E & O - Would you consider?

[John Bowman]

This post is just a feeler.

Yesterday, I along with NACHI VP Keith Swift had the opportunity to meet with Insurance Carriers to discuss the high costs of E & O Insurance and continued working on a program to decrease costs.

Without comprimising the individuals in attendance nor the Insurance Firms being represented I am extremely pleased to report that preliminary (6 months) investigations by these two firms has indicated that claims are indeed down and that lower E&O costs may very well be in our future.

This posting is general in nature and its only intent is to get a general (real general) feel of how many would participate in a structured program to participate in a reduced cost E&O program.

The, program as proposed is based on a basic three tier system which tentatively goes like this:

Inspectors with less than three years in business who are not full members of NACHI - $2,000.00 (or less) per year for 1 million coverage, $2,500 deductible.

Inspectors with more than three years in business who are full members of NACHI - $1,750.00 per year for 1 million coverage, $2,500 deductible.

Inspectors with more than ten years in business who are Certified Master Inspectors (NACHI members only) - $1,500.oo (or less) per year for 1 million coverage, $2,500 deductible.

NOTE: The above are only samples based on what I surmised as average costs and are not at this time solidified. Costs ranging from as low as $500.00 up to $2,000.00 were discussed and bantered around.

Each insured would be held accountable for NACHI's membership requirements at time of renewal. For instance - and this is only an example that is not cast in stone. A NACHI member has been insured as a Full Member but fails to meet all of the Full Membership requirements the following year. His rates may or could revert back to "Not Full Member" status and he/she must requalify as a Full Member to enjoy the additional lower rates. On the other hand - a NACHI member has been insured as a Non-full member but has obtained Full Member status during the year. His rates may or could be reduced the new insured year, etc.

Considerations concerning multiple inspector firms, carry-over coverage, and just about everything under the sun were discussed.

Both agency's are rated A+ and both are already currently operating in all states. Both are fully aware of special considerations for California, etc. concerning coverage periods and back coverage.

What type of interest would we expect to see in this program? Please post or email your thoughts, suggestion, etc. within the next couple of weeks before I have another meeting.

Best Regards,

John B.

[Greg Bell]

It all looks good except for having that CMI thing in there.

[Gerry Beaumont]

Hi John,

I am sure that many more inspectors would be purchasing E&O if the costs were lower, I am also sure that many more would purchase E&O if they felt that the insurer would adequately defend against all unreasonable claims.

Maybe the real answer is to put in place a legal defense fund ahead of the E&O underwritting to try and limit the unfair claims going to underwritting, this is the realy big issue as it can cost $100K to defend against a frivolous claim, so even an inspector who should not be being held liable can incour tremdous costs defending himself, This is the real reason that our E&O costs are so high.

Regards

Gerry

[John Bowman]

Originally Posted by gbell

It all looks good except for having that CMI thing in there.

I share your concerns and have been in contact with Mr. Rowan concerning this.

To alleviate or soften this concern the "Years in Business" to qualify for each step was addressed and included.

[John Bowman]

Originally Posted by gbeaumont

Hi John,

I am sure that many more inspectors would be purchasing E&O if the costs were lower, I am also sure that many more would purchase E&O if they felt that the insurer would adequately defend against all unreasonable claims.

Maybe the real answer is to put in place a legal defense fund ahead of the E&O underwritting to try and limit the unfair claims going to underwritting, this is the realy big issue as it can cost $100K to defend against a frivolous claim, so even an inspector who should not be being held liable can incour tremdous costs defending himself, This is the real reason that our E&O costs are so high.

Regards

Gerry

Gerry,

Well said. This was also addressed at the meeting and will continue to be beat around in subsequent meetings. Talk about hitting a brick wall here...

Well not quite...Legislation against "Frivilous" claims is the route we are looking at to combat this. Naturally, if successful, we may see even lower rates in the future.

[Michael Larson]

Gerry, raises an excellent point.
The perception is is out that the the insurance company rolls over when a claim is made against an inspector. I understand this is a business decision in the best interest of the company but it certainly is not in the best interest of the inspector in the case of a frivolous claim.
I support a defense fund to fight frivolous claims as I see it as the only way to take the target off the back of HIs. If we as an industry aggressively fight these type of claims our clients and their lawyers will be much less likely to bring suit IMHO.

