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E&O insurance -- Would you buy if not required?

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I have been debating whether to purchase errors and omissions insurance. It isn't required in my state, and I have gotten along just fine for 14 years without it. But at the same time I realize that it's probably just a matter of time before I wish I had it. As we all know, even if you don't make a mistake there's always somebody willing to sue you. So what do you guys think? Would you buy it if it wasn't a state requirement for your license? I would NOT advertise that I have it. I carry well over the state-required minimum general liability insurance, but of course I realize that's a separate matter.

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I wouldn't buy it, but I've no complaints about the state requiring it given the number of crap inspectors there are out there. Home buyers need at least some protection in case they sustain damage from these inspectors.

Training, testing and regulation are always better than an E/O policy.

Marc

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Not necessarily. Insurance is not for all the things you can think of, it's for the low probability thing you can't think of.

Sometimes crazy stuff happens.

In a major metro area, even a false claim that's dismissed can break you. A claim, a couple depositions, one or two rounds of discovery, and a couple moderately compensated attorneys talking for a few days can quickly climb to >$50,000.

I carry the insurance. I have since '89.

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I have carried E&O well before I was required by law to do so. I think I have had it since 1997 or somewhere in that time frame. Working in the litigation support arena as I do, I have been exposed to more lawsuits that most will see in their lifetime. It is just not worth it from my point of view. Sure it cost money, but even if it was not required by my state and as long as I could afford it I would have it. It is just the cost of doing business.

More than once, I have seen home inspectors forced to file for bankruptcy due to a lawsuit. I have also seen many who have been sued and do not blink an eye when it is time to pay that deductible knowing that they will be protected and taken care of down the road.

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just keep in mind that it will only cover you for the inspections you make after purchasing the coverage.

That is pretty much how all insurance works! Ya gotta have it in place prior to anything that might be covered happening!

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just keep in mind that it will only cover you for the inspections you make after purchasing the coverage.

That is pretty much how all insurance works! Ya gotta have it in place prior to anything that might be covered happening!

yup, and the day you stop doing inspections, you either keep paying for a few years or you hope you never get sued while retired.

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Is that right? I got to keep buying E&O after I quit this gig?

Louisiana has a 12 month statute of limitations.

Marc

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No, you get a "tail" policy. It's a foreshortened coverage, if you decide to keep it at all.

Wow. A 12 month statute. You guys are clean after only 12 months? Double wow.

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The statute is a year here also, but I've no doubt that a decent lawyer could shred that in court. Just like they can blast away the contract provision limiting damages to the cost of the inspection.

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No, you get a "tail" policy. It's a foreshortened coverage, if you decide to keep it at all.

Wow. A 12 month statute. You guys are clean after only 12 months?Double wow.

It's already been challenged in court and was upheld. Some inspector had missed a foundation issue and got off the hook.

Marc

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I carry it and I'm not required too. It gives me piece of mind. The price for E&O has really come down. It is 75% less for me than it was 15 years ago.

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I would not have carried E&O insurance if I wasn't required to and I did not purchase tail coverage after leaving the gig in December. It's a numbers game, and by my calculation the numbers favor the insurance companies.

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If the numbers didn't favor the insurance company, or any business in the private sector for that matter then the company or business wouldn't exist. No profit? No company.

Kurt's got me convinced though. I'd buy it for that one oddball case that would otherwise put me out of business.

Marc

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I have had it since day one. Did not even hang out my shingle until I had it. I consider it a cost of doing business and a cost to make sure I can stay in business. If someone can sue a fast food restaurant, and win, because she put a hot cup of coffee in her lap claiming the coffee was to hot...... Well far be it from me to thing some person won't get up on the wrong side of the bed one day and decide to take it out on me.

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What the previous 2 posters say. Of course the numbers are slanted in favor of the insurance companies; I hope they are.

Statistically, I can make extremely strong arguments for not having insurance. Interestingly, those arguments have nothing to do with insurance, and everything to do with personal bias and inclinations, which, I will add, is what makes America great.

Of course we all hate insurance. While I'm not going to go into the history of the industry, insurance is one of the modern abstractions that make complex businesses possible.

It's a business and personal decision everyone gets to make for themselves; I'd never try to convince anyone to get it. There's too many well proven historical studies to do that for me.

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Thanks for all the replies. I had pretty well already made up my mind that I was going to buy it, but I tend to be very deliberate and analyze things to death. I wanted to make sure there weren't any possible negatives that I had not previously considered.

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A little off subject, but I got a call yesterday to inspect a bank. The current owner has a requirement that any inspector have $2 million in general libility coverage. I don't have that much. so no bank inspection. I thought that was a pretty high number, what the heck could I have done to cause $2 million in damage. In 8 years of full time inspection I've nver caused more then $50 in damage.

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A little off subject, but I got a call yesterday to inspect a bank. The current owner has a requirement that any inspector have $2 million in general libility coverage. I don't have that much. so no bank inspection. I thought that was a pretty high number, what the heck could I have done to cause $2 million in damage. In 8 years of full time inspection I've nver caused more then $50 in damage.

The owner knows that most of us don't carry that kind of coverage and he's banking on them not being able to find anyone. Call your insurance company to see if it's possible, for a fee, for them to raise your limit to $2M, just to cover that inspection.

ONE TEAM - ONE FIGHT!!!

Mike

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A little off subject, but I got a call yesterday to inspect a bank. The current owner has a requirement that any inspector have $2 million in general libility coverage. I don't have that much. so no bank inspection. I thought that was a pretty high number, what the heck could I have done to cause $2 million in damage. In 8 years of full time inspection I've nver caused more then $50 in damage.

Many commercial type folks(most banks and venture capitalist investors) require $2M GL for anyone that is doing work on their behalf, such as commercial draw or consulting. I ran into this several years back and bumped my GL umbrella policy up to $2M, it only cost me an extra $110 a year over the cost of the $1M policy to have it .. Not really a big deal and they are doing it to cover their ass-sets!

It's not that you are going to do that much in damage to the property but when you are dealing with banks that have a huge net worth and you are working on a multi-million dollar property it is all about prospective and CYA.

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"Some" new home builders raising the bar as well.

Over the past year or so some builders in various Texas cities have also been ramping up insurance requirements for us 3rd party inspectors when a home-buyer wants us to provide our inspection/report.

Builder won't let us on-site without a signed agreement/statement with copies of various minimal insurance requirements.

One builder had these three items:

E&O - $2M

GL - $4M

Auto - $1M

They are not all that extreme, but this builder was getting away with it and pretty much stopping inspections by 3rd parties for the buyers.

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I could carry the NY minimum of 500k GL, but for less than $20 a year more I got a business owners policy that provides $2 million GL, $5k in medical, $20k in equipment coverage, and $20k in lost earnings coverage. It's under $500 a year.

The policy is apparently popular with small farms, a couple years ago I got an amendment to the equipment coverage the specifically excluded livestock.

$1 million Auto coverage is going to be impossible unless the vehicle is owned by the business.

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