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As we speak, the website includes all 38 articles currently stored at this location, as well as social networking information, the best way to reach me and a welcome video! More great information and programs will be posted shortly.

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Pre-Inspections for Relocation Companies

A home inspector recently emailed me with a question about doing pre-inspections for relocation companies. I referred him to a prior post that I wrote on the subject which answered his question. But it reminded me of several cases that I have had involving inspection companies that subcontract out inspections on behalf of relocation companies.

Based on the experience of those cases, if I were a home inspector, I would steer well clear of doing inspections for one of those outfits. For several reasons.

First, in order to get the business from relo companies, they drop their pants on pricing precipitously. So the inspector who actually does the inspection is very likely losing money on the proposition.

Second, their loyalty is to the relo company, not the inspector. So the minute that there is an “issue”, they are all too willing, ready and able to adopt a customer-is-always-right attitude despite the mountain of empirical evidence that I have assembled that, when it comes to dissatisfied home inspection clients, the customer is invariably wrong.

In one case that is typical of the genre, the client for whom the inspection had been performed was complaining about alleged damage to the property “discovered” months after the original inspection by a subsequent inspection after “destructive probing of exterior stucco.” You can’t make this sh*t up.

So the geniuses who run this inspection company, which gets thousands of inspections - maybe, tens of thousands - from this relo company, sided with the client and paid the claim, notwithstanding that the original inspector’s report clearly pointed out not only that the portion of the property that was implicated in the claim had not been inspected due to weather and safety concerns but also recommended “Further evaluation . . . to identify potential issues.”

Now I can understand that these guys wanted to mollify a big client that gives them tens of thousands of dollars in business but then they wanted the inspector to reimburse them for their generosity. It’s like going to dinner with an ostentatious check-grabber who then hits you up for gas money to get home.

So when I got involved in the matter, I had to advise these folks that they were volunteers and that, in law, volunteers get squat!

Under the well-established Voluntary Payment Doctrine, of course, which states that there can be no recovery for a voluntary payment of the obligation of another without request and with no promise of repayment by the party whose debt is paid.

Bonds are NOT a Form of E&O Insurance

Reader Martin Greenberg brought up a good point in a comment on my recent post “The Importance of E & O Insurance.”

“In the state of Arizona,” he wrote, “the licensing bureau offers a choice. E&O coverage or post a bond. Since few inspectors are successfully sued and plaintiffs rarely win more than a few thousand dollars, bonds make sense. However, the inspector is ultimately responsible for paying the claim in the event a plaintiff is successful.”

A number of states that require a license to perform home inspections also require that Home Inspectors carry Errors and Omissions Insurance in certain minimum amounts as a condition of licensure. The intent is to assure that the inspector will be able to respond financially in the event that her negligence causes harm to one or more of her clients. A handful of states allow Home Inspectors to fulfill their financial responsibility requirement by securing a surety bond.

The most important thing to understand about surety bonds is this: they are not insurance. They are a guarantee that, if the obligor [the Home Inspector] fails to fulfill an obligation that is covered by the bond [pay a judgment], the surety [bond insurer] will pay and then go against the obligor [home inspector] to be reimbursed. Most of us are familiar with the concept of bail bonds. If the defendant fails to appear for trial, the bail bond is forfeited.

The problem with claims against home inspectors that reach the lawsuit stage is not the size of the awards; though, contrary to the writer’s assertion, they can, in fact, be quite sizable. It is the size of the legal costs that, in professional liability cases, where the defendant almost always prevails, ensures that any victory will be a Pyrrhic one.

Another problem with surety bonds is that underwriters require the obligor [home inspector] to have substantial assets, usually 5 times the amount of the bond. Otherwise, the obligor has to collateralize the bond.

Thus, a $50,000 bond would require an obligor to have $250,000 in unencumbered assets in order to qualify. Or to assign collateral to the surety in the amount of the bond. The fees for bonds range from 1% to 3% - depending on the creditworthiness of the obligor - with a minimum premium of about $250. Thus, a $50,000 bond could cost upwards of $1500.00. A million dollar E & O policy would not cost much more than that, provide substantially more protection and not encumber or imperil assets.

Thus, while a bond might satisfy a statutory licensing requirement, the obligor is essentially self-insured. And would still have to hire and pay for her own counsel.

Five Steps To a Good Night's Sleep...and Higher Inspection Fees

The number one complaint that I get from Home Inspectors on the Law and Disorder Tour is about E & O Insurance companies. Their perceived default claim posture of caving in and paying unmeritorious claims - usually with a hefty contribution from the inspector pursuant to the deductible feature of the insurance policy - sends inspectors over the edge. And justifiably so, in my opinion.

