E&O Coverage for Other Report Users

[rjmiller]

Does anyone know if E&O insurance covers losses by other users of inspection reports other than the client?

...which leads to the next question, has anyone encountered issues allowing pre-sale reports to be distributed to potential buyers (i.e. can buyers sue for losses).

Thanks

[Robert Jones]

My reports are only for my client, the one who actually signs my agreement. The report belongs to my client as they paid and signed for it. If I receive a call from someone that happens to "come across" their report, I explain that I cannot discuss the report findings with them. My liability ends with my client.

[Scottpat]

I'm pretty sure that all of the major professional liability coverages will cover third party issues. Once it is out your hands, you have no control over the reports use. It makes no difference if you have Copyright or whatever on it, you still reported it and folks will still use that information and hold you accountable right or wrong. The E&O coverage is to help protect you.

[John Kogel]

Thanks, Scott. I was feeling that is the case but not sure. I would read the E+O information to be sure.

Pre-sale inspection reports are going to be distributed to interested parties, and the buyer will almost certainly get a copy.

You can have a disclaimer in there that holds you the inspector harmless from any use by a third party, which is anyone other than the party that hired you.

A disclaimer won't eliminate trouble but it helps to discourage sharks to some extent. If they didn't hire you and did not pay for the info, they have a weak case.

However, all the complainant has to do is convince a judge that they relied on your info and that your info has caused them harm.

So yes, they can sue you.

Even if your report is accurate and faultless, they can sue you because they misinterpreted the info. That is the nature of this crazy biz.

[rjmiller]

Great answers, thank you.

[InspectorPro Insurance]

On 8/30/2014 at 1:00 PM, rjmiller said:

Does anyone know if E&O insurance covers losses by other users of inspection reports other than the client?

 

...which leads to the next question, has anyone encountered issues allowing pre-sale reports to be distributed to potential buyers (i.e. can buyers sue for losses).

 

Thanks

Old post but worth a reply since no one in the insurance industry wrote a response back in 2014.

In the last five years, we've seen a fair number of claims resulting from report passing or third-party reliance. In Northern California in particular, it's pretty common for home inspectors to perform inspection for sellers and for those sellers to provide the report to potential buyers.

Ultimately, anyone can sue you for any reason. However, there are some things you can do to mitigate report passing and give yourself some ammo when unintentional reporting passing happens. Some general recommendations:

• Teach the real estate agents you work with that it's important to get a new inspection every time there's a new buyer⁠—regardless of what the findings were during your initial inspector.
• Make sure you really spell out the limitations of your visual, non-invasive inspection verbally and in writing to your clients, agents, and anyone interested in acquiring your reports. Understanding that inspections are snapshots in time will help them recognize that report passing isn't reliable.
• If inspecting for a seller, be sure your pre-inspection agreement includes third-party reliance language that requires whomever the seller shares the agreement with (i.e. a potential home buyer) to execute an inspection review agreement.
• On the first or second page of your inspection report, we recommend prominently stating that third-party reliance is prohibited without a signed inspection review agreement. Also include instructions on how clients can request inspection review.

As always, check in with your attorney or insurance provider to make sure that any of the risk management techniques you use, including the ones recommended above, make sense for your state.

Hope that helps!