Kansas Law with Limit of Liability

[Kenny Rigler]

Since the new Kansas law states that, "no registered home inspector may...limit the amount of damages for liability for any errors and omissions which may arise during a home inspection to less than $10,000 in the aggregate for each home inspection" and since I'm being required to have a "policy of errors and omissions insurance coverage", I was curious of a few things.

First, I'm thankful for NACHI including in the inspection agreement site the following paragraph for it's Kansas members:

"INSPECTOR assumes no liability for the cost of repair or replacement of unreported defects or deficiencies either current or arising in the future. CLIENT acknowledges that the liability of INSPECTOR, its agents, employees, for claims or damages, costs of defense or suit, attorney's fees and expenses and payments arising out of or related to the INSPECTOR's negligence or breach of any obligation under this Agreement, including errors and omissions in the inspection or the report, shall be limited to $10,001.00, and this liability shall be exclusive..."

So if I include this in my pre-inspection agreement and have it signed, then do an inspection and miss something big, get sued and am found negligent; the most I can get sued for is $10,001? Even if what I missed would cost the buyer way more than that to fix? Do the courts honor that?

And I ask this based off of a conversation with an insurance agent who I was getting quotes from for insurance. Early on, prior to discussing the $10,000 clause, he said in terms of E&O, whether I had $10,000 or $300,000 probably was going to cost about the same. But after I mentioned the clause and said there was no need for that much since my liability was limited, he agreed as long as the courts would honor that. So he said if I could provide documentation, he could probably get a far better quote. But also recommended I double-check that to make sure that's accurate. Am I correct in saying that all the E&O insurance I would need for a given inspection would be the $10,001?

If there wasn't much difference in price between $10,000 and $50,000, should I go with more?

Have you ever lost a client because of the amount of the limit of liability in your contract?

[James H. Bushart]

Originally Posted by krigler

Since the new Kansas law states that, "no registered home inspector may...limit the amount of damages for liability for any errors and omissions which may arise during a home inspection to less than $10,000 in the aggregate for each home inspection" and since I'm being required to have a "policy of errors and omissions insurance coverage", I was curious of a few things.

First, I'm thankful for NACHI including in the inspection agreement site the following paragraph for it's Kansas members:

"INSPECTOR assumes no liability for the cost of repair or replacement of unreported defects or deficiencies either current or arising in the future. CLIENT acknowledges that the liability of INSPECTOR, its agents, employees, for claims or damages, costs of defense or suit, attorney's fees and expenses and payments arising out of or related to the INSPECTOR's negligence or breach of any obligation under this Agreement, including errors and omissions in the inspection or the report, shall be limited to $10,001.00, and this liability shall be exclusive..."

So if I include this in my pre-inspection agreement and have it signed, then do an inspection and miss something big, get sued and am found negligent; the most I can get sued for is $10,001? Even if what I missed would cost the buyer way more than that to fix? Do the courts honor that?

And I ask this based off of a conversation with an insurance agent who I was getting quotes from for insurance. Early on, prior to discussing the $10,000 clause, he said in terms of E&O, whether I had $10,000 or $300,000 probably was going to cost about the same. But after I mentioned the clause and said there was no need for that much since my liability was limited, he agreed as long as the courts would honor that. So he said if I could provide documentation, he could probably get a far better quote. But also recommended I double-check that to make sure that's accurate. Am I correct in saying that all the E&O insurance I would need for a given inspection would be the $10,001?

If there wasn't much difference in price between $10,000 and $50,000, should I go with more?

Have you ever lost a client because of the amount of the limit of liability in your contract?

This exercise in mental retardation (aka Kansas Home Inspector Licensing Law) has already been sent back to the legislature by the Attorney General after having been signed by the Governor...for the blatant and obvious flaws and contradictions. A few politicians attempted to address the problems, fewer even read it, and mostly spilled their drinks on it as it was re-reviewed, somewhat corrected, and returned for another governor to sign.

Today, this untested and impotent pile of bug feces (aka Kansas Home Inspector Licensing Law) still contains obvious conflicts that will be left up to the various courts to determine how it should be applied.