Having quashed over 200 claims at the demand-letter stage in the last four-and-a-half years - and several more where the first notice of claim was an actual lawsuit - I am confident that I have solved that problem - at least for those insured under the Lockton Affinity E & O Program described elsewhere on this site.

The second-most common complaint that I get is that it is nearly impossible for home inspectors to charge fees commensurate with their skills and level of experience because the competition is chasing business by quoting absurdly low fees. So inspectors feel that they have to match those fees to protect market share.

A few years ago, well-known Home Inspector Marketing Coach Ken Compton [http://www.staybusyallyear.com] invited me to speak at the Annual Workshop that he conducts for his coaching clients. The Workshops are now conducted in Naples, Florida but this one was in Jasper, Georgia.

The Workshops are intense plenary sessions that go from 8:00 a. m. to 5:00 p. m. for three full days and feature top speakers that teach the coaching clients how to by-pass real estate agents, go directly to the consumer, how to use blogs, video and a whole host of other techniques to outmaneuver your competition. It was fascinating to me because a lot of the techniques are obviously transferable to other enterprises.

At the end of each day, everyone assembles for cocktails and dinner and socializing, including the speakers who are always quite generous with their time and advice. I was scheduled to speak on the second day of the Workshop for an hour and forty minutes and I was turning over in my head what material from the four-hour Law and Disorder Seminar I would present in this truncated session, keeping in mind that this was a Workshop on how to increase your revenue.

I was still thinking about it up until shortly before it was my turn to speak and then it came to me. In a moment of inspiration, I solved the problem of the low-baller.

Almost everywhere that it is allowed - which is pretty much everywhere - home inspectors will contractually limit their liability to the amount of the fee charged for the inspection. So why not eliminate the Limitation of Liability provision and charge more for the inspection?

“Have I lost my mind?” you ask. Absolutely not. ClaimIntercept™, my proprietary method of terminating home inspection claims aborning, is well past its proof-of-concept stage. Virtually all claims - over 99% - against home inspectors are completely defensible as I have conclusively demonstrated time after time over more than 200 cases for reasons explained at length elsewhere on this site.

Here’s how the colloquy would go with a prospect. What’s the first thing out of your prospect’s mouth when you answer the phone? All together now. “How much do you charge for a home inspection?”

You say: “I’m pretty sure that I charge more than anyone whom you have talked to. Would I be correct in saying that you probably already have 3 or 4 quotes of $350 [or whatever it is in your market]?”

The prospect will agree. You say “I will tell you why those inspectors can charge as little as that. They don’t stand behind their inspection reports.”

The prospect: “Hunh?” You: “They limit their liability to the amount of the inspection fee. So, if they miss something major in their inspection, they’ll give you your money back and walk away. Would you go to a doctor who told you “Hey, if you die on the operating table, I’ll give your family back my fee for services?”

The prospect, who cannot fail to see the perils of going with a low-baller at this point, will then ask “So what do you charge?” And now you have him.

If you say “I charge $500 [or whatever $150 above your market is],” the prospect will not be thinking that he’s paying $500 for an inspection that should only cost $350. He will be thinking that he’s paying $150 more than the cost of a worthless inspection.

Which is not to say that the low-baller might not do just as good an inspection or, perhaps, even better than you would. Keep in mind that a lot of very good inspectors are forced into being low-ballers by cut-throat competition. And real estate agents.

Now the caveats: DO NOT DO THIS IF YOU DO NOT HAVE E & O INSURANCE THROUGH LOCKTON AFFINITY and DO NOT SUBSCRIBE TO ClaimIntercept™ and ARE NOT GETTING AT LEAST $150 MORE PER INSPECTION.

Repeat: DO NOT DO THIS IF YOU DO NOT HAVE E & O INSURANCE THROUGH LOCKTON AFFINITY and DO NOT SUBSCRIBE TO ClaimIntercept™ and ARE NOT GETTING AT LEAST $150 MORE PER INSPECTION.

Here are the five steps to a good night’s sleep and higher inspection fees:


One: Get E & O Insurance through Lockton Affinity http://inspectors.locktonaffinity.com or by calling 800-803-9552.

Two: Subscribe to ClaimIntercept™.

Three: Eliminate the Limitation of Liability clause from your Pre-Inspection Agreement.

Four: Demand at least $150 above market for your superior inspection service.

Five: Perform the superior inspection service and write the superior inspection report that you are capable of performing and writing by reason of your training, skill and experience.

