Texas E&O Requirement Position Statement

[Michael R. Boyett]

A few weeks ago I developed a 'position statement' to describe how Texas iNACHI members collectively viewed the proposed TREC SOP Commentary. It was seemingly well received by TREC staff and the commissioners. I plan to develop a similar position statement regarding the E&O insurance requirement that was imposed upon us by two members of the last legislature (they are not running for re-election next year). So, I would like to solicit your input on developing that E&O Position Statement and ask that you post or send me some brief bullet points that I can use to begin writing the statement. Again, bullet points...not a dissertation is what I need right now. I'm starting with the following:

1. E&O requirement was added, by a state representative, onto a critical Senate Bill in the waning hours of the last legislative session.
2. Unknown as to who or what prompted the addition.
3. Gov. Perry expressed concern about the requirement but signed the bill into law. Suggested the next legislative session should review the requirement.
4. Inspectors are the only Texas business licensee required to have E&O.
5. The TREC Inspectors Recovery Fund functioned well since the early 90's to address valid consumer complaints.
6. E&O premiums place an onerous and unnecessary burden on inspectors in these economic times (OK, admittedly, that one probably won't hold water and will not be used).
7. E&O insurance may very well be a good thing for an inspector to have but it should be a business decision, not a government mandate. (I intend for this to be the crux of the matter).

Add, modify, delete, or comments would be appreciated. I'll post what I have here for review and comment when I have a first draft.

[Chuck Evans]

Thanks Michael,

Your #1: If I recall correctly it was attached as an amendment at the very last moment and never discussed / debated on its own merit or given justification;

Your #2: I believe that it was at the prompting of a lobbyist for an insurance carrier. I forget who but may have something on file;

Your #4: Inspectors are the only professional group regulated by the Texas Real Estate Commission who are required to carry this insurance. Complaints by the public against Brokers and and Agents far exceed those against Inspectors, both in terms of raw numbers and as a percentage of transactions;

Your #5: The recovery fund is still in place (they never refunded my monies, I'm sure you didn't get yours back either). So now Home Inspectors are legislatively required to maintain duplicate, redundant insurance on behalf of the public that we serve (one administered by TREC and the other Monitored by TREC)

Your #6: That onerous burden gets passed onto the public in the form of increased fees and reduced choice. This one one of the things Perry mentioned before he signed the bill anyway. It has all but eliminated part time inspectors and I believe is largely responsible for the sharp drop in the numbers of inspectors. Do they feel that the public is better served by reducing the testing and educational standards for licensing qualification because they have added an insurance requirement behind it?

The requirement has served the insurance providers while causing harm to home inspectors and resulted in increased cost, reduced choice and little benefit to the consumer.

OK so it's a dissertation.

Thanks!

[Michael R. Boyett]

Chuck, not only is the Recovery Fund still in place, it's paid out monies recently. I haven't been able to figure out exactly how that could happen but, then again, I haven't worked on it much either. Since a payment from the Recovery Fund requires a legal judgment to have have been imposed on an inspector and he is unable or unwilling to pay it then the fund can pay out if the plaintiff applies for it. Now, if the inspector has E&O and it paid then would a court also agree to apply a judgment against the inspector? I doubt it. So, I've still got to figure out the circumstances under which the Fund will pay out nowadays. We had suspicions when E&O was being imposed that a disgruntled client could 'double-dip', maybe this is proof of that. More likely it is from a deficiency not noted on a report long before E&O was imposed and the inspector's coverage does not go back that far.

If you have something concrete re: a lobbyist I'd like to see it. There was a little bit of surmising when Rep McCall's amendment got added to Sen Shapleigh's bill but I never heard anything with evidence.

Great comments...thanks for helping. I was afraid I was going to have to post something about the legislators being liberal, atheist, pot smoking homosexuals before anyone would comment.

[John Cahill]

I say keep it and also pass it for real estate agents. That would reduce them from 130,000 to about 78,000. That is a lot of lost revenue for TREC and TAR

If we double the price of E&O it will eliminate 25% more of the competition.

Then if we get a statute passed that does not allow limitation of liability that will wipe out 10% more.

The if we get TREC to interpret the SoP literally the experts can sue everyone including themselves!

Then we make it easier to get a license so all the newbies are set up for claims.

The result will be a few inspectors charging $1,000 per inspection and 200 page reports.

[Michael R. Boyett]

Well, let's hope for something a little less dramatic

[Chuck Evans]

Originally Posted by mboyett

I was afraid I was going to have to post something about the legislators being liberal, atheist, pot smoking homosexuals before anyone would comment.

[Michael R. Boyett]

A few weeks ago I developed a 'position statement' to describe how Texas iNACHI members collectively viewed the proposed TREC SOP Commentary. It was seemingly well received by TREC staff and the commissioners. I plan to develop a similar position statement regarding the E&O insurance requirement that was imposed upon us by two members of the last legislature (they are not running for re-election next year). So, I would like to solicit your input on developing that E&O Position Statement and ask that you post or send me some brief bullet points that I can use to begin writing the statement. Again, bullet points...not a dissertation is what I need right now. I'm starting with the following:

1. E&O requirement was added, by a state representative, onto a critical Senate Bill in the waning hours of the last legislative session.
2. Unknown as to who or what prompted the addition.
3. Gov. Perry expressed concern about the requirement but signed the bill into law. Suggested the next legislative session should review the requirement.
4. Inspectors are the only Texas business licensee required to have E&O.
5. The TREC Inspectors Recovery Fund functioned well since the early 90's to address valid consumer complaints.
6. E&O premiums place an onerous and unnecessary burden on inspectors in these economic times (OK, admittedly, that one probably won't hold water and will not be used).
7. E&O insurance may very well be a good thing for an inspector to have but it should be a business decision, not a government mandate. (I intend for this to be the crux of the matter).