[John Bowman]

Frivilous claims pose an insubordinate amount of concern to all. But until the laws are strengthened to the point where the simple act of writing a check for $28.00 and filling out a form to bring claims up against anyone are the norm, and the filer (and their lawyer or other representative) is subject to punishment for such frivilous acts, nothing will change in that respect.

Collections of monies to fight frivilous claims in court only adds as another resource for these litigants to garner monies, IMO. I share your concern but question the method. A personal lawyer on a monthly retainer that I have interviewed or selected would have my best interests addressed more to my likeing than some general pool of stuffed suits who know nothing about me or my business. Imagine the costs to have a bank of lawyers standing by that can practice in all areas of North America.

[Gerry Beaumont]

Originally Posted by jbowman

Well not quite...Legislation against "Frivilous" claims is the route we are looking at to combat this. Naturally, if successful, we may see even lower rates in the future.

John, good luck with that, however much changes are long overdue in the area of Tort reform I doubt that it will ever happen as the legal lobbyists are way too powerfull. I think we would be better served buy lowering our sites to an area where we may be able to effect change.

For example Inspectors should be lobbying for sensible statutes of limitations covering home inspections when discussing any proposed legislation or changes to legislation. That alone would reduce our current levels of liability hugely.

Regards

Gerry

[John Bowman]

Originally Posted by gbeaumont

John, good luck with that, however much changes are long overdue in the area of Tort reform I doubt that it will ever happen as the legal lobbyists are way too powerfull. I think we would be better served buy lowering our sites to an area where we may be able to effect change.

For example Inspectors should be lobbying for sensible statutes of limitations covering home inspections when discussing any proposed legislation or changes to legislation. That alone would reduce our current levels of liability hugely.

Regards

Gerry

Agree,

Baby steps, Gerry. 1st let's get the rates respectful where every NACHI Home Inspector member has a reasonable shot at protecting his business. Statutes of Limitation is something that may very well be important, but does not address or change the "frivilous claims".

[Gerry Beaumont]

Originally Posted by jbowman

Agree,

Baby steps, Gerry. 1st let's get the rates respectful where every NACHI Home Inspector member has a reasonable shot at protecting his business. Statutes of Limitation is something that may very well be important, but does not address or change the "frivilous claims".

Agreed John but it would reduce considerably the time frame in which claims could be brought, that alone would have great bearing on the number of claims.

It is just not reasonable that a claim can be brought against a home inspector for up to 7 years (here in Florida) based on a one time limited visual inspection, when you factor in that the average home changes hands every 7 years that gives the entire inspection community perpetual liability.

Regards

Gerry

[Douglas Cossar]

Just a Canuk question:

Do the companies you have spoken with have operations north of the 49th ?

Cheers

[John Bowman]

Originally Posted by dcossar

Just a Canuk question:

Do the companies you have spoken with have operations north of the 49th ?

Cheers

You may have to move to the U.S. It was addressed, but I don't remember getting a difinitive answer. I'll have to readdress this at the next gatharing.

[Roy D. Cooke, Sr]

Originally Posted by jbowman

You may have to move to the U.S. It was addressed, but I don't remember getting a difinitive answer. I'll have to readdress this at the next gatharing.

Thanks John ,Keith and NACHI , Keep up the good work it is well appreciated .
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[Randy D. Stufflebeem]

A big thank for your work on this and glad you have made it a priority. I carry E&O for Home Inspection, Radon, and Mold. I would love to see the prices lower especially if I could carry all with one company at a reduced price. Currently I am around $5000.00 plus or minus a few bucks, per year for all.
Thank you again,
Randy

[lcapaul]

John, Sounds great, thanks for your work. One thing I would like to see would be a policy similar to Allen Insurance's pay per Inspection type policy for first Year inspectors be extended to include everyone, some inspectors only work at inspecting part time, and some are semi-retired or have other businesses. pay per inspection would work great for them.