Pay per inspection E&O insurance. Voice your interest now.

[Bill Mullen]

There was a 4.5 million dollar claim about six years ago against an Ontario inspector. That scared the heck out of insurers who promptly refused to renew more than 1,000 policies for inspectors at that time. Soon they were offering insurance again, but at more than twice the premium.

Within a year the claim got settled for $ 90,000 which basically covered legal fees.

To my knowledge there has never been a payout in Canada for more than $ 250,000. I have knowledge of all claims for about a ten years period.

E & O and the required high coverage is an assault on inspectors.

John Bowman, once a NACHI Star, wrote a piece a few years ago that I really think hits the nail on the head and I have copied it below.

Bill Mullen

I'm personally against requiring E & O for two major reasons.

1. The E & O carrier now controls your business. Imagine that! If you have two claims against you, you're going to be dropped like a hot rock and placed on the "high risk" or "do not insure list". .........and don't forget, they decide what claims get fought and which ones are simply just paid to avoid legal costs.....two unfounded allegations of wrongdoing by a client simply paid off by the E & O coverage, and you're out of business. You have no control over this.
2. It does not cover your clients. I don't care how much you spin it, your clients name is not on the insurance agreement anywhere. Yet they and the Insurance Company are the only ones that profit. What do you get ? - $5,000.00 yearly premiums with huge deductibles. E & O is a high class scam in my book. Sure you won't lose your home, but you'll lose your business simply because the insurance carrier decides to pay it rather than fight it.

Until regulations on the E & O scam have been put in place and their godly powers are removed, I would not recommend that any licensing agent, or government require it. I can see your argument already. "Well, if you have the proper training, blah. blah. blah...." I simply submit the following. Anyone who has been in this business for any length of time is liable to encounter that one person who is going to sue you for a hidden defect. You know - the one that was not visible behind the finished wall. Now you're stuck with a decision...... Do I pay for the repairs out of my pocket?.....Do I report it to my E & O Insurance? (Most must be notified within 24 hours in order to fall under your coverage).....Do I fight it?......

Now for figures sake, let's say that the damage was $6,000.00. Do I pay for the repairs out of my pocket? - Cost: $6,000.00. E&O carrier is not involved and your rates will not go up and you won't be dropped. Do I report it to my E&O Provider?. - Cost: $5,000.00 initial coverage cost plus my deductible of another $1,000.00. Increase of next years coverage costs plus if I'm lucky they won't drop me. Chances of them fighting any claim less than 50,000.00 is very slim. It's almost guaranteed that if this is a second claim you will be dropped and out of business. Do I fight it?... - If you were right, absolutely. What the heck, you'll be out of business anyway you look at it.

Otherwise your options are above. I would choose #1. Take that $5,000.00 per year that you would have paid the insurance carrier and put it to better use. Prepaid legal services is a good idea. I would refuse to play roulette with my business and family's income on a scam like E&O.

Require E & O???. You gotta be kidding. Only a fool would even suggest that it protects the consumer. It scams the consumer into believing that they are the ones being covered. It's a slap in the face to the legal system and a huge scam on the Inspection Industry. This is my opinion and does not represent the opinion of any association or any one else.

John Bowman
I'm personally against requiring E & O for two major reasons.

1. The E & O carrier now controls your business. Imagine that! If you have two claims against you, you're going to be dropped like a hot rock and placed on the "high risk" or "do not insure list". .........and don't forget, they decide what claims get fought and which ones are simply just paid to avoid legal costs.....two unfounded allegations of wrongdoing by a client simply paid off by the E & O coverage, and you're out of business. You have no control over this.
2. It does not cover your clients. I don't care how much you spin it, your clients name is not on the insurance agreement anywhere. Yet they and the Insurance Company are the only ones that profit. What do you get ? - $5,000.00 yearly premiums with huge deductibles. E & O is a high class scam in my book. Sure you won't lose your home, but you'll lose your business simply because the insurance carrier decides to pay it rather than fight it.

Until regulations on the E & O scam have been put in place and their godly powers are removed, I would not recommend that any licensing agent, or government require it. I can see your argument already. "Well, if you have the proper training, blah. blah. blah...." I simply submit the following. Anyone who has been in this business for any length of time is liable to encounter that one person who is going to sue you for a hidden defect. You know - the one that was not visible behind the finished wall. Now you're stuck with a decision...... Do I pay for the repairs out of my pocket?.....Do I report it to my E & O Insurance? (Most must be notified within 24 hours in order to fall under your coverage).....Do I fight it?......

Now for figures sake, let's say that the damage was $6,000.00. Do I pay for the repairs out of my pocket? - Cost: $6,000.00. E&O carrier is not involved and your rates will not go up and you won't be dropped. Do I report it to my E&O Provider?. - Cost: $5,000.00 initial coverage cost plus my deductible of another $1,000.00. Increase of next years coverage costs plus if I'm lucky they won't drop me. Chances of them fighting any claim less than 50,000.00 is very slim. It's almost guaranteed that if this is a second claim you will be dropped and out of business. Do I fight it?... - If you were right, absolutely. What the heck, you'll be out of business anyway you look at it.

Otherwise your options are above. I would choose #1. Take that $5,000.00 per year that you would have paid the insurance carrier and put it to better use. Prepaid legal services is a good idea. I would refuse to play roulette with my business and family's income on a scam like E&O.

Require E & O???. You gotta be kidding. Only a fool would even suggest that it protects the consumer. It scams the consumer into believing that they are the ones being covered. It's a slap in the face to the legal system and a huge scam on the Inspection Industry. This is my opinion and does not represent the opinion of any association or any one else.

John Bowman

[hjanssen]

Wayne,the reason home inspectors should have E&o is simple,it is not for the small stuff
What would happen if you did not notice that the vent pipe for the furnace was disconected and some one died or the deck collapsped and some one was seriously hurt,in cases like this ,the insurance is worthwill
Does this happen often,of course not,but if it should happen, you will be glad you have insurance
Harry

[wschreiber]

I've always had E & O and Liability insurance. But sometimes the numbers make me scratch my head.

Most of the houses I inspect are around two hundred thousand dollars. But my insurance is for two million.

If someone complained about a defect, I could literally buy them ten houses with my insurance.

It would be nice if you could get a cheap insurance policy that would cover you for twenty grand. Twenty thousand dollars seems much more realistic in terms of what you could be forced to pay for a screw-up.

Things like leaky roof, leaky basement, broken furnace, aluminum wiring, etc. would all probably come in under that amount.

Can you imagine someone claiming two million dollars in water damage on a townhouse?

[Claude Lawrenson]

http://rhymeswithsnitch.blogspot.com...appraiser.html

http://www.nachi.org/forum/f14/rappe...25/#post522825

http://www.moldinstructor.com/mcmahon_lawsuit.htm

http://50citytour.com/?cat=3

Now read the reality.....
http://www.nelligan.ca/e/pdf/Lawyers...07_COBrien.pdf

[wschreiber]

Those articles all reinforce what I just said.

If I was inspecting homes worth twenty million dollars, then two million dollars insurance coverage is well within reason.

But a whole city block where I live in isn't worth that much.

[wblakey]

And here's the 50 cent reality:

The contractor hired by BVH to conduct the 2003 inspection, John Thomas Wilcox Jr.

The dim bulb who did the inspection for the even dimmer bulb was not even a home inspector.

And for this we get shafted?