InterNACHI Inspection Forum

InterNACHI Inspection Forum (https://www.nachi.org/forum/)
-   Legislation, Licensing, Ethics & Legal Issues for Inspectors (https://www.nachi.org/forum/f14/)
-   -   Limiting liability contract language (https://www.nachi.org/forum/f14/limiting-liability-contract-language-134986/)

lrabun 3/12/19 11:55 PM

Limiting liability contract language
 
Ok, I'm having a crazy idea and I figured you guys would be happy to tell me why it's a ludicrous idea. But please constructive in your reply. I figured I'd run it by you guys to see if it was worth talking to my attorney about.
Ok here it is, something to the effect of.....

1. The inspector will preform the inspection to the State's SOP but it is limited to 2.5hrs of onsite inspection and observations. Plus the time needed to write the report, do an on-site review, file setup, travel time, and to answer any questions after the inspection.
2. The inspector is only liable for the defects he finds within this time frame and not the defects that he doesn't find.
3. If you would like to upgrade to our premium inspection that is 5 to 6 hour in length and is not limited by the terms of #2 above please contact your inspector prior to your inspection.

Guess I'm trying to set better expectation for clients that think a HI goes over every square inch of a house with a fine tooth comb. If thats what they want them I'm happy to do that as well, it's just going to cost more.

jjonas 3/13/19 8:11 AM

Re: Limiting liability contract language
 
Quote:

Originally Posted by lrabun (Post 2078699)
Ok, I'm having a crazy idea and I figured you guys would be happy to tell me why it's a ludicrous idea. But please constructive in your reply. I figured I'd run it by you guys to see if it was worth talking to my attorney about.
Ok here it is, something to the effect of.....

1. The inspector will preform the inspection to the State's SOP but it is limited to 2.5hrs of onsite inspection and observations. Plus the time needed to write the report, do an on-site review, file setup, travel time, and to answer any questions after the inspection.
2. The inspector is only liable for the defects he finds within this time frame and not the defects that he doesn't find.
3. If you would like to upgrade to our premium inspection that is 5 to 6 hour in length and is not limited by the terms of #2 above please contact your inspector prior to your inspection.

Guess I'm trying to set better expectation for clients that think a HI goes over every square inch of a house with a fine tooth comb. If thats what they want them I'm happy to do that as well, it's just going to cost more.

No time for a discussion this morning, but here's my thoughts on your idea in three simple words... 'Oh Hell No'!! =;

mgleeson 3/13/19 8:28 AM

Re: Limiting liability contract language
 
I don't think that to be a good idea but the InterNACHI agreement has something of a similar concept regarding limiting expectations and liquidated damages

LIMITATION ON LIABILITY AND DAMAGES. We assume no liability for the cost of repair or replacement of unreported defects, either current or
arising in the future. In all cases, our liability is limited to liquidated damages in an amount not greater than 1.5 times the fee you paid us. You waive any
claim for consequential, exemplary, special or incidental damages or for the loss of the use of the home/building. You acknowledge that this liquidated
damages is not a penalty, but that we intend it to: (i) reflect the fact that actual damages may be difficult or impractical to ascertain; (ii) allocate risk between
us; and (iii) enable us to perform the inspection for the agreed-upon fee. If you wish to eliminate this liquidated damages provision, we are willing to perform
the inspection for an increased fee of $______, payable in advance.

rmayo 3/13/19 9:08 AM

Re: Limiting liability contract language
 
I would stick with a limited liability clause that was vetted by an attorney. If you look at NACHI's or look at what the franchise inspection companies use you will see what E&O insurance companies and lawyers have approved. What you like is not as important as what your lawyer is willing to defend in court.

jhastey 3/14/19 10:45 PM

Re: Limiting liability contract language
 
in California, using any contract that limits the liability to the cost of the inspection is, IMO, very risky.

Per California law:

“Contractual provisions that purport to waive the duty owed pursuant to Section 7196, or limit the liability of the home inspector to the cost of the home inspection report, are contrary to public policy and invalid.”

The belief that making the limit of liabilty to $1.00 above the cost of the report, or 1.1111% of the report, or 1.5% will be viewed by the courts as consistent with the legislative intent of the statute is hopelessly misguided and wishful thinking at best.

What you don’t understand is that in states that have such a statute, you’ve just tripled your exposure. First, under California statutes, you’ve just violated California’s UnFair Business Practices Act by contravening the legislative intent of this statute. By having it established that you’ve violiated the statute, you’re now liable under Unfair Business Practices Act for the consumers attorneys fees (a remedy specifically listed as a remedy under that statue). Secondly, that statute allows for an award of triple the actual damages. Thirdly, you’ve exposed yourself to tort liability, which is a separate and different measure of damages than the companion claims brought under your contract. Finally, you’ve provided counsel for the claimant a platform to allege your bad faith attempt to skirt the law, which acts to disparage you, and which can have a negative impact on otherwise meritorious defenses.

More good stuff: The above quoted statute falls under the category of statutes intended to promote an important public policy...ie, consumer protection. California courts have a long history of interpreting such statutes very broadley and liberally....and not strictly, as the authors of this “not more than 1.5%” contract verbiage must have thought when it was inserted and promoted as a good risk management step.

Bottom line: incorporating this limit of liability on California consumers has a very high probability of coming back to bite you in a big way. So for those in California who employ this language, good luck with that. Just understand that the plaintiffs bar here in California is very happy to see you have verbiage that dramatically expands yor exposure.


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