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InspectorPro Insurance

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  1. Hi @Jim Katen. Thank you for your thoughts on this. I find your examples with the moisture meter and digital camera particularly interesting since they do show a definitive change in risk management recommendations. While I don't see us changing our recommendation to "tactical exceedance" just yet, I do think "The Katen Method" concept presents an interesting compromise. I'll pass the idea on to our claims team, who determines our recommendations, as an item of interest.
  2. I'd like to think our audience is broader than the "bottom end" you've described! However, most of the questions we get asked have to do with managing risk, so I must acknowledge that we're speaking with different groups of inspectors. While I have to stand beside my earlier comments about the SOP, I do agree with the idea of better training, educating, and inspecting likely reducing claims. We've definitely seen a relationship between a lack of experience and training and claims. Ha! While we recommend staying within the SOP, we don't penalize people for exceeding it. Frankly, we don't ask. As for a denial, the only way to know for sure is apply! However, unless you have any other experiences I'm unaware of, like an inspection-related felony, I can't see there being a problem.
  3. Thanks for sharing that. That section from the ASHI SOP does shed some much needed light on the SOP's intended use. However, I do think you misunderstand our purpose as insurance providers. The risk management tips we provide are meant to do just that: manage risk. We aim to help home inspectors limit their liability and prevent potential claims by sharing the information we've gathered from a decade of insuring and defending inspectors from allegations. While you may disagree with the counsel to stay within the SOP rather than exceed it, that counsel isn't based on personal opinion. Rather, it's based on actual cases we've faced. To not recognize that inspecting beyond the SOP can make claims more difficult to defend would be a disservice to our clients and other inspectors who read our articles in hopes of being able to apply various techniques to shield their businesses from claims. So, while there are some inspectors who disagree with the principle, we continue to share that counsel so that inspectors can then make an educated decision about how they run their inspection businesses.
  4. Hi, @Jim Katen. I agree that, in many instances, what protects the client and the inspector are the same thing. As for the SoP being a minimum rather than a maximum, that's just not how we've seen the SoP interpreted by attorneys, arbitrators, and judges. That's why we recommend staying within the SoP rather than exceeding it. Whether meeting rather than exceeding the SoP was what the people who framed the SoP intended, I can't say. But, I can say that's not how the SoP is regularly being used in both claims filings and defense. Hi, @hausdok. Your claims example is an interesting one. Here at InspectorPro, we only charge the deductible when the claim amount--including payment and legal fees--meets or exceeds the deductible. So, in your particular case, you likely would have just paid the $350 to the client and nothing to us. As for your 18 years since, it's great that you haven't had any claims since you dropped your insurance coverage, and it's likely that your inspection practices have a lot to do with it. Unfortunately, you may be the exception to the rule. Just looking at the inspectors we've insured over the past 10 years, about 60 percent of them have at least one claim in their career. And of those claims that we receive, 80 percent of the claims are meritless, meaning the technical inspection was accurate and the home inspector still received a claim. Ultimately, in states where insurance isn't required, whether you buy insurance is up to your risk tolerance: how much you want to protect yourself versus how much you're willing to leave up to chance. As insurance providers, we'd say that inspectors like you who choose not to carry insurance have a high risk tolerance. In contrast, an inspector who chooses to carry all the insurance coverage they can has a low risk tolerance. It's a personal choice.
  5. I get your point. We argue that a balance is possible: You can provide a stellar service to your inspection clients while still managing your risk. But, we recognize, too, that there are plenty of instances where what best serves the client and what best protects the inspector seem to be in conflict. In these situations, as insurance providers, it's always our job to always advocate for what's most likely to avoid claims. It's then up to the inspectors individually to weigh the options and decide what's best for their businesses.
  6. Great question. The answer remains to be seen. So far, we haven't run into any issues with courts arguing that IR exceeds the SOP of a visual, non-invasive inspection. That doesn't mean we never will. But, IR isn't something our claims team or carrier are concerned about at the moment. In fact, we've seen many instances in which the use of IR helped prevent or defend against claims.