The extra $150 per inspection will vastly outstrip the cost of E & O Insurance and ClaimIntercept™.

I have every confidence that only a very small percentage of home inspectors who read this post will implement this strategy, but know this: every inspector who has done it, has become a huge fan of the Home Inspector Lawyer.

Managing Risk with E&O Insurance

A home inspector in Texas recently asked me via email what I thought "about the efforts to have the Texas Inspector E & O mandate rescinded" which was my first notice that such an effort was afoot. Evidently the Texas Professional Real Estate Inspection Association (“TPREIA”) had succeeded in having a bill to do just that introduced into the Texas Legislature.

Anyone who has been “stalking me”, as one HI who recently connected with me on LinkedIn put it, for any length of time surely knows that I am no fan of government mandates. In general. So, bully for TPREIA for taking the laboring oar on an issue that is a major concern to its membership.

Should home inspectors protect themselves from their nutty clients? Of course. And only those who are nuttier than their clients do not take some protective measures: tightening their pre-inspection agreements, contractually limiting their maximum monetary exposure [where permitted, of course, as many jurisdictions do not allow this], issuing short-term warranties, friending the Home Inspector Lawyer, and purchasing errors and omissions insurance.

Any businessman with a professional liability exposure as severe as that faced by home inspectors - see multiple horror stories, infra - who needs to be government-mandated into a scheme for managing that risk should seriously consider working for “the Man”, instead.

The major problem with government insurance mandates is that they are unrivaled in their capacity for gumming up the American free market system. Florida, for example, has recently mandated that mold assessors must carry $1,000,000 in errors and omissions insurance. One imagines the smug legislators clinking martini glasses after this surpassingly stupid law was passed and congratulating themselves for this major step forward in consumer protection. Meanwhile, insurance companies are staying away in droves from this newly created “market.”

Many home inspectors, of course, do carry errors and omissions insurance irrespective of whether or not it is a statutory requirement in their jurisdiction. Others are dead-set against it. I have friends in both communities.

I know a home inspector who manages his professional liability risk thus: He puts aside the premium that an insurance company would charge for E&O insurance into an escrow account each year and he has a $30,000 line of credit against his house. He figures that, between the two, that should cover him if he has a claim and, if he doesn’t, break out the champagne!

I told him, “Paul, if that were the only way to hedge your professional liability exposure and, tomorrow, someone invented E&O insurance, he would win the Nobel Prize.”

Most HIs who do carry E&O insurance, however, are not leveraging it into higher inspection fees.

How to do that, next time.

The Story of ClaimIntercept and How to Receive It

When I first began presenting the Law and Disorder Seminar back in 2007, many of the inspectors in attendance would approach me afterwards and ask if they could retain my claim squashing services on a pre-paid basis - a pre-paid legal of sorts.  While I appreciated the sentiment, I was very wary of providing such a service for a number of reasons.  For one, I did not have any idea of how to price such a service or, indeed, what services to provide.  Or what the inspectors’ expectations might be.  So I simply said that it was not something that I had ever considered doing but would give the matter some thought.

Three years later, after having defeated over 150 claims aborning, I really did begin to give it some very serious thought.  I thought about how truly ridiculous the overwhelming majority of claims against home inspectors are.

When I first started getting asked by home inspectors to respond to negligence claims being made by their former clients and/or their attorneys, every single one of them was dropped after I intervened and sent a responsive letter.  After dispatching the sixteenth or seventeenth claim in succession, I thought that I was probably seeing a skewed sample.  These absurd claims could not possibly represent the universe of home inspection negligence claims.

Later, when the number of consecutive successful claim interventions reached forty, I had a different thought.  I no longer thought that the sample that I was seeing was skewed.  What I was seeing was the sample.  In other words, virtually every claim against home inspectors is without merit.  And eminently defensible.

Now, four years and close to 200 successful interventions later, I am absolutely certain that I have figured it out.  And so, last November, I began to offer my claim intervention services on a pre-paid basis.

At first, I offered it exclusively to those inspectors who had actually had to avail themselves of those services on an ad hoc hourly fee basis and the very enthusiastic response of those inspectors to the offer convinced me that this was definitely a service that home inspectors would support and that I was pricing the service fairly.

Now, I am opening the claim intervention service up to every inspector on a pre-paid basis.  Please email me if you would like further information.