With the KAR advertising the inspector's liability and the Vice Chairman of the Kansas Licensing Board (an attorney) offering for $375 a pop to help clients "navigate around" the inspector liability limitations, I would venture to say that the majority of Kansas home inspectors should immediately seek removal of any hemorrhoids so as to minimize the painful effects of the administration of the new law.

Your best bet is to cover your butt to the maximum extent possible, since the Kansas Assoc of Realtors financially backed this inbred child (aka Kansas Home Inspector Licensing Law) for the main purpose of transferring their liability to the backs of the home inspectors.

[Dale Duffy]

Hi Kenny,

I do not believe you will find an E&O Policy with less than $100,000.00 per occurrence, the figures you have would be for General Liability Insurance, not E&O.

Oh...and I agree with Jim's assessment of the travesty in your state.

[Kenny Rigler]

Wow, Mr. Bushart, I'm glad I caught you in a good mood this evening...why don't you tell us how you really feel! Okay, so maybe I should have left out the whole Kansas thing (to avoid that ugly issue) and just simply asked the question on limit of liability.

So basically even if I include the above mentioned paragraph written by what I would assume to be the NACHI legal team in my pre-inspection contract it doesn't really limit my liability to the $10,000? Or am I misunderstanding what a limit of liability is?

[Dale Duffy]

Anyone can Sue Anyone for anything regarding an Inspection, in my opinion any Inspection Agreement is basically worthless in a court of law.

Required, but Worthless, regarding indemnity to a limited amount one CAN be sued for.

[Patrick Carter]

Originally Posted by krigler

Wow, Mr. Bushart, I'm glad I caught you in a good mood this evening...why don't you tell us how you really feel! Okay, so maybe I should have left out the whole Kansas thing (to avoid that ugly issue) and just simply asked the question on limit of liability.

So basically even if I include the above mentioned paragraph written by what I would assume to be the NACHI legal team in my pre-inspection contract it doesn't really limit my liability to the $10,000? Or am I misunderstanding what a limit of liability is?

My advice to you, go talk to your attorney regarding this latest piece of crap ASHI bill and start putting a game plan together to protect yourself after the first of the year. This first year (2010) of this bill is going to be very interesting indeed. I would also keep your game plan to yourself as well, there are too many unfriendly eyes that view this message board if you get my drift. If you need to discuss, use your private email and the PM feature of this message board for communications to other HI's you know and trust in Kansas regarding Kansas HI laws.

This is not directed to you Ken.......
Hiya doing tonight Molly B. are your ears turning red.................

[James E. Braun, CMI]

Originally Posted by krigler

Wow, Mr. Bushart, I'm glad I caught you in a good mood this evening...why don't you tell us how you really feel! Okay, so maybe I should have left out the whole Kansas thing (to avoid that ugly issue) and just simply asked the question on limit of liability.

So basically even if I include the above mentioned paragraph written by what I would assume to be the NACHI legal team in my pre-inspection contract it doesn't really limit my liability to the $10,000? Or am I misunderstanding what a limit of liability is?

Jim was actually in a good mood.

[Gary L. Farnsworth, CMI]

Wow. I needed that. Hilarious!!!!!!!!!!!!!!

And all true.

Senator Wysong changed the liability limit to $2,000 at their last ways and means committee meeting back in April. Everyone on the committee agreed to it. The reason that if a new inspector limited his liability to $10,000 and got sued, he would lose his limit in one case. Since most deductables (which I mentioned to the Senator in person) were around $ 2,000, this amount was agreed to. A few days later, the amount did not make the paperwork, was discussed on the floor of the Senate by Senator Wysong himself, and voted on by the full senate.

Are you with me so far?

When the law (paperwork) was typed by some secretary, we hear that the $10,000 did not get changed to $2,000 when it was signed in a big hurry by the then female governor. To this day, we do not know how, why, or where we stand. HOWEVER, all inspectors need to know that the attorney representing the home inspection board is from the Kansas Attorney General's office. Now do you see where the conspiricy lies? At the upper levels of the capitol building. With the governor cleansing his hands of the situation (I have a letter from him stating that) the only way to change this fiasco is by legislation. I hope Senator Wysong can re-write SB 329 and get out the bug spray.