  7. Hi @Jim Katen. I think that both are important. Yes, we want home inspectors to stay within the SOP, but we want them to take the time to find problems and tell customers about them, too. In this particular scenario, staying within the SOP is extremely relevant. Note that the beetle damage wasn't visible during the inspection; the client only discovered the beetle damage during renovations. Thus, our primary argument in defense of the inspector was that a home inspection is a limited, non-invasive, visual inspection that cannot see through walls or predict the future. But, let's say the home inspector had exceeded that definition in another way. Perhaps he moved furniture and belongings during the inspection. Or maybe he probed the wall to identify water intrusion. If he had exceeded the SOP in those instances, the claimant and their lawyer could have argued that he should have exceeded the SOP in others, too. The SOP helps set customer expectations and determine inspection scope. But, when inspectors go above or below those standards, things can get muddled.
  8. Hi TIJ readers, Every few months or so, we try to share a story from our pre-claim and claim archives. By choosing cases representative of the allegations coming in, we hope to help you manage your own business' risk against similar complaints. Enjoy! Stephanie With A Little Help From My Friends: A Home Inspection Insurance Pre-Claim The following is a real home inspection insurance pre-claim from our insurance claim archives. In order to protect the insured's identity, all identifiable characteristics—including names, associations, and locations—have been omitted or removed. A year after their inspection, a client began to perform renovations to their recently purchased property. Upon removing some exterior siding by the basement entrance and some insulation in the basement ceiling, the client discovered some powder post beetle damage. The client asked their home inspector to take a look at what he'd uncovered. When the inspector returned to re-inspect the property, the inspector took photos of the damage. Additionally, the inspector explained that, because of the siding and the insulation, the beetle damage was not visible during the inspection. The client resolved to ask the sellers to compensate him for the damage. Two months after the re-inspection, the client called the home inspector again. He hadn't heard back from the sellers, he explained, so he had reached out to some lawyers to ask what to do. The lawyers advised that he redirect his complaint to the home inspector. The inspectors' insurance, the lawyers said, should cover the cost to repair the damage. The Response Having heard about pre-claims assistance in a recent newsletter, the home inspector reached out to our pre-claims team for assistance. Because his client's complaint lacked a written demand for money—which is how his insurance policy defines a claim—the inspector's incident qualified for free legal help stifling the grievance. Additionally, should the complaint escalate to a claim after pre-claims assistance tried to help, the inspector would qualify for up to 50 percent off his deductible through his policy's Waiver of Deductible endorsement. (You can learn more about pre-claims assistance here.) The home inspector discussed the issue with pre-claims assistance over the phone. During the conversation, the home inspector was able to tell his side of the story and receive helpful risk management tips. "[My pre-claims agent] explained to me that, the faster you deal with these situations and get [a response] out to the client so that they understand what the limitations of the inspection are, the better chance you have of them not following up further with litigation," the home inspector told us in an interview for this article. [READ MORE]
  9. Hi TIJ Readers! If you've followed our series on the top claims against home inspectors, you know that most industry allegations involve errors or omissions, which mean they are filed against inspectors' E&O coverage. (For those of you who've missed them, check our articles on the industry's top claims here. We recommend starting with the Top 5 Claims.) However, like E&O claims, there are certain types of general liability (GL) claims that are more prevalent than others. We discuss the top 5 general liability claims against home inspectors and how you can avoid them. Enjoy an excerpt below. I'd be interested to hear if any of you were surprised by the list of GL claims we found to be most prevalent or if the list is true to your individual experiences. Best, Stephanie What is general liability insurance? Unlike errors and omissions (E&O) claims, general liability claims don't typically question the quality of your home inspection or service. Rather, GL claims involve any bodily injury or property damage that result from the inspection. (Learn more about the two coverage types and why they're important here.) There are many reasons to carry general liability insurance coverage. In our survey of over 450 home inspectors, we found that the top three reasons inspectors choose to carry both E&O and general liability insurance are to: Avoid large payouts for claims. According to The Hartford, a general liability claim can average more than $75,000 per case to defend and settle when a lawsuit is involved. Receive claims handling and defense. When you work with an insurance company familiar with the home inspection industry, their claims team can minimize or eliminate your potential liability by properly handling claims. In many cases, our claims team's industry knowledge enables them to resolve liability claims quickly, saving insured precious time and money. Fulfill licensing and state requirements. As of September 2019, the following states have general liability requirements: Alabama, Arkansas, Florida, Indiana, Kansas, Kentucky, Louisiana, Maryland, Mississippi, Montana, Nevada, New York, North Carolina, Ohio, Oklahoma, Oregon, Rhode Island, Tennessee, Virginia, and West Virginia. What types of liability claims against home inspectors are most common? Here at InspectorPro, the vast majority of GL claims result from: Water damage Power outage Ceiling hole Garage door Frozen plumbing We go through each one of these common general liability claims scenarios in detail in our infographic. [READ MORE]
  10. Sorry for the delayed response on this and thanks for the insight. I think your recommendation that the public weigh in is an interesting one as it would solve more problems than one. I'll be interested to see if some of the new states adopting home inspection regulation employ this method.
