Texas Atty. General Renders Opinion about Liability Insurance

[Bruce Thompson]

Hey folks,

Just found out the AG rendered his opinion on the insurance debacle we've been facing. I'm wading through the opinion now (I need smarter people around me).

Anyway, here is the link.

http://www.oag.state.tx.us/opinions/...tt/ga-0581.htm

Happy reading.

Bruce

[Bruce Thompson]

Here's the summary. From what I am understanding, the original is vague enough; but the word "intentional" will indicate that we should have E&O.

Thoughts?

S U M M A R Y

The Eightieth Legislature amended Occupations Code sections 1102.114 and 1102.203 to require liability insurance coverage for persons applying for a real estate inspector's license or renewal of such license. The insurance must have a minimum limit of $100,000 per occurrence to protect the public against negligence or incompetence in violation of chapter 1102, subchapter G. The insurance requirement does not apply to intentional acts.
If a real estate inspector has more than one insurance policy applicable to the same occurrence, a combined coverage of $100,000 for that occurrence under all policies would comply with section 1102.114(c).

[Richard W. Washington]

I'm no lawyer but that reads to me like general liability and not e&0.

[Richard W. Washington]

Now I'm confused. I read this from the last paragraph before the summary.

We reiterate that the insurance policy, regardless of its name, must provide coverage for non-intentional acts, particularly acts performed in a negligent or incompetent manner within chapter 1102, subchapter G.

This paragraph is in the middle. Seems to not say e&o is required but says that liability is not adequate either. You don't have to call it e&o but if it is required to cover negligence then it will still mean insurance of e&o dollars.

Thus, regardless of what the insurance policy (5) is called, it must cover an inspector's performing a real estate inspection "in a negligent or incompetent manner" and his violation of any other provisions of chapter 1102 or Commission rules prohibiting negligent or incompetent acts by an inspector. (6) Tex. Occ. Code Ann.§§ 1102.301, .305 (Vernon 2004).

[Bruce Thompson]

Originally Posted by rwashington

I'm no lawyer but that reads to me like general liability and not e&0.

You need to re-read it. It is stating we need E&O.

[Bruce Thompson]

Originally Posted by rwashington

Now I'm confused. I read this from the last paragraph before the summary.

We reiterate that the insurance policy, regardless of its name, must provide coverage for non-intentional acts, particularly acts performed in a negligent or incompetent manner within chapter 1102, subchapter G.

This paragraph is in the middle. Seems to not say e&o is required but says that liability is not adequate either. You don't have to call it e&o but if it is required to cover negligence then it will still mean insurance of e&o dollars.

Thus, regardless of what the insurance policy (5) is called, it must cover an inspector's performing a real estate inspection "in a negligent or incompetent manner" and his violation of any other provisions of chapter 1102 or Commission rules prohibiting negligent or incompetent acts by an inspector. (6) Tex. Occ. Code Ann.§§ 1102.301, .305 (Vernon 2004).

Oops. I see you've already re-read it.

The way I read it the AG is saying insurance has different names and the law couldn't hope to know all of the names insurance providers label differing policies. Therefore, ere to wit, notwithstanding, et cetera, et cetera, et cetera...we must have insurance that covers us if we're negligent or incompetent. Dropping a ladder on your client's car may be negligent or incompetent -- or maybe just an accident and requires an insurance for
"jes such an emergency" (In my best Foghorn Leghorn voice). But performing an inspection in a negligent manner -- needs an insurance that covers such.

Viva E&O!!

I bought mine last month thinking the AG might rule like this.

Bruce

[John Onofrey]

This is from TAREI:

Fellow TAREI Member,

On Monday November 26th, the Attorney General released their opinion regarding the TREC request dated June 18th. The OAG opinion can be read in its entirety at: http://www.oag.state.tx.us/opinions/op50abbott/ga-0581.htm

In my opinion, the OAG Opinion (#GA-0581) can be interpreted however one wishes to read. Example: Look at the following statement per OAG:


We cannot determine as a matter of law whether sections 38 and 39 of Senate Bill 914 require real estate inspectors to have a "general liability policy" or an "errors or omissions”

Considering this is “the” legal defensible position from the state of Texas, this statement has left the door open for questioning what specific type of insurance is the Inspectors in Texas required to carry and/or maintain.
That said, another statement in the OAG opinion which cannot possibly be construed as being General Liability. This statement reads as follows:


We reiterate that the insurance policy, regardless of its name, must provide coverage for non-intentional acts, particularly acts performed in a negligent or incompetent manner within chapter 1102, subchapter G.

