Regarding the cover page that the customer signs that states
various limitations and agreements for the home inspection…
If a clause states, with proper language, that the inspector
is liable only for the cost of the inspection fee…
and…
that any disputes will be handled with NACHI arbitration…
then…
If the inspector is found guilty, for whatever, will the arbitration
judge rule that the inspector is liable for ONLY for the amount
of the inspection fee? (as stated on the signed cover page)
John,
It is impossible to determine in advance how to rule on a case without having all of the facts of the case presented from both sides.
For instance, in some jurisdictions, an “in-home sales agreement” must have a 72 hour period in which a person has the right to cancel the agreement. If the agreement was signed immediately prior to the inspection, in such a jurisdiction the consumer, not having the opportunity to cancel it, may challenge its validity under those circumstances.
James,
Would that realy applie to services, that is after all what we are doing.
Again, it depends upon the jusridiction and how the law is applied there. You can bet that your client, if challenging your agreement in court or in arbitration, will have researched his rights in this regard quite thoroughly.
There are many other factors to consider, as well.
Some jursidictions will not recognize any pre-arranged limits on what a consumer may or may not recover in damages.
NACHI ADRS has some specific language as it pertains to arbitration and mediation.
The first this is make sure you have subscribed to the service (it is not automatic as a NACHI member).
The process is explained at www.nachiadrs.com
I have written at length on the prior Message Board about Limitation of Liability Clauses.
They are rarely enforced.
To Joe, and Joe,
So then, if limitation clauses are not worth much…
is ARBITRATION worth much?
If someone can ignore your limitation clause they
can also ignore your ARBITRATION clause, yes?
If it goes to ARBITRATION (not court), will they
rule in favor of your limitation of liability clause
that states it should not be more than the
inspectors fee?
Or… if someone is mad as hell at the inspector,
then no matter what ARBITRATION clause or
other liabilty clause is signed… the customer can
go for blood in a court of law?
Many, many inspectors I know will not carry insurance
because they know it makes them a target for lawyers
looking for easy money (insuarance weenies pee in their
pants if they get one letter from a lawyer and pay
a token amount as a matter of policy… just to avoid
another letter).
And then they raise the inspectors premiums. :roll:
Hi John,
My take on this is that while someone can sue you having these items in your agreement can help to prevent someone from taking it that far. It will only help to defray the nuisance client. If you really miss something important it doesn’t matter what is written in your agreement.
Just my two cents worth.
I am not Joe or Joe, but I’d like to throw in my 2 cents…
An arbitration judge will rule upon the evidence that is presented by both sides regarding the case.
An angry client will go as far as his pockets will allow to seek justice. If you have an insurance policy, his lawyer will probably be happy to take the case on contingency. If you do not have insurance, his lawyer will probably want to be paid by him up front. In either event…no matter how right you may be…an angry client who is “going for blood” will prove to be an expense to you. It is best to act early and to avoid this conflict, when you can.
I keep hearing about all these home inspectors who have been sued.
I wonder why we seldom get to see the court cases .
I receive a lot of information from papers all over the world about Home Inspectors
and do not ever remember seeing any thing about law suits.
I would like to read a few of these so I can make up my mind about Insurance .
Roy Cooke… Royshomeinspection.com
I have written extensively about every issue that you raise in this post. Please go to the Message Board Archive and search for posts authored by jferry. Look at the “Ask Joe Ferry” thread. I discuss the viability of Limitation of Liability clauses at length therein.
Essentially, Limitation of Liability clauses are not enforced because they are not negotiated by parties of equal bargaining power and are patently unfair. You can’t cause a client a $30,000 loss and expect any court to award the guy $300 based upon your Limitation of Liability clause. It simply won’t happen. Why is the guy hiring you, if you won’t stand by your report?
As for insurance putting a target on your back, I know that that’s a popularly held belief but my experience does not support it. What puts a target on your back is performing a negligent inspection that ends up costing a client a lot of money. In that instance, you will be sued whether or not you have insurance.