  11. I agree that a lot of good could be done by educating home buyers themselves, but that duty rests primarily on home inspectors. Inspectors know who their clients are; we don't unless things go south. And, we recommend that we keep it that way simply because we have seen a correlation between advertising the existence of home inspection insurance to buyers and buyers filing claims. I do think your comment selecting home inspectors based on versions of their reports is interesting. While I agree that reports are a great indicator of expertise, technique, priorities, etc., I wonder if the average home buyer has the skills necessary to compare inspection reports. Perhaps that's an item of additional education needed. You make an interesting point here about consumer fraud violations in relation to inspector reports that cater to real estate brokers. I would agree that such a practice, when it occurs, is definitely an issue. And if it is, in fact, as widespread as you claim, just not something that falls under our radar for some of the points you described, it's cause for concern. Based on your acknowledgement of some state laws supporting the realtor referral system, and based on the fact that so many inspectors do rely on realtor referrals to stay in business, what would be your recommendations to mitigate the model of the agent/home inspector relationship you described? Here's a decent opinion piece on the Herner v Housemaster case from a law firm for those looking for a quick overview: http://www.meislik.com/cases/herner_v_housemaster_america/. Yes, we and others who discuss risk management techniques for the industry definitely struggle to make our content broad enough for a national audience while considering how local legislation can change the game entirely. For us personally, our aim is to give as accurate and thorough a look at an issue we can while noting places for further reading for inspectors impacted by local law that changes recommendations. I agree with @Jim Katen's interpretation of sanitize.
  12. I think the main reason we have concerns about managing or setting expectations is because 80% of our claims we've received over the last decade go in what we call the "meritless" category. For us, that means the inspector's technical inspection was accurate but their client still filed a claim. Most of these claims have to do with a misunderstanding of the scope of the inspection. For example, a home inspector gets a claim for mold when they don't inspect for it. Or, an inspector gets a claim for a defect that arises later that they had no way of predicting. We hope that, when we write about setting and resetting expectations, that we can help home inspectors avoid misunderstandings that result in frivolous claims. I'm not sure that the fact that we disagree is really an issue. I think that agent referrals are a more polarizing topic than I previously understood but, as stated earlier, we need more information on our end before we discourage or endorse realtor referrals from our end. As stated earlier, we don't have enough data on realtor referrals alone to do as thorough an analysis we'd want to to make any concrete claims about agent referrals. However, based on the statistics we do have and the anecdotal evidence we've received, we haven't found a correlation between claims and agent relationships that we feel comfortable backing. If it is something that inspectors would like more information regarding, we encourage them to share the experiences they have so that we can look at the issue more in depth. As with all of our data and information, we rely heavily upon home inspectors to provide the numbers and the stories since you're the ones in the field actually having these experiences. I, too, have learned a lot of things from our dialogue that will inform a lot of the topic choices and writing decisions we make going forward. I'm also considering how to take some of the points made here on the forum regarding potential ethical and liability issues associated with realtor relationships and share them with our claims team to see how we might study the issue out further on our end. I think having these conversations is productive and I appreciate the time you and others on the forum take to articulate your thoughts and concerns. As stated earlier, the intent of the article wasn't to endorse agent marketing or argue that all inspectors should market to agents. Rather, the intent was to explain a common insurance policy endorsement through the lens of something we know a lot of inspectors are doing: marketing to realtors. We hope that, by putting referring party indemnification in this frame, we can both better engage our readers and increase their understanding of how their policy applies outside of the "named insured." We don't advocate "riding on insurance policies" or even relying on referring party indemnification as a way to gain referrals. However, we do recognize that there are some agents concerned about receiving claims for work that home inspectors perform, and referring party indemnification endorsements can provide peace of mind and resolve such concerns.
