Pearl River, NY, October 2009
Professional liability is defined as “the area of law concerning lawsuits brought against a professional in the course of their professionâ€. Home inspectors, like other professionals, are vulnerable to professional liability actions. When a client is dissatisfied with an inspection, typically because some defect is discovered after closing, the knee-jerk reaction is often to blame the inspector. Second only to the inspector comes placing blame on the Realtor, especially if the inspector was recommended by them.
What can a professional home inspector do to protect himself from frivolous claims? Home Inspectors can purchase E & O Insurance which protects them for claims arising from allegations of wrongful acts, errors and omissions in their inspections. Whether or not an inspector decides to carry E & O insurance is a personal decision unless the state the inspector lives in requires it. Even if the inspector decides to carry E & O, what kind of protection is available if there is a gap in their coverage? What about if the inspector provides ancillary inspection services such as radon testing, termite inspections and mold inspections? These services are not covered by a normal E & O policy; often a separate rider is required. E & O premiums cost several thousand dollars/year and in the case of a dispute, the inspector often has to settle the claim by paying out of his/her deductible. So even if an inspector carries E & O insurance, he/she is still out of pocket thousands of dollars should he/she be named in a lawsuit, even when he/she has done nothing wrong. The problem with E & O insurance is that it often paints a target on the inspector‘s back. E & O does not protect the consumer for the majority of payouts are from the deductible that the inspector carries, anyway. E & O insurance is also an expense that few part time and rural inspectors can afford and often puts them out of business. If an attorney gets involved, the next thing the inspector knows, he/she receives service to answer a complaint. Even if they are in the right and have done nothing wrong, they need to either represent themselves, tender the claim to their E & O carrier (and relinquish all control), or hire their own attorney. The matter tends to get expensive in a hurry.
The specter of a lawsuit can weigh heavy on an inspector‘s mind. Inspection Arbitration Services (IAS) can help the inspector avert a lawsuit before it happens. Arbitration services tend to be rather costly, even though they are often still less expensive than legal services. IAS offers a low cost, fixed-price mediation and arbitration service dedicated exclusively to the inspection industry, with neutrals that are intimate with the workings of the inspection industry. IAS is unique in that it is Internet-based, concentrates on inspection mediation and arbitration ONLY and uses neutrals that are experts in their respective fields, all relevant to the inspection industry. If a dispute goes through the court system or is arbitrated by someone other than an inspection industry expert, those who will be ruling on inspection dispute cases have no inkling of the inspection business. They are easily fooled and swayed from arguments on either side….they are simply looking for the cheapest way of resolving the issue for the provider. Neither side can expect “justice†and, in that respect, neither side is actually “protectedâ€.
IAS requires that the consumer make the first serious move. They have skin in the game, and have a burden of proof that many cannot achieve. IAS has a record of over 50 potential cases that never went to arbitration or file because the disputants were coached on how to prepare their case. Unlike the insurance company who is looking to get out of the mess as inexpensively as possible, the claimant must gather and put forth his evidence.
Arbitration is NOT like insurance. It is a means to provide cost-effective alternatives to traditional litigation. An arbitration clause is useful in that it is there for BOTH parties. Inspectors can‘t lie to IAS neutrals, because they are extremely knowledgeable regarding contracts, contract law, construction, and inspection. IAS neutrals are absolutely unbiased, and the service is non-binding, which still leaves disputants the option to sue in the event they do not like the outcome. It‘s like mediation, with evidence, discovery, and a mock trial. It is cost-effective. Should the decision be rejected by either side, and it goes to trial, the first thing a judge will ask is whether the parties tried to settle differences out of court. Neither the judge nor the law clerk will be pleased when it is revealed that the parties went out of their way to avoid clogging the court‘s calendar, and have a fair decision which is being ignored by the plaintiff?
There is no lost time from work, no court costs, no face-to-face intimidation, and no travel. It‘s is fairly simple to analyze a complaint remotely; it comes down to the SOP, the contract, and the report.
Inspectors are the most knowledgeable professionals involved in the real estate transaction. They carry the most liability. They are often paid the least. They are relied on by the client, and are often the final say in whether a deal goes through or not. Unfortunately, inspectors also have the largest target painted on them.
For more information, contact Joe Farsetta at [email protected].