuracy of the report, not its style, that lessens the likelihood of being sued or losing in court. Whether the report style is check-the-box, narrative or a combination of the two, accuracy is elevated when comments are included on the limitations, obstructions and impedances (LOIs) that affected the findings.

Cover all the bases

Having a contract reviewed by competent legal council can reduce risk, but doing so will not prevent complaints. Written contracts are starting points; they are not necessarily the finish line. Among other things, contracts should define inspection standards and the rules of engagement after a complaint has been received. Like verbal contracts, verbal reports often carry the following attachment, “Thank you for suing me.” A disclaimer at the end of a report without a written contract is a little better than a verbal contract, but not much.

In addition to written contracts, high quality and thorough inspections will not stop complaints if findings are not reported. Whether you have a preference for check boxes, narrative reports or a combination of both, the information contained within must be accurate. It has been my experience that accuracy requires the use of LOIs. Without LOIs, inspectors increase the risk of spending valuable time dealing with call-backs and complaints.