The key words are negligent/incompetent. As we know, these two words fall under the category of Professional Liability and/or Errors & Omissions based policies.
We will update you in the next couple of days pertaining to possible options TAREI has based on receipt of the OAG opinion.

[John Onofrey]

From Frd Wilcox:

I’ve read the opinion and Administrator Irvine’s interpretation of the AG’s opinion. The AG states that an inspector must have insurance in the minimum amount of $100,000 per occurrence (per inspection) that covers negligence (failure to do something you should have done) or incompetence. What this type of policy is called is not an issue. It does not have to be errors and omissions, the policy, which is a contractual issue between the inspector and his insurance company, can be limited to negligence and/or incompetence.

This decision does little to help and some to hurt our cause. It details that a person or entity cannot be insured against “willful” acts such as fraud and collusion. So the AG’s opinion simply omits those requirements of subsection G from the discussion. The legislature said “violations of subsection G” and the AG said “you can’t cover willful acts so we will just ignore the parts of the act of the legislature that we do not like.”

I need some time to review this with others but I don’t see where this helps either side other than it gives the commissioners more of a stance in justifying their position.

As this gets bounced around, I’ll keep you informed on what the thinking of the various parties is. As you can imagine, I am getting lots of phone calls and emails so please feel free to distribute this.

Thank you,

Fred Willcox, C.P.I.
TREC Professional Inspector #160
SBCCI Certification #995

[Dan Bowers, CMI]

We reiterate that the insurance policy, regardless of its name, must provide coverage for non-intentional acts, particularly acts performed in a negligent or incompetent manner within chapter 1102, subchapter G.

Gosh that sure sounds like a non-intentional act like putting my foot through a ceiling when I walked across the rafters in a negligent or incompetent manner. I think I'd shoot for "General Liability Ins".

[John Onofrey]

Originally Posted by dbowers

Gosh that sure sounds like a non-intentional act like putting my foot through a ceiling when I walked across the rafters in a negligent or incompetent manner. I think I'd shoot for "General Liability Ins".

Dan, I agree. Unfortunately, I doubt that TREC will see it that way as they have made the preliminary decision that the law requires E$O. The AG, as far as I can tell, has provided nothing that is likely to change their minds. My guess is that the only chance for the E$O requirement to be quashed would be to challenge it in court and win a decision. I doubt any individual inspector would do that and TAREI, it seems, has it's own internal problems lately.

TAREI, in my opinion, is giving lip service with regards to this issue. They should get off the stick and challenge the law in court if it is their intent to prevent an E$O requirement.

Personally, I don't really care how it ends up. The E$O requirement benefits established Texas inspectors and provides another barrier to entry for others. If E$O is not required, then it's just business as usual and business is good.

[Tracy Schoop]

How much money does TAREI have to put up a challenge?

It could be a long and costly process to only discover that you did not win or every have a chance of winning. It sounds to me that the AG is not going to voice an opinion one way or the other. He is ridding the fence.

If anyone has ever battled a state over legislation that is already enacted, you know how difficult and costly it can be and the results seldom change. The courts will look at similar laws in adjoining states and what the trends are across the country.

[John Cahill]

Don't waste your time interpreting. Texas inspectors WILL have E&O and general liability. It was the intention of TAR, TREC and the politicians. If you cannot spot the mark at a card game your it.

www.hiexpertwitness.com (in development)

THIS IS A DONE DEAL

Pay up.

John Cahill
Past TREC Inspector Committee Chairman

[Bruce Thompson]

Mr. Cahill,

I know this changes the thread, but there doesn't seem much more to say about it...so....

What, in your opinion, would we need to do to get the ball rolling for 2009 to get legislation passed to separate inspectors from TREC?

Bruce

[John Cahill]

Getting away from TREC is impossible, even with money and inspector organization. A simple fact. TAR has to much power and money. Besides, getting out of TREC has nothing to do with controlling our industry. Our past and future is controlled by legislation run through at the last minute. It makes no difference what agency we are with . . . . special interests call the shots though last minute legislation. Inspectors are too small, weak and broke to fight them.

Learn how to run your business within the rules. There is always a little wriggle room in any statute or rule. Focus on risk managment and growth. Pay attention to politics but do not get involved.

Please call me John.

[John McKenna]

E&O is here... just do it...
No big deal.