What’s E&O insurance?

By Stephanie Jaynes, Marketing Director, InspectorPro Insurance

A home buyer sues their inspector for not catching a roof leak. A seller accuses an inspector of not performing the mold sampling they paid them to do. Another client calls, furious their inspector reported their HVAC system was in good condition, only for it to fail three months after they moved in.

What do all these claims have in common? They’re all examples of errors or omissions–exactly what errors and omissions insurance (E&O) is designed to cover.

Errors and omissions insurance, also known as professional liability coverage, protects home inspectors against accusations of breach of duty or neglect, errors, misstatements or misleading statements, and omissions.

Breach of Duty or Neglect

When a client accuses you of breaching your duty, they’re saying you neglected to (didn’t) meet the terms of your agreement. For example:

• They paid for a sewer scope inspection, and they’re suing you for not doing it.
• Your contract says you check crawlspaces, but you didn’t enter the crawlspace during their inspection. (And you didn’t note that it was inaccessible in your report.)
• Your SOP says you check a representative sample of windows, but you didn’t examine a single one.

Not fulfilling the duties outlined in your pre-inspection agreement can lead to professional liability claims.

Errors, Misstatements, or Misleading Statements

When a client sues for errors, misstatements, or misleading statements, they’re charging you for saying things that were inaccurate or not giving them good recommendations for reported defects. This could happen if:

• You said the ceiling stain was from a past leak and nothing to worry about. But in reality, the roof was still leaking.
• You reported the bathroom plumbing worked great, but it was improperly plumbed and on the fritz.
• You misidentified their polybutylene pipes.
• You identified potential termite activity in the attic, but didn’t recommend they do anything about it. It escalated into a full-blown infestation with widespread rote.
• You reported shingle damage and suggested they patch it themselves when hiring a roofer was really the right move.

Poor communication and bad recommendations can lead to E&O claims.

Omissions

When a client accuses you of an omission, they think you failed to find a defect.

• You didn’t catch that roof leak.
• Or you forgot to tell them about those cracks in the basement wall.

Not giving your clients important information from your home inspection can lead to errors and omissions claims.

E&O claims happen to everyone.

Now, if you’re like most home inspectors, you’re good at your job. You’re not missing huge defects, cutting corners from your standards of practice, or giving bad tips left and right. But in our experience, three truths hold steady:

1. Even the best inspectors make mistakes occasionally.
2. You don’t have to make a mistake to get an E&O claim. Plenty of inspectors receive frivolous allegations, too.
3. More than half of home inspectors will face at least one insurance claim during their careers.

Even if your state doesn’t require it, all inspectors should carry E&O insurance for help:

• Obtaining an ironclad pre-inspection agreement that specifies your duties and exclusions.
• Responding to unhappy clients—even before conflicts escalate into claims.
• Covering legal defense costs, settlements, or judgements.
• Meeting regulatory or licensing requirements.
• Feeling peace of mind.

As an ASHI member, you enjoy exclusive access to InspectorPro with the ASHI Advantage, which gives inspectors the best E&O coverage for less. Click here to learn more about the ASHI Advantage’s benefits and discounts.