  13. I agree with that. It's in everyone's best interest--especially the client--that the client properly vet the inspector they're using.
  14. I agree with everything you said except the last part: "The agent cannot make a fair decision on the best inspector for the client because he will be affected by the result." This would mean that all agents would only refer clients to inspectors with "don't kill the deal" attitudes. Based on anecdotal evidence of speaking with inspectors that receive realtor referrals, I don't believe this is the case. And, from a data standpoint, we're constantly looking for similarities between claims so that we can offer better risk management solutions to inspectors based on trends. In reviewing thousands of claims, we have yet to pick up on a correlation between realtor referrals and poor inspection practices. So, if one exits, it's not big enough to be blatantly obvious. The bottom line: We don't have any evidence to suggest that receiving realtor referrals puts our clients at increased risk, either because of the agents' or their own actions. Until we do, we think it best to let the home inspectors individually decide if agent referrals are helpful or detrimental to their businesses and respect the decision either way. Returning to the article that started this conversation: The intent of the article wasn't to endorse agent marketing or argue that all inspectors should market to agents. Rather, the intent was to explain a common insurance policy endorsement through the lens of something we know a lot of inspectors are doing: marketing to realtors. We hope that, by putting referring party indemnification in this frame, we can both better engage our readers and increase their understanding of how their policy applies outside of the "named insured."
  15. Hi @Marc. I'm kind of confused by your response. You say that recognition of agent expectations can be a detriment to the client. What do you mean by that? Here's some clarification on what I meant: Many home inspection clients turn to real estate agents not just for inspector recommendations but inspection information. As such, it can be helpful to make sure that the real estate agents involved understand the basic definition and scope of a home inspection. It also helps if agents know to direct questions and concerns about the inspection back to the inspector rather than weighing in themselves. We've seen some agents mitigate and other agents exacerbate issues for our inspector insureds based on their understanding (or lack of understanding) of home inspections. While it isn't a home inspector's duty to make real estate agents aware of basic home inspection protocol, helping set appropriate inspection expectations with agents can serve inspectors' and agents' shared clients immensely.
  16. Great points, @Marc! Client expectations definitely need to be managed, and I think management of those expectations contributes to making clients happy. (i.e. When your client finds mold behind a wall during renovations, they're not going to point the finger at you if they have a good understanding of your inspection's scope and are satisfied with their interactions with you.) I think the same could be said about agent expectations.
  17. @Jim Katen, thanks for your response. Based on your comments, it sounds like we're working off of completely different paradigms. You say that you "believe strongly that there's no 'delicate balance'" and that "if you cover your client's butt, [yours] will be covered automatically." Our philosophy dramatically differs in that we believe there are specific things home inspectors should do to manage their risk and limit their liability outside of being a good technical inspector. So, I believe we've reached an impasse. However, I do appreciate you taking the time to articulate your position and read our content—even though we don't always agree!
