Risk Management: Inspection Basics to Manage Risk

Most of us consider ourselves to be technically astute when we’re in the field performing inspections. We spend hours every year expanding our knowledge by attending continuing-education classes and meetings. Yet, how often each day do we think about managing our risk? When is the last time you updated your contract? Do you think about what you do and say every day on the job with regard to risk management? Outlined below are a few of the common missteps we see when evaluating claims that could have been prevented or at least the exposure could have been reduced.

1) The inspection agreement (or contract): Bottom line: Get a signed contract from the client. It is not enough to include language in your report, stating that “use thereof constitutes agreement with the policies herein and in the contract whether or not a signature has been obtained.” In these days of modern electronic communication, it is easy to send an agreement to the client as soon as the inspection is scheduled. Email the contract or send the client to your website to download a contract to execute and return (fax, email scan, mail, etc.). In some states, a simple return email acknowledging agreement with the contract will work, as will the checked box “I agree,” such as we see with software and other agreements. However, the old-fashioned convention of obtaining a real signature on the document is always best. Without a signed agreement, you risk denial of coverage from most E&O insurance providers and possible nonenforcement of the agreement should the contract be questioned in a legal proceeding.

2) Reporting inaccessible locations:
National Standards of Practice by associations and those adopted by states all require the inspector to identify systems, components or locations that are to be inspected, but were not accessible for any reason. Inspectors are usually adept at noting in their reports these locations, however, we recommend that language similar to the following be added to the note: We recommend that this (location, system, component) be made accessible and inspected by a professional prior to expiration of the inspection contingency period; hidden damage may exist. We have been seeing claims where the client indicates he/she was not alerted to this possibility.

3) Reporting magnitude of deficient conditions: Be sure to alert your clients as to the severity of conditions discovered AND the potential implications for not taking action prior to the end of the inspection contingency period, including, but not limited to, the potential for hidden damage and significant cost, life safety implications and/or potential for continued damage. This is one of the most common claims – lack of understanding of the condition.

4) Deficient conditions not cross-referenced in summary:
Not much explanation needed here. If you prepare an inspection summary or action items, be sure to include all significant items (significant in magnitude by virtue of cost and/or safety) in the report. Unfortunately, many times we see that important items do not make it into report summaries.

5) Relying on verbal disclosure:
Always write what you say and say what you write. If you mention anything to the client, make sure it gets into the written report. At the end of the day, all that matters is what is in the report.

6) Identifying sewage disposal as public or private: We have not seen any state-codified or professional association-promulgated Standards of Practice that require the inspector to determine if sewage is handled by private disposal or municipal. Yet, we see many reports identifying septic or municipal. Don’t do it. If you must include such a determination, please identify where your information was obtained and include the proviso “verify with seller or municipality” with the public or private comment. Better yet, “this information was obtained from ______ and was not verified. This information is considered reliable; however, client should verify all information provided by third parties” or a similar disclaimer.

7) Admitting guilt: If a client calls or emails you with a complaint, never write or say: “I guess I missed that” or anything similar. Handle the complaint immediately. Before providing a response to the claim, review your report and go to the site to evaluate the claim, taking photos whenever possible.

8) Taking photographs or video:
Many inspectors tell us they don’t take photos for fear of something being in the photograph they might have missed. Get some confidence. We’ve rarely, if ever, seen this occur. Visual documentation of the conditions at the time of the inspection has, much more often than not, immediately settled a dispute in favor of the inspector.

We hope you enjoyed our risk management tips; more to come soon!

Disclaimer: This article is designed to be informative only and is not to be considered legal advice. Consult an attorney knowledgeable about the laws in your state for review and approval of your PSA.


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