Add, modify, delete, or comments would be appreciated. I'll post what I have here for review and comment when I have a first draft.

[Chuck Evans]

Sent a note to Andrea Barnard to get the name of the Lobbyist responsible for the amendment. She had Mark Eberwine respond

Chuck,

Andrea forwarded to me, your inquiry. I don't know who his clients were at the time of the E&O legislation. Here are some links to Curtis Fuelberg's activities.

What's currently going on with him? Do you have a plan?

Mark


http://www.google.com/search?hl=en&e...lients&spell=1

Looks like Curtis Fuelberg has been involved in some shady dealings leading to grand jury indictments.

I would suggest sharing any position we publish with other associations with significant TX inspector representation in their membership. Maybe even ask them to endorse it. This is an area where we would benefit by cooperation vs. competition. IMHO.

I also went looking for more information relative to representative McCall on this which, low and behold, brought me full circle to you and John C. According to the old posts there is a direct connection between McCall and an insurance company which would stand to benefit financially from his amendment to make E&O coverage mandatory for Home Inspectors.

http://www.nachi.org/forum/f14/e-and...47/#post204839

http://www.nachi.org/forum/f14/e-and...tml#post205295

http://www.nachi.org/forum/attachmen...vey-mccall.pdf

Thanks again Michael.

[Michael R. Boyett]

Chuck, I did share the earlier position statement I did on the Commentary with the other trade associations that are active in Texas and suggested they all develop their own version. I haven't seen anything as yet but I hope they do that as I see it as a really good first step at all Texas inspectors speaking with one voice. One of the issues is that of the +/- 2500 active inspectors here probably less than half belong to any trade association. Getting one voice for all inspectors will be really hard to do but I do hope we can get better at it.

Yeah, John C and I wrestled quite a bit with the E&O as it was being rammed down our throats in early 2007. Rep McCall was connected to an insurance subsidiary of Temple-Inland, who at the time did not offer E&O, and I had suspicions that they soon would after the bill was passed but that never happened, they never offered it. It wasn't long after 2007 when the E&O requirement came to be that Temple-Inland started having financial difficulties, spun off their banking & insurance operations and then not much has been heard from them since then, at least insurance wise. I'll look more at the Fuelberg references but I've only heard his name in reference to PEC dealings. I did hear of a TAR lobbyist from around 4-5 years ago that could have been the source.

[lfoster]

At one time when I was fussing about the E&O regulation, someone told me (I'm not sure who now) that it was pushed by the large insp companies to weed out the smaller companies.
??

[Michael R. Boyett]

Here's the current draft:

INACHI EO Position Stmt -DRAFT.pdf

[Chuck Evans]

Originally Posted by mboyett

Here's the current draft:

Attachment 35384

Looks good. I'll offer a few suggestions for your consideration:

This paragraph is a little awkward

As I’m sure you are aware, during the waning hours of the legislative session, Representative Brian McCall of Plano introduced an amendment to Senate Bill 914 that provided for TREC regulated home inspectors license applicants and renewals to “offer(s) proof that the applicant carries liability insurance with a minimum limit of $100,000 per occurrence to protect the public against a violation of Subchapter
G”. SB914 effectively requires all Texas home inspectors to purchase and maintain Errors &
Omissions insurance.

Consider rephrasing the statement

Yet amazingly, TREC licensed Real Estate Brokers and Agents are not mandated or required to maintain E&O insurance.

It would be easy to interpret this as a call for them to have to have E&O. Our goal is not for brokers and agents to be required to have to have E&O but to remove the requirement from HIs as it's inherently unfair and illogical to require it of HIs if it's not required of brokers and agents.

In the discussion of the recovery fund, keep in mind that TREC can come back to all licensees for more funding if it determines that reserves are too low. Reinforcing the argument that E&O is redundant.

Great job again - Thanks

[Michael R. Boyett]

Good inputs Chuck, thanks. Yeah that one paragraph is definitely awkward, I'll work on that.

On the 2nd comment, maybe I'm thinking too far down the line. I suppose that is my underlying idea....if inspectors are forced to have it then why excuse brokers/agents? They are more likely to need it than inspectors. I see your approach of coming at it from the other direction though.

On the recovery fund then that's what I was trying to show, i.e. it's a healthy, well managed fund that has tremendous reserves based on prior payouts. I do need to reinforce the fact of the redundancy though for sure. Thanks!

[Woodrow C. McDougald]

Hope I don't offend anyone by butting in here. I'd like to thank you and the others here on my behalf for trying to help us all.

I would suggest a slight modification to the last paragraph:


In conclusion, INACHI believes E&O should be a business decision made by each inspector and not required by obtrusive, cost prohibitive government mandates. Rather than a lowering of test standards to help stem the exodus of inspectors, we should strive to find ways to raise the level of professional expertise. The onerous, prejudicial Inspector E&O requirement is counterproductive to this and should be eliminated. The Recovery Fund could then, once again, provide for consumer protection like it has so successfully done for almost 20 years.

Craig McDougald

[Michael R. Boyett]

Craig, thanks, good input. I plan to work on the position statement today and incorporate many of the inputs that I've received so far. If not verbatim, at least in spirit. Watch for an updated version here in the next day or so.