The Importance of E&O Insurance

I am continuously surprised at the number of inspectors who do not carry professional liability insurance or, as it is popularly known, Errors and Omissions Insurance (“E & O”). When I ask inspectors who attend the Law and Disorder seminar whether or not they carry E & O insurance, between 40 and 60 percent of them say that they do not. That number is constantly diminishing, however, as more and more jurisdictions have introduced laws requiring that home inspectors become licensed and have made the carrying of E & O insurance a condition of licensure.

Some inspectors who do not carry E & O would, perhaps, like to carry it but simply do not conduct enough inspections to be able to afford it. Those inspectors generally leave the profession when carrying professional liability insurance becomes a condition of having a license.

Many others do not carry it because they think that it is “too expensive” and/or that it “paints a target on your back” - that is, it makes you more likely to be sued than if you had no insurance.

Whether or not a given product is “too expensive” is something that individual consumers have to determine for themselves after conducting a cost-benefit analysis and considering competing products.

Inspectors who elect to “go bare” should not, however, delude themselves into thinking that their not having professional liability insurance removes “the target” from their back.

In many ways, an uninsured defendant is a much easier “target” for an aggrieved claimant. For one thing, not having insurance, they are less likely to defend a suit and plaintiff can, thus, obtain a judgment against them by default. Even if they have viable defenses to the suit!! If they do defend, they have to make the calculus of whether it is more expensive to defend the suit or simply pay the plaintiff. And having an unpaid judgment on your credit report effectively makes you unbankable, a terrible position for a serious businessman to be in.

About three years after I began practicing law, I had a matter that brought me to small claims court in a neighboring municipality. The court’s docket was very crowded that day and I had to wait my turn behind several other attorneys, one of whom had a number of matters before the court and was taking one default judgment after another against no-show defendants on behalf of several institutional creditors.

In my naivete, I thought that he was on a fool’s errand and asked him afterwards what the point was of obtaining judgments against folks who were not likely to satisfy them. His reply opened my eyes and taught me that very few people are truly judgment-proof.

He told me that he had a file cabinet that was chock full of default judgments that he had obtained and that eventually these folks were going to want to buy a house or a car or refinance and will have to satisfy the judgment in order to do so. Of course, by then the judgment will have swelled with the addition of post-judgment interest.

“Not a day goes by,” he told me, “that I don’t get a call from one or more of these judgment-debtors who wants to satisfy the judgment.”

Risk, Its Place in the Industry and How to Combat It

The recent earthquake that hit near Japan set me to thinking about emergency preparedness in general and disaster-preparedness, in particular. The earthquake-prone nation is being widely praised for the strength of its building codes which contemplate the need for buildings to be able to withstand these inevitable periodic massive shocks to their structural integrity. And by all accounts, all things considered, the minimal damage that was sustained by buildings in cities closest to the epicenter of the huge quake has vindicated the decision to implement those precautions.

Where I live, we seldom experience earthquakes, a fact that prompted the actor David Morse [St. Elsewhere] to move here with his Philly-born wife, after an earthquake destroyed their family home in California in 1994. And the ones we do experience tend to be at the lower end of the Richter Scale. I personally have never experienced one and apparently slept through one that took place here in the early ‘70s.

We do get our share of capricious weather, however - Nor’easters, blizzards, hurricanes and the occasional tornado - for which you do have to be prepared. As President Kennedy sagely observed, “The time to fix the roof is when the sun is shining.” The time to plan for disaster is before disaster strikes.

Risk management is the workman-like name that economists give to this hedging science. Most major corporations have entire departments devoted solely to minimizing the shock to earnings that might ensue, should some identifiable risk eventuate. And many of their techniques for doing so are quite sophisticated. Airlines, for example, hedge against spikes in the price of oil, a major component of their cost structure, by playing the oil futures market and thereby reducing the risk.

That is one of the four generally recognized methods of managing risk: risk reduction. The other methods are: avoiding the risk altogether, transferring it to another party and risk retention or accepting the risk. Home inspectors engage in all four of these strategies.

Many home inspectors will not perform certain types of inspections: pool inspections, for example, or termite inspections, or for certain kinds of clients: lawyers come to mind for some reason, thus avoiding that particular risk. Others purchase insurance with various deductibles, thus both transferring and reducing the risk at the same time. A tremendous number of inspectors - maybe even a majority - simply retain the risk, relying on their acknowledged skill and, perhaps, over-relying on the strength and enforceability of their inspection agreements to protect them.

The problem with the home inspection industry, of course, is that no matter what an inspector does, no matter how thorough he is, no matter how painstakingly she identifies and accurately reports issues, no matter how thoroughly and appropriately he disclaims responsibility for certain inaccessible systems, the home inspector is simply too tempting a target for that scapegoating troika: the client, the real estate agent and the repairman, all of whom have vested interests in getting the inspector to pay for needed repairs.

