Court: No Limiting HI Liability in Kentucky

[James H. Bushart]

Read it, here.

[Kevin Luce]

Same with Indiana.

I wonder how many states have the "No Limiting HI Liability"?

Indiana
Kentucky
New Jursey

[Ed Bancroft]

I don't like the sounds of this...........but it makes sense.
So if a wall has a crack in it you better refer a SEngineer every time?
I wonder if the HI contract had the part in it about
" in order to allocate risk and enable inspector to perform the inspection at the quoted fee"
or if the liablity was maybe 3 times the inspection fee would that give the HI something to lose and a reason to be diligent in his inspection?

[Scott Patterson]

Limiting of liability has been struck down in many States when it is tested in court. I know that it will not work in AL, LA, TX, MS, TN and IL. I'm sure limiting liability will not work in many other States as well. The only way it works is if it is written into the home inspectors license law.

[James H. Bushart]

Originally Posted by Scott Patterson

Limiting of liability has been struck down in many States when it is tested in court. I know that it will not work in AL, LA, TX, MS, TN and IL. I'm sure limiting liability will not work in many other States as well. The only way it works is if it is written into the home inspectors license law.

It works in Missouri.

It will easily work in other states, as well, if it is properly worded in your contract. Simply give your client a choice between a limited liability inspection for your regular fee .... and an unlimited liability inspection for a fee that will cover your expenses at bringing in electrical and structural engineers and allow fifteen days for the report. I charge $3,000.00 for an unlimited liability home inspection. On each contract, my client has declined his opportunity to select and pay for an unlimited liability inspection. Thus, he is bound by his choice as I am bound to provide the required service.

There is no opportunity for argument as to "confusing" language or customer's intent or understanding when he has initialed on the contract that he "declines" the opportunity for unlimited liability and, instead, "accepts the limited liability" in place of the higher fee. It becomes clearly his negotiated choice and decision to purchase the liability amount that comes with the lower fee.

[Nick Gromicko]

Scott writes:

I know that it will not work in AL, LA, TX, MS, TN and IL.

Scott is not quite correct (InterNACHI members have already limited their liability to the cost of the inspection in TX, TN and IL, had it challenged by the plaintiff, and prevailed anyway)... and Jim is basically correct, although our experience is that you might not need to actually give your client the limitless liability option to limit liquidated damages to the cost of the inspection if you use InterNACHI's contract, which reads in part:

The parties acknowledge that the liquidated damages are not intended as a penalty but are intended (i) to reflect the fact that actual damages may be difficult and impractical to ascertain; (ii) to allocate risk among the INSPECTOR and CLIENT; and (iii) to enable the INSPECTOR to perform the inspection at the stated fee.

Note ii and iii, which are similar to what Jim is talking about.

InterNACHI has spent nearly a million dollars and many years on producing, refining, and testing its legal documents. Use them: www.nachi.org/documents.htm You can have Uncle Bob (your families attorney) review them if you like, but it would take him years to catch up and so he and you, should always begin with InterNACHI's legal documents as core drafts for any inspection agreements you need.

[rking6]

The problem is that most HI agreements limit the liability to the fee paid to the inspector. Many people will not like this statement but this is not considered a "fair condition" in many court sytems and as such is not considered an enforceable arm's length agreement in many cases. In the end you end up with an agreement that is not enforceable. If it is considered a real and fair condition it is thus enforceable it is usually at minimum defendable.

Read the article carefully and you will understand what the judge is getting at. Let's face it say you hired someone and they come to consult on an issue that could potentially have thousands of dollars of repercussions and they are only liable to what you paid which could be miniscule in comparison to the damage you could personally incur. It just doesn't equate in the minds of most court systems and to be quite honest it doesn't in mine either. I think HI's should have a liability set at 2-5x the cost of the service showing the court that you truly and honestly carry a liability with the service and as such will not be negligent because of your potential liability concerns. Now take into consideration this is my personal opinion and each state is going to vary especially if you have a regulating body but here in MN we do not. I live by a few simple rules:

1) Make sure the client had ample time to review the agreement. Send it to them well in advance and make sure they sign before the service is rendered.

2) Have a limit of liability that is honestly fair to both parties and terms and conditions well laid out within the document

3) Review the information they signed again at the conclusion of the service and touch on main points and ask if they have questions. I usually review the limit of liability and the dispute resolution sections of my agreement.

4) Make sure the client has the ability to have a copy of the inspection agreement, either the option to print it out after signing it prior to the service or provide to them within the report.