  18. Thanks for clarifying, @Jim Katen. I think you make an important point about on whom inspectors and agents should primarily focus: clients. While it is important to limit your liability to protect against potential litigation, inspectors' and agents' main focus should be serving their client home buyers to the best of their ability. It's a delicate balance but an important one. Now, there are a few points that you make that I want to address. First, you argue that it's potentially problematic to not disclose referring party indemnification to clients. I'd argue that a lack of disclosure doesn't hurt the consumer while a disclosure can. As a general rule, we don't recommend that home inspectors advertise the fact that they carry insurance to clients--even if they're in a state that requires them to carry insurance, so that fact can be inferred with licensure. The reason being is because most people have an easier time mentally filing a lawsuit against an insurance company rather than an individual, and there are the occasional suit seekers. A great example of this issue is a conversation I had with one of our insureds a while back. He'd had three claims come in in less than six months, which is pretty unusual, so the underwriters tried to investigate what about the inspector's behavior might be promoting such suits. They didn't find anything glaringly wrong with his technical inspection practices. However, upon visiting the inspectors website, they found a big, bold advertisement of his insurance information on his homepage. By promoting his insurance information, the inspector was attracting clients who perceived his inspections as warranties for which they could get refunds (and then some) if anything was amiss. This isn't best risk management practice. Second, you argue that consumers may perceive referring party indemnification as an unfair arrangement between inspectors and agents. I can see this happening but only because I think a lot of people wouldn't understand what referring party indemnification actually is. Putting it into a different context, say my primary care doctor referred me to a surgeon who ended up botching my operation. I sue both the doctor and the surgeon, and the doctor turns around and says to the surgeon, "Hey, you're the one that messed up. I'm filing my claim with your insurance." As a consumer, I wouldn't blame the doctor for doing this nor would I really care because my claim is getting addressed either way. Again, my perspective might be skewed since I've actually read referring party indemnification endorsements, but to me, I think it's pretty fair when you think about it in terms of whoever did the work is paying for problems with the work.
  19. @Marc, I think you make a lot of good points about agent motivations and how they can negatively impact inspection results. It's not something we publish on much, but it is something we discuss with inspectors over the phone and at conferences. Compromising inspection results to appease realtors is a disservice to their shared clients. Plus, it opens inspectors up to liability, which, in turn, opens us up to liability. So, it certainly isn't something we condone. Returning to the premise of the article itself, it is possible to have relationships with real estate agents that provide client referrals without compromising inspection integrity. It requires inspectors to be selective in who they choose to work with and diligent in setting appropriate expectations. We insure many inspectors with healthy working relationships with realtors who respect their work--even when it "kills" a deal--because they recognize the value of accurate, thorough inspections. We hope that inspectors use the ideas presented in the article to find agent relationships that don't just support their business but that support their clients and the inspection industry. @Les, we didn't really think of referring party indemnification as a marketing tool, either, until we started getting questions about it. Questions like: 1. Real estate agents are afraid of being wrapped into lawsuits regarding my home inspections. Is there any way my insurance can cover them, too? 2. Do you have any flyers, presentations, or other marketing materials about referring party indemnification I could use to educate the agents I work with? Those questions popping up over and over again made us think we needed to a) clarify what referring party indemnification is and how to recognize it in your insurance policy and b) provide guidance as to how inspectors could come up with their own marketing materials should they see fit.
  20. What makes you feel like referring party coverage is a scheme? Third-party coverage is actually really common. You see it in the real estate space all the time with builders, contractors, etc. It's present in other fields, too, like the medical field. All it's really trying to do is make sure that the person who actually did the work subject to the lawsuit is the one paying for the coverage. Because, chances are, if you don't do the same type of work as the party you're referring (or being referred by), you don't carry the right coverage. That's why we recommend you request additional insured coverage on the insurance of those companies to whom you refer business (i.e. termite company, roofer, etc.). Now, if you're uncomfortable with marketing to real estate agents generally, I can understand that. We insure quite a few inspectors who prefer to market their business to consumers rather than agents--some for ethical reasons others for economic concerns. (i.e. If the economy takes a turn, I don't want to be relying on realtors that go out of business.)