The good news is, as I have pointed out quite often elsewhere on this site, is that these generally ludicrous claims are eminently defensible. The bad news is that, if the inspectors who come to the Law and Disorder seminar can be credited, no one is all that enthusiastic about defending them. Especially, if it’s going to cost, you know, more than the deductible.

And that is the problem that I have identified with the home inspector E & O insurance market place and a major reason why so many inspectors are willing to take their chances going it alone. And who can blame them? If the insurer is not going to actively resist ridiculous claims, why bother having insurance? Better to set the money aside and conduct your own defense if the time comes.

Fortunately, there is now a better way. My success rate at terminating these claims aborning attracted the attention of a major insurance broker who completely supports and endorses my approach to claim containment and incorporated that approach into the E & O program that it designed for home inspectors. For more information and a quote call 800-803-9552 or visit http://inspectors.locktonaffinity.com.

Look at Me Now: The Defendants AREN'T Always Guilty

A week or so ago, I received an email invitation to attend Alumni Weekend at my law school alma mater, the Temple University Beasley School of Law. And because this is my class’ Silver Anniversary year, there is additional hoopla planned for us. Attached to the email was a list of all of the members of the class and their current contact information.

Glancing at the list, I was surprised at how large the class actually was on the one hand and how few of the names I actually recognized on the other. Our class includes a former US Congressman and a current one, senior partners at large Philadelphia law firms, Federal and State Court judges, top homicide prosecutors and criminal defense attorneys, and a surprising number of married couples. Who knew law school was such a “meet” market?

Law school, of course, is a much different experience than a resident college where you’re interacting with classmates continually: in class, in the dorms, in the dining hall, in the gym, on the quad and at off-campus student hangouts.

In law school, especially an urban school like Temple, where there was a substantial population of “returning” students, like me, with families and professional obligations, you don’t see much of your classmates outside of class. The minute that class is over, you’re out the door to attend to your other interests.

Where you did spend a lot of time with classmates, however, was in Clinical Programs. The one I participated in was the Defender Program that was administered by the Philadelphia Public Defender’s office. The idea was to give you some practical courtroom experience so that your knees would not be knocking together the first time you were representing a paying client in court.

I made two enduring friendships in that 12-student practicum, one now a top homicide prosecutor and the other a top public defender, but what I remember most about my classmates was this one woman who, when the rest of us were dreaming of becoming center-fielders for the Brooklyn Dodgers even though we could not hit a curve ball, must have been pretending to defend her Barbie doll for killing her abusive Ken doll.

She never thought that any criminal defendant could ever possibly actually be guilty of the crime charged, a belief that never failed to engender a cascade of eye-rolling amongst the rest of us given that the vast majority of criminal defendants are, in fact, guilty as charged.

I’m trying to imagine what my classmates from that clinical program will be thinking about me when I tell them that the claims that I see being made against my home inspector clients actually never do have any validity.

Dirty Harry and Home Inspection: You Don't Need to Pay

There's a scene in the original Dirty Harry movie that resonated with me when I first saw it and that I am frequently reminded of in my practice of advising home inspectors. Clint Eastwood, as Inspector Harry Callaghan, is hustling against a deadline set by a lunatic serial killer, based on the Zodiac killer that plagued San Francisco in the early ‘70s. Along the way to his rendez-vous with the killer, Harry is accosted by some street toughs whom he handles methodically despite being outnumbered. They keep coming back for more, however. Finally, exasperated by their perseverance, he whips out the huge .44 Magnum, sticks it in the face of one relentless punk and says “You don’t listen, do you, Asshole?”

Recently, one of the home inspectors who participates in my pre-paid claim response program had this unhappy experience. The inspector conducted the inspection in August and was accompanied by the client's agent on his rounds. He reported his findings in the normal fashion and everyone seemed to be happy with the results.

The client did not move into the home until some four months later and when she did, she thought that she smelled gas upon entering the property. She called the local utility which confirmed a gas leak and there then ensued an epic effort on the part of both the client and the real estate agent to dragoon the inspector into paying for the needed repairs.

As I have written elsewhere on this site, I think that refunding inspection fees every time a client experiences a bad result is a very bad habit to develop. I told the inspector that not only should he not be ratifying this unreasonable client’s delusional notions of culpability but that neither should the real estate agent. So he told the agent that he was not going to pay because he was not responsible and that furthermore, she should not be paying anything either.