I have documentation of that hearing and am limiting my liability to $2,001. I am sure any attorney in Kansas can get a copy of the minutes to that day of the Kansas congress.

[Dan Bowers, CMI]

Part of the Bill says $2,000 - part references $10,000. As Gary said it took 5 straight days of arguing before the Senators to get this changed AND then some Bozo records it wrong (You Think) ................

Now you don't need E & O. You can go with a $10,000 Bond (about $125) per year. Mny of the guys are going that way.

[James E. Braun, CMI]

So the Senate agreed on $2,000 limit but the governor signed the last bill that has a $10,000 limit. If so how is this a valid law since the Senate did not agree on it? In Kansas does the Constitution read the the House, the Senate and the Governor all have to agree on the same terms of a bill before it becomes a law?

[Scott Patterson]

This law might have a limit of liability but you need to keep in mind that you can not limit your liability for professional negligence or fraud.

FYI, most home inspector lawsuits deal in professional negligence. What is professional negligence? Just a few items that could be considered professional negligence:

• Not following prescribed standards.
• Missing an item that it required by the standards.
• Failing to write a report that conveys the problems severity and the implications if it is not corrected.
• Failing to inspect to the "Standard of Care" (what other inspectors are doing on a normal basis during an inspection).

[Gary L. Farnsworth, CMI]

James, just a part of the fiasco here. It is this way for one reason; so the attorneys on the board can make money from the litigation that will be coming their way. Insurance by inspectors is required so that they can extort money from the insurance companies. Lawmakers will not change a thing because of the contributions from the KAR to their campaign coffers.

A full investigation by the KBI, FBI, even the federal government should be in order. However, they will probably wait until a few consumers get burnt by all of this cr*p, or it could also not be investigated because these groups may be in on this, too. Look at the federal congress; a health bill that is 2,000 pages long; how stupid. And who is the Health secretary? The former governor of Kansas who signed these home inspection laws into play just hours before going to Washington DC. Scary.

[Kenny Rigler]

Originally Posted by dbowers

Part of the Bill says $2,000 - part references $10,000. As Gary said it took 5 straight days of arguing before the Senators to get this changed AND then some Bozo records it wrong (You Think) ................

Now you don't need E & O. You can go with a $10,000 Bond (about $125) per year. Mny of the guys are going that way.

I was aware of the bond option but I wasn't aware that it was that affordable...I will look into that. Thanks a lot.

[James H. Bushart]

Originally Posted by Scott Patterson

This law might have a limit of liability but you need to keep in mind that you can not limit your liability for professional negligence or fraud.

FYI, most home inspector lawsuits deal in professional negligence. What is professional negligence? Just a few items that could be considered professional negligence:

• Not following prescribed standards.
• Missing an item that it required by the standards.
• Failing to write a report that conveys the problems severity and the implications if it is not corrected.
• Failing to inspect to the "Standard of Care" (what other inspectors are doing on a normal basis during an inspection).

This is what I was explaining to Nick when he was under the impression that the Kansas law was "good" in that it set a limit as to how much an inspector could be sued for.

As Scott has correctly stated, there is no limit for punitive damages when the lawsuit correctly alleges fraud or negligence. Fraud is not all that difficult to allege when it is alleged that an inspector breached his contract by not following his SOP, for example.

[Joseph A. Ferry]

Originally Posted by jbushart

This is what I was explaining to Nick when he was under the impression that the Kansas law was "good" in that it set a limit as to how much an inspector could be sued for.

As Scott has correctly stated, there is no limit for punitive damages when the lawsuit correctly alleges fraud or negligence. Fraud is not all that difficult to allege when it is alleged that an inspector breached his contract by not following his SOP, for example.

The law does not "set a limit as to how much an inspector [can] be sued for". It allows an inspector to limit his liability to $10,000 and that is "good".

A breach of contract is not fraud. Nor is failure to follow the SOP. Fraud is an intentional tort. Punitive damages are a plaintiff's wet dream. They are never awarded.