  21. Hi TIJ Readers! With 69 percent of home buyers nationally choosing their home inspectors based on their realtors' recommendations, it's no wonder why we see a lot of industry interest in bettering agent marketing efforts. Yet, few inspectors know that most home inspection insurance policies come with referring party indemnification, an endorsement that many real estate brokers see as a benefit. Teach your local realtors about your insurance policy's referring party indemnification coverage, and you may be able to improve your referral rate. You can learn more about referring party indemnification in our recent article, previewed below. Best, Stephanie How To Improve Your Marketability with Referring Party Indemnification During a recent home inspection, you missed the polybutylene pipes in the attic. When your clients, the home buyers, discovered your error, they were furious. They didn't just sue you; they sued everyone involved in the home's sale. That included the real estate agent that referred the job to you. What is referring party indemnification? In home inspection policies that include referring party indemnification, should there be a claim about inspection findings, the insurance company assumes liability for not just the home inspector but the referring party. If your insurer offers third party indemnification, your insurance policy will define referring real estate agents, real estate brokers, mortgage lenders, relocation companies, and other relevant third party referral sources as limited additional insureds. As such, these referral sources can receive insurance coverage from claims arising from your inspection services. Common conditions to these endorsements include: You and the referring party didn't give notice of the claim to another insurance carrier before your current policy began. The inspection related to the claim occurred on or after your retroactive date and before the end of your policy period. Before you started carrying insurance, you and your referring party couldn't reasonably predict that your clients were going to file the claim. The referring party reports the claim in writing to your carrier during the policy period. The claim doesn't involve any services the referring party performed independent of you, the home inspector. The claim is subject to your insurance limits. In addition to insurance carriers, some other companies offer referring party indemnification to home inspectors. Just like you do with your insurance policy, we recommend reviewing any referring party indemnification plan you intend to use to make sure you understand the terms. How can referral coverage improve my marketability? As a home inspector, Paul Stratton, Owner of Stratton Inspection Services, LLC in Arizona, finds that realtors worry about potential claims. Many are concerned that, if the home inspector they refer to the client misses something, they'll be liable. Stratton calms brokers' nerves by explaining that his insurance policy protects them, too. "Realtors want to know that they're covered and that their client is covered as well," Stratton told us in an interview for our article "How to work with more realtors." "[Referring party indemnification] gives them more peace of mind." [READ MORE]
  22. Hi TIJ readers! Recently, we did a free webinar with InterNACHI and with ASHI on understanding your insurance policies. The theme of the hour were common policy pitfalls: the fine print that leads many home inspectors to purchase less coverage than they actually need. This article highlights the top three pitfalls to watch out for. Enjoy! Stephanie 3 most common insurance policy pitfalls Did you know that not all insurance policies are created equal? Or that policies can exclude some business practices? If you don't know the ins and outs of your policy, you could end up buying less coverage than you need. In this article, we go over three of the most common insurance policy pitfalls plaguing the home inspection insurance industry. Look for these pitfalls when shopping or renewing insurance to ensure you're getting the coverage your business really needs. Your insurance carrier doesn't cover it. Exclusions are the portions of your policy that define what you are not covered to inspect. Some exclusions are permanent while others can be modified with an endorsement. (More on endorsements in the next section.) Exclusions allow the insurance company to offer more competitive rates by eliminating business practices that go beyond the policy's intent. Common non-endorseable exclusions in home inspection errors and omissions and general liability policies include: Asbestos Pollution Improper licensure Warranty claims To find out what exclusions lie in your policy, you've got to read it. And before you do, you should know whether your policy offers basic or broad coverage. Basic policies state what's covered, and anything that isn't listed is an uncovered inspection. These policies tend to be easier to read because they're shorter, but they often offer less coverage. On the other hand, broad policies offer more open-ended coverage than basic policies. If an exclusion isn't on the list, then it's automatically covered. These policies are a tough read but much more comprehensive. (In case you're wondering, InspectorPro offers broad policies.) Keep in mind that there are insurance carriers that advertise to property inspectors but explicitly exclude home inspection services in their policies. If you receive a quote for hundreds or thousands of dollars less than that of a specialized home inspection insurance provider, be sure to study the policy to make sure home inspections aren't excluded. [READ MORE]
  23. Great question, @Jim Katen. While finding the property after the fact is rare, it does happen, so most equipment coverage insurance policies have a section dedicated on what to do when you recover the lost or damaged property. You'd have to check your specific policy to be sure of the proper course of action according to your carrier. But, to get an idea, here's what it says about recoveries in our inland marine policy: So, technically, according the most equipment coverage policies, your recovered equipment and tools would be the property of the insurance company, and they should have the final say if they would like it back or if it's not worth the value to have you return it to them. It probably wasn't your insurance agent's place to dismiss it and advise you not to bring it up again; it should have been the insurance carrier and their claims adjusters' call. Additionally, if you're still working with that agent, you may want to consider how her counsel in this situation could reflect the quality of future counsel in the future and act accordingly. Hope that's helpful. If you have a current equipment coverage policy and are curious about its stance on recoveries, I'd happy to look it over for you, too.
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