But this yenta was relentless. Multiple email correspondence to both the real estate agent and the inspector with ccs to attorneys. The real estate agent - who just wanted the whole thing to go away - was putting none-too-subtle pressure on the inspector to pay for part of the repair - to split it with her - or at least refund the inspection fee. Never mind that a. detection of gas leaks is not part of a home inspection and b. neither the inspector nor the real estate agent smelled gas at any point in the two-plus hours it took to conduct the inspection. Notwithstanding that, the real estate agent ended up paying part of the repair bill. But the inspector continued to stonewall.

Finally, the client sent the inspector an ultimatum that threatened legal action lest he fail to acquiesce to her preposterous demand.

So, I finally had to explain to her that the inspector would not be paying for her repairs for the very compelling reason that he was not responsible for their provenance; that, under those circumstances, her threat of legal action had no cognizable foundation; and that, if she persisted in pursuing that spectacularly foolish strategy, she would most assuredly ultimately wish that she had not. I call it the “Dirty Harry letter.”

The Six Claim Categories Are All Defensible

Rare is the Law and Disorder Seminar that does not have a few - and often several - casualties of war among the attending home inspectors - the multi-front war between them, their unreasonable and unrealistic clients, their referring real estate agents and, all too frequently, their insurance companies. They all seem to think that it is the inspector’s responsibility to “make things right”, even if he has no culpability whatsoever, which, in my experience, he almost never does. Here’s why.

Almost every claim that is brought against a home inspector will fall into one of the following six categories.

1. A claim for something that cannot possibly be determined by a home inspection: Boundaries, Title, Encumbrances and the like.

2. A claim for something that is outside the operative Standard of Practice: mold, underground tanks and the like.

3. A claim for something that was concealed at the time of the inspection: by furniture, carpeting, furniture, or finished work.

4. A claim for something that was disclaimed in the inspection report due to inaccessibility: roof covered by ice and snow, for example.

5. A claim for something that was discovered by the inspector and reported by him. Really!

6. A claim for something that was operating/functional at the time of the inspection but ceases to be so some time after the inspection.

And what those six categories of claims have in common is this: they are all eminently defensible. The problem is that clients and not infrequently their real estate agents, as well, often regard that as a mere technicality that should not prevent the home inspector from paying to have their underground storage tanks removed, their worn-out heat pumps replaced, or their backed-up septic tanks unclogged.

And, of course, it is one thing for clients and real estate agents to think that way, quite another for an insurance company to do so. Yet, that is the tale I hear time and time again from inspectors who come to the Law and Disorder seminar. Companies continue to pay bogus claims because it is “cheaper” than defending them. You don’t have to be Buckminster Fuller to conclude that that is a business model that is doomed to failure.

Yet that is the bizarro world that home inspectors inhabit.

The Five Stages of Claim Grief: Denial, Anger, Bargaining, Depression, Acceptance

A few weeks ago, I had a conversation with a home inspector in Connecticut. The inspector was trying to neutralize a claim by a former client over asbestos contamination issues with a property that he had inspected some months previous.

Now, as a general matter, the determination of environmental hazards and toxins is some distance outside of extant home inspection standards of practice (“SOP”) and Connecticut, which has its own state home inspection SOP, is no exception. Unfortunately, Connecticut is no exception only because the Connecticut Department of Consumer Protection issued a letter clarifying the fact that notwithstanding the fact that the law, itself, states that inspectors are required to inspect for and report asbestos, in reality they do not have to. Thus, as elsewhere, Nutmeggers are in the very best of hands.

In the event, the inspector did in fact observe, photograph and report asbestos in this ancient dwelling even though he did not have to and, in addition, opined that this dwelling, having been constructed in asbestos’s salad days, very likely had even more asbestos than he was able to observe in a limited, non-invasive, visual inspection and that his client should, thus, seek a further, more thorough determination of the presence of this lethal contaminant by another professional possessing the requisite skill.

Most of this website's readers should be able to guess how this movie ends.

Despite the inspector’s having advised her that the home contained asbestos, advised her that it very likely had even more asbestos than even the inspector was able to determine - even though he did not even have to - and advised her in the strongest possible terms to have a more thorough investigation of this potential health and environmental hazard by a skilled professional, she not only ignored that sage advice, she didn’t even read the inspector’s report. Ever.

Now she wants the inspector to pay for remediation. So the inspector has been going back and forth with her trying to explain all the reasons that he’s not responsible and making no headway whatsoever. So, one of his colleagues, a Law and Disorder Seminar alumnus, referred him to me.

