Educational Tip: 1 Jul 2007 - Legal

[John Bowman]

Using a hold-harmless clause as a marketing tool.


NACHI members are often asked by real estate agents if they carry Error & Omissions insurance (E&O) and if that E&O insurance indemnifies real estate agents. If you do not have such insurance you should use a hold-harmless clause in your pre-inspection agreement (between you and your client). You should explain to all real estate agents that unlike indemnification insurance which only pays for the legal defense of a real estate agent who gets sued over one of your inspections, your hold-harmless clause is even better in that your client pre-agrees not to file suit against the agent at all.

A real estate agent is just a sales person. Having your client agree not to hold a real estate agent responsible for anything related to your home inspection is proper. Many real estate agents are worried about negligent referral claims. Ease their worries by letting them know you use a hold-harmless clause which protects them.

This is a great tool for breaking-into new real estate offices. It is somewhat difficult to explain to some real estate agents but many members have found success when they present it to the broker/owner directly. Believe it, a broker/owner will be all ears as you explain how using your services protects his/her agents.

The following is a sample hold-harmless clause for you attorney's review:

HOLD HARMLESS AGREEMENT: CLIENT agrees to hold any and all real estate agents involved in the purchase of the property to be inspected harmless and keep them exonerated from all loss, damage, liability or expense occasioned or claimed by reasons of acts or neglects of the INSPECTOR or his employees or visitors or of independent contractors engaged or paid by INSPECTOR for the purpose of inspecting the subject home.

See: http://www.nachi.org/harmless.htm

[James H. Bushart]

One thing to consider, however, is the fact that if you are limiting your own liability to the cost of the inspection ...such a clause as this "hold harmless clause" is likely to be considered as contradictory and meaningless.

[Russel Ray]

Originally Posted by jbowman

A real estate agent is just a sales person. Having your client agree not to hold a real estate agent responsible for anything related to your home inspection is proper.

Actually, the only way I know of for it to be proper is for all three parties to agree to the clause and sign the contract. Generally, Person A cannot require Person B to hold harmless Person C unless Person C is a party to the contract. And I doubt that one would ever be successful in getting a Realtor to sign a home inspection contract for a home that the Realtor was not buying for himself. Additionally, I've never understood why, in the case of a home inspector, such home inspector, for $299 (or $49 for a WALK inspection ) would want the Client to hold harmless a Realtor making $15,000 on a $500,000 house. That has never made sense to me, especially since most, if not all, E&O policies include Realtor indemnity clauses nowadays.