These are items that I have personally gathered after carefully stepping away from my position as an HI and looking at what court cases have occured in the HI industry. In most cases the courts seem to not care about the agreement if they were not provided a copy, the limitations or conditions are ridiculous or you were just plain negligent. I think everyone in the industry should be doing their best to deter bad claims and to prevent working with poor clients or the "price shopper" I can tell you 9 times out of 10 if I have worked with a "price shopper" or negotiator that it ends up biting me in the butt down the road, so I know longer negotiate pricing or services. If someone wants to utilize me and my outstanding service so be it, if they want someone cheap, check out the yellow pages and start calling because it isn't going to be me.

Obviously, this is my personal opinion and everyone should check with their states requirements and your individual attorney.

[Scott Patterson]

Originally Posted by gromicko

Scott writes: Scott is not quite correct (InterNACHI members have already limited their liability to the cost of the inspection in TX, TN and IL, had it challenged by the plaintiff, and prevailed anyway)... and Jim is basically correct, although our experience is that you might not need to actually give your client the limitless liability option to limit liquidated damages to the cost of the inspection if you use InterNACHI's contract, which reads in part:

Nick that is good news, can you cite the case's? I would like to read up on them, especially the ones on TN.

[Michael R. Boyett]

Scott,
One such case in Texas is Head -vs- US Inspects. On the attached document, read pg 2 starting with "Professional Services under DTPA". I am not aware of any connection to INACHI however. I make no claim that this has not been further litigated nor overturned on higher appeal but I have not heard that to be the case. Sorry, it's a pdf file but just a little too big to post directly so it's in a .zip file.

Head vs US Inspect.zip

[Nick Gromicko]

There are other little tweaks to your contract which will strengthen your agreement through a strategy similar to what Jim talks about and what I posted in post #6. For instance, in the first paragraph of InterNACHI's inspection agreement, we reference the report as "the bargained-for report."

All of these little tweaks help, and we've been making them for decades based on the cases inspectors have been involved in, across several countries, and over many years.

www.nachi.org/documents.htm

[Nick Gromicko]

Here are some inspection cases to read.

Here are some steps inspectors can take to avoid lawsuits.

[Dan Bowers, CMI]

Three years ago I presented this letter MULTIPLE times to the Kansas Board of Realtors; the Kansas Legislation; and MANY media sources.

Anybody following the Kansas fiasco saw the good it did us.

[Nick Gromicko]

Kansas only became a "fiasco" because stupid home inspectors funded ASSHI with their hard-earned membership dues. Sleep with dogs, ya get flies. Any dummy who opened their checkbook to ASSHI should now close their mouth. The ASSHI logo is the home inspection industry's symbol of shame.

[Joe Farsetta]

Any clause limiting the inspector's liability in a home inspection contract in the state of MAssachusetts can cost the inspector his or her license.

Courts are beginning to carefully review the opressive nature of inspection agreements, and the sophistication of the clients when deciding whether to uphold contract provisions.

[Gary Farnsworth]

All companies and corporations do countless contracts everyday, all with limitations. Inspectors should be able to do this also. If states do not allow us to limit our contracts, this will open up countless lawsuits to the states, or to the lawmakers individually.

Just yesterday, as Joe Ferry can atest to, I had an issue with a VA lender, who wanted me to sign a statement on a termite inspection I did on a home. She wanted assurance that there was no structural damage. I refused. The sad thing about this is that on the NPMA-33 form that I used for this particular termite inspection is allowed for FHA/VA loans. They also wanted my termite license number, which was actually on the front of the form.

On the back, it stated that "........the report.......nor is it a sturctural integrity report". "...........not qualify the inspector in damage evaluation..."

Front page line #3 for visible damage found, was not filled out by me.

All they wanted was to push off the liability onto me, when they cannot read their own report that was approved by them.

Lenders, agents, brokers are pushing liability onto us, and using everyway to do so. Those inspectors who are not listening to this message board, Nick, Joe Ferry, Joe Farsetta, Kenton Shepard, better listen, or just go ahead and give up your savings account, home, and business, to money hungry home owners.

We must write detailed reports, keep agreements current, not change the reports when asked, watch what we say and to whom, and stand by our reports no matter what. We also, as stated on another thread, when someone calls and asks you about the inspection you did at such and such address, to state that "I cannot discuss the results of the inspection without permission from my client".

And, when the VA lender called me, from Virginia, I talked to an assistant to the lender. The lender would not talk to me. So, this assistant did. She wanted the statement from me to give to her boss. I told her the reasons why I refused, told her what the form stated, then she put me on hold. After several minutes, she came back on and said that "we understand" and that they would "investigate further" and hung up.

People are getting arrogant in this economy. Be careful, and tactful.