I told him that, in my experience, these home inspection claims never have any validity and the reasons why that is universally the case. He wanted to know what it is that I do. I told him that most folks who make claims against home inspectors go through a version of the Five Stages of Grief: Denial, Anger, Bargaining, Depression and, finally, Acceptance.

First, they can’t believe this calamity is happening to them. Then, after some contractor throws the home inspector under the bus, they’re angry at the home inspector for not making them read the inspection report. Then, they begin to bargain. With the Contractor. Who tells them that the home inspector is responsible for their problems, probably has insurance and should be the one to pay to resolve the issue and, if they can get the real estate agent to pay for some or all of it, well, it doesn’t get any better than that. Depression when they discover that the inspector is not going to pay for something he didn’t cause.

Then, I told him, I get them to Acceptance.

Arbitrators Don't Need to Know the Business

A question that comes up fairly frequently at the Law and Disorder Seminars when I am extolling the virtues of requiring disputes to be settled in Arbitration is whether or not there should be a requirement that the arbitrator be “familiar with the home inspection business.” And many home inspectors have such requirements in the Arbitration Clauses of their Agreements.

As I have written elsewhere on this site, home inspectors have a very dim view of the American legal system and do not expect to get a fair shake. So some of them, in an effort to level the pitch or stack the deck - choose your own metaphor - have inserted this additional requirement into their Agreements.

What I tell them is this: when I was in the Army, forty-some years ago - yeah, I know, I don’t look that old - the Uniform Code of Military Justice had recently been revised to give Enlisted Men who were facing Courts-Martial the right to have one Enlisted Man on the Court-Martial panel. The change was widely hailed as a victory for Enlisted Men [and Women]. The reality for those exercising this “right” was that the Enlisted Man selected to fulfill it was always some cranky senior NCO with a chest festooned with decorations and a lengthy series of service stripes on his sleeve.

It didn’t take long for Enlisted Men to realize that they were much better off with a baby-faced Lieutenant who would actually listen to the evidence before making up his mind.

If you have ever had occasion to read any of the many home inspection message boards extant on the web, you will not fail to notice that there is no shortage of testosterone or pride in their personal work-product among regular contributors to those boards. Would you want any of those folks - the moral equivalent of the cranky senior NCO - acting as your arbitrator? I didn’t think so. That’s also the demographic that populates State Home Inspection Licensing Boards, as well. And you most definitely would not want any of those folks as your arbitrator.

The truth is that in every Court House in every County in this country on every day of the week, juries of laymen are making decisions on matters far more complicated and serious than a residential home inspection: medical malpractice cases, murder cases, securities violations, anti-trust - you name it.

How do they do that? By listening to the proffered evidence presented by the opposing advocates, making factual determinations based on their common sense and then applying the law to those facts.

Your non-home inspector arbitrator will be able to do the same thing and he will not, at the end of the day, be congratulating himself for being a much more thorough inspector than you are.

Strengthen Pre-Inspection Agreements to Avoid Lawsuits

One of the techniques that I stress in the Law and Disorder Seminar for reducing one's potential for being successfully sued is for home inspectors to strengthen their Pre-Inspection Agreements with clauses that narrow a claimant’s ability to bring a claim by designating contractually the exact circumstances under which the inspector will be amenable to suit.

One of those circumstances is the venue wherein a claim may be brought. As a home inspector, or any business performing services pursuant to a contract, you never want to be in any state or federal court. And for a myriad of reasons.

For one thing, in the context of a residential real estate inspection, any lawsuit is bound to involve multiple parties, a circumstance that is guaranteed to increase the cost and decrease the likelihood of resolution. For another, the cost for the plaintiff to get into court is low. Filing fees for plaintiffs are pretty modest. The cost to you to get out of court, on the other hand, will be quite high. Not only will you have the plaintiff to contend with but your fellow defendants, as well. And while the plaintiff may be very agreeable to letting you out of the suit, your fellow defendants, who will have filed their own cross-claims against you, may not be.

Most home inspectors of my acquaintance have already figured this out and, so, have clauses in their Pre-Inspection Agreements that mandate that all disputes arising from the inspection must be brought in Arbitration. If your client’s attorney has read his client’s Pre-Inspection Agreement, he knows that he will not be able to join you in with the seller, the seller’s agent and broker and his client’s agent and broker. He’ll have to prosecute the case in two separate venues, which he will be loathe to do. Especially if he has heard from me the manifold reasons why you have no liability.

Problems arise, however, when the attorney does not know that there is an Arbitration Clause in the Pre-Inspection Agreement or as is often the case that there even is a Pre-Inspection Agreement and goes ahead and includes the home inspector as a named defendant. In those cases, the more reasonable attorneys will generally - though not always - agree to voluntarily dismiss the claim against the home inspector upon hearing from me a compelling litany of reasons why that would be in his and his client’s best interests.

Another problem that has affected home inspectors adversely is that the Arbitration entity that their Pre-Inspection Agreements mandate be used may have gone out of business, thereby invalidating their Arbitration Clauses altogether, and putting the home inspector back into the mix with all the other defendants. And from that predicament, no one can extract the inspector.

To be on the safe side always name the American Arbitration Association as your required arbitrator. Its website is http://www.adr.org.

When the Report Speaks for Itself

Since this blog launched in early December, I have received a steady stream of correspondence from home inspectors asking my opinion on a wide variety of topics related to home inspections. Frequently, these inquiries inspire a blog article. So keep them coming.

A while ago, I got an interesting question from a reader about an inspection conducted for a young couple. The mother of one of them was financing the contemplated home purchase and was a looming presence during the home inspection and the inspector had heard her opine that she didn’t like the house because it was “too small.” The couple was represented by a buyer’s agent and the inspector knew both the buyer’s agent and the seller’s agent professionally.

Afterwards, the inspector discussed the findings in detail with the couple who seemed to find the discovered deficiencies manageable and were allowing how they would go about rectifying them. That was on Friday.

The following Monday, the inspector got a call from the listing broker who was considerably put out because the buyer’s agent had just informed him that the couple was backing out of the deal, according to the buyer’s agent, because they were claiming that the inspection had uncovered defects that could lead to a catastrophic fire. The inspector then told the listing broker that there was nothing in the inspection report that would remotely imply anything of the kind. To make the listing broker’s confusion even further pronounced, the sellers had agreed to correct several of the discovered deficiencies and drop the price further.

Well, you don’t have to be Ellery Queen to ascertain why these buyers were defaulting on their agreement. And so the inspector told the listing broker about the mother-financier’s dislike of the house.

And the questions that the inspector had were: did this disclosure breach a professional confidence and is there a better way to handle such a situation in the future?

The answers are: “Yes” and “Yes”.

If the sellers were going to be repairing certain uncovered defects, as well as reducing the price, it is a mortal certainty that the listing broker already had a copy of the inspector’s report. They were not taking those measures in a vacuum.

So there was likely no breach of confidence in telling the listing broker that the catastrophic fire potentiality was, at best, fanciful. You can’t betray a confidence that doesn’t exist. So no harm, no foul there.

The disclosure of the mother-financier’s audible musings of displeasure as a putative extraneous cause of the deal-breaking, however, was, methinks, a bridge too far and could engender a torrent of legal unpleasantness for the inspector’s clients should the sellers be so inclined, including a suit in equity for specific performance. At a minimum, the buyers could forfeit their deposit. Not that I have any sympathy for them. The time to discover a property’s dimensional insufficiencies is well before making a purchase offer.

If a similar situation presents itself in the future, a prudent inspector should first ascertain whether the opposing party or his representative has already seen a copy of the inspection report and from whom. Then simply say “The report speaks for itself.”

My Schedule for the Future Could Involve YOU

A couple of weeks ago, I presented the Law and Disorder Seminar at the West Virginia Association of Home Inspectors (“WVAHI”) Winter Workshop in Flatwoods, West Virginia pursuant to an invitation that I had received back in November from Sam Wood, an inspector that I have known for quite some time.

That prompted this email request from reader Robert J. Stawicki of Medina, NY:

“Could I get your schedule for your Law and Disorder seminar. I tried to catch the Flatwoods one but could not get directions or any other info. Thank you in advance.”

Presenting the Law and Disorder Seminar is one of the most enjoyable aspects of my practice. I like traveling to different parts of the country that I might not otherwise get to, meeting home inspectors from around the nation, pressing the flesh, taking in the local scenery and sampling regional delicacies. What I do not like is all the work involved in setting up the seminar only to have to cancel it because not enough folks registered early enough to justify the expense.

So I have decided to stop scheduling live seminars because doing so was taking up too much of my time often for too little return. Instead, I am making myself available to regional, state, and national associations and National Franchisors as a featured speaker at their monthly meetings or their summer, fall, winter, spring or semi-annual or annual conventions for a fee of $1,000 out of which I will cover all of my travel expenses.

I will be presenting the seminar at the Florida InterNACHI chapter in Sarasota, Florida on April 30, 2011, pursuant to a similar arrangement