I have sued many people who did not have insurance and defended many folks who did not have insurance. Telling the other side that you have no insurance has never resulted in a suit being dropped. On the contrary, it makes it much easier to get a judgment, if you have no one defending you.
You don’t have any assets? Fine. I’ll take my judgment and wait. Wait til you want to get a mortgage or refinance your current mortgage. You will never get a loan or any credit with a judgment hanging over your head.
I know a lawyer who has multiple default judgments against defendants who thought that they had walked away from their responsibilities. He told me that on average he has to wait six years to collect and usually when the guy needs a mortgage. By that time the judgment has been inflated by post-judgment interest.
So, by and large, if you intend to make this your career, you need to make some business decisions on whether or not to carry insurance.
In the archive, I answered a question from Justin Watts [jwatts on your search] about E & O. The answer is in the archive. It is also in Paul Hinsperger’s “Great Posts” archive and it was widely reported on TIJ.
If Paul would repost his “Great Posts” collection, it would be a great benefit to a lot of our newer members.
Arbitration clauses are enforced because they are not unfair. Arbitration is widely recognized as an alternative method of resolving disputes. They are also favored by the law because they generally provide cost-effective and swift justice. Arbitration awards are also subject to judicial review.
Your belief that insurance companies are “weenies pee[ing] in their pants” is also contrary to my experience. Have you ever been injured in an auto accident? Did they roll over and pay you?
And do you know why they didn’t? Because that is a doomed business model. Ford Motor Company used to do that and guess what happened? Exactly. It was inundated with claims.
Joe,
Can you address the question concerning the Arbitration Clause?
Interesting question that deserves an answer.
I did answer it.
“Arbitration clauses are enforced because they are not unfair. Arbitration is widely recognized as an alternative method of resolving disputes. They are also favored by the law because they generally provide cost-effective and swift justice. Arbitration awards are also subject to judicial review.”
Ooops, You did, didn’t you. Thanks…
I respect everyone’s views on this subject, but kind of agree with Roy on this one. No lawsuits have been publicized in Maine that I am aware of, and would not say that it hasn’t, but would be awfully curious myself to know what the Court rulings have been on cases that have happened elsewhere.
I carry no Insurance because my Inspections are a limited few due a full time job as a Commercial Builder, and see no need to have one, but on a different token, would be open to any liabilities that I am opening myself too, in case I come across a difficult client that is just looking for the right opportunity.
Since I have already worked for a Lawyers firm as an Expert Witness, I kind of no what to expect, but not clearly.
Maybe someone can elaborate on cases and outcome of the Court’s decision on some of these Cases.
Thank you for your shared information.
Marcel 
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Here is Paul’s Great Posts link:
http://www.nachi.org/forum/showthread.php?p=727#post727
Here’s the link to my E & O post:
In order for an arbitration clause to be enforced, its first test is that it is not onerous. Suggested language for ADRS is not onerous. The HI pays annually for the service, and the plaintiff pays a reasonable fee to bring action.
38 ADRS cases never moved forward last year after speaking to the potential plaintiff. The process was explained at length, including carefully reviewing the inspection report, recollecting conditions met on the day of the inspection, and examining the SOP the inspector operated under. All sound advice for a plaintff preparing a case pro se. 33 dissapeared after this. In some instances, where a client could have sued, after speaking with ADRS, they chose the route of calm communication with the inspector. Those went away also (5).
ADRS is also non-binding. For some who may not know be aware, arbitration has been challenged and overturned. Some arbitrators have even been sued. We communicate, coach, mediate, and if needed, arbitrate.
In an official lawsuit with a judge, sometimes arbitration is offered as a last resort before trial. Folks had better have a valid reason for rejecting it, or these judges can get pissed off. Not good for the parties. Judges and court admind dont like the system clogged with trivial actions. They want to get rid of them. I have seen cases where arbitration is agreed to in the 11th hour in a courtroom, and the plaintiff and defendent lead to another room with an arbitrator sitting there. Binding arbitration, by the way. Not a whole lot of time, either.
It happens. ADRS is a cost effective alternative that works.