My clents backed away from the first house, are now planning to sell my inspection report.
I will be seeing the clients tomorrow AM at the second inspection.
Should they sign something like a disclaimer for my Co.?
Does anyone have an agreement that will hold me harmless?
John Kogel
www.allsafehome.ca
All my inspection have this written on them This report is the exclusive property of Magnum Property Inspection and its use by any unauthorized persons is prohibited.
This means the client does not have the right to distribute at all, just to read it
My contracts state the following:
“The inspection report to be prepared for client is solely and exclusively for clients own information and may not be relied upon by any other person. Client agrees to idemnify, defend, and hold inspector harmless from any 3rd party claims arising out of misrepresentation of the inspection report.”
Also I would kindly remind them that the agreement they signed allows the report to be used for their exclusive use and not for distribution.
That is a good point, but I expect they will go ahead and regain some of their lost cash anyway. 
My contract does have the “protect and indemnify from third party” clause, I just think it’s weak.
Explain to them what the “protect and indemnify from third party claims” really means. See if they still want to take on that liability!
If a client “sells” your report to a new buyer (or to the Realtor) and the new client buys the house and, later, finds fault, the inspector is not liable. The first client paid and contracted for the report, but there was no legal contract or expectation of service between the inspector and the 2nd client.
In fact, if the first client or the Realtor sell the report, they assume the liability for its accuracy because they are the ones selling it.
I have had it happen a copuple of times (the defect was more perceived than actual) and my lawyer simply explained that I had no liability since I was not a party to the 1st client’s sale.
Case closed.
BTW: The same applies to pre-listing inspectons, were the seller presents the report to prospective buyers.
Good advice indeed.
Update : 9AM, I presented a fresh copy of my standard inspection contract, but this time pointed out the third party clauses. This time. I keep the top sheet too. 11AM The clients have talked to their lawyer and have been properly advised, end of story !!
Glad that’s over! Happy Holidays!
The recipient of the report may later sue as a third party beneficiary of the original report.
Will their case prevail?..most likely not.
Will you spend money defending an erroneous claim?..most definitely.
In Illinois, we have a legal point, called a 301 complaint. If a lawyer, knowingly, files a frivilous lawsuit, one that he knows has no standing and will be thrown out, just as a point of common law (which this is) the lawyer is personally and corporately liable to pay the court costs and legal fees of the person who he filed the suit against.
Third parties have no standing. My contract, and my fiduciary responsibility, is to my client. Fiduciary works both ways. One of the benefits of having a state license. The fiduciary is legally established.
And my lawyer is real good and a personal friend and, most probably, the state’s most experienced with reagrds to the state HI law.
Different areas, different situations.
Hey Will;
I wish that were the case here in California. Unforturnately you can and no doubt will be held responsible. If you sent a copy of the original report to the seller and or listing agent you’ve really shot yourself in the foot.
http://www.mcallisterlaw.net/newsletters/spring_2001.pdf
page #2 is of interest…
http://www.gmsr.com/writing/Leko%20v%20Cornerstone%20Bldg%20Inspection%20Service%20Amicus.pdf
Say it ain’t so…