Professional liability is defined as “the area of law concerning lawsuits brought against a professional in the course of their profession”. Home inspectors, like other professionals, are vulnerable to professional liability actions. When a client is dissatisfied with an inspection, typically because some defect is discovered after closing, the knee-jerk reaction is often to blame the inspector. Second only to the inspector comes placing blame on the Realtor, especially if the inspector was recommended by them.
What can a professional home inspector do to protect himself from frivolous claims? Home Inspectors can purchase E & O Insurance which protects them for claims arising from allegations of wrongful acts, errors and omissions in their inspections. Whether or not an inspector decides to carry E & O insurance is a personal decision unless the state the inspector lives in requires it. Even if the inspector decides to carry E & O, how does he/she protect themselves if there is a gap in their coverage? What about if the inspector provides ancillary inspection services such as radon testing, termite inspections and mold inspections? These services are not covered by a normal E & O policy; often a separate rider is required. E & O premiums cost several thousand dollars/year and in the case of a dispute, the inspector often has to settle the claim by paying out of his/her deductable. So even if an inspector carries E & O insurance, he/she is still out of pocket thousands of dollars should he/she be named in a lawsuit, even when he/she has done nothing wrong. The problem with E & O insurance is that it often paints a target on the inspector’s back. E & O does not protect the consumer for the majority of payouts are from the deductible that the inspector carries, anyway. E & O insurance is also an expense that few part time and rural inspectors can afford and often puts them out of business. If an attorneys gets involved, the next thing you know, you receive service to answer a complaint. Even if you are in the right and have done nothing wrong, you need to either represent yourself, tender the claim to your E & O carrier (and relinquish all control), or hire your own attorney. The matter tends to get expensive in a hurry.
As an inspector who carried E & O for many years, the specter of a lawsuit weighed pretty heavy in the back of my mind. I have always prided myself in performing thorough inspections, and consider myself to be an educated and competent inspector. I am not alone in this. There are literally thousands of competent inspectors who pride themselves in performing quality inspections for their clients.
In an effort to quell my concerns about litigation, I started to think about how I could avert a lawsuit before it happened and thought about arbitration. Through my research on arbitration as an alternative to the courts, I found that arbitration services tend to be rather costly, even though they are often still less expensive than legal services. Some arbitration firms charge over $1000. The other reality, I soon discovered, was that none seemed to specialize in inspection litigation which means that in cases where a dispute arises between a home owner and an inspector, there would be a learning curve while the arbitrator became educated about the inspection industry which would likely raise the cost of this arbitration. This is where, I believe, a need existed for a low cost, fixed-price mediation and arbitration service dedicated exclusively to the inspection industry, with neutrals that are intimate with the workings of the inspection industry.
The challenge is to keep the cost down. Inspection Arbitration Services (IAS) does it by making the service subscription-based, as opposed to pay as you go. The other item which makes us unique is that we are Internet-based. We concentrate on inspection mediation and arbitration ONLY. Our neutrals are experts in their respective fields, all relevant to our industry. If a dispute goes through the court system or is arbitrated by someone other than an inspection industry expert, those who will be ruling on inspection dispute cases have no inkling of the inspection business. They are easily fooled and swayed from arguments on either side….they are simply looking for the cheapest way of resolving the issue for the provider. Neither side can expect “justice” and, in that respect, neither side is actually “protected”.
IAS requires that the consumer make the first serious move. They have skin in the game, and have a burden of proof that many cannot achieve. We have a record of over 50 potential cases that never went to arbitration or file when we coached the complaining party how to prepare their case. Unlike the insurance company who is looking to get out of the mess as inexpensively as possible, the claimant must gather and put forth his evidence.
Arbitration is NOT like insurance. It is a means to provide cost-effective alternatives to traditional litigation. An arbitration clause is useful in that it is there for BOTH parties. Inspectors can’t lie to our neutrals, because they are extremely knowledgeable regarding contracts, contract law, construction, and inspection. Inspection arbitration is all we do. We are absolutely neutral, and the service is non-binding, which still leaves disputants the option to sue in the event they do not like the outcome. It’s like mediation, with evidence, discovery, and a mock trial. It is cost-effective. Should the decision be rejected by either side, and it goes to trial, the first thing a judge will ask is whether you tried to settle differences out of court. What do you think the judge (and law clerk) will think when it is revealed that you went out of your way to avoid clogging the court’s calendar, and have a fair decision which is being ignored by the plaintiff?
There is no lost time from work, no court costs, no face-to-face intimidation, and no travel. It’s is fairly simple to analyze a complaint remotely; it comes down to the SOP, the contract, and the report.
It is my belief that inspectors are the most knowledgeable professionals involved in the real estate transaction. We carry the most liability. We are often paid the least. We are relied on by the client, and are often the final say in whether a deal goes through or not.
Unfortunately, we often have the largest target painted on us. I believed that the time had come for inspectors to have an alternative to the high price of traditional litigation and arbitration. I launched Inspection Arbitration Services to answer this need. We are experienced and independent, and are one of the best kept secrets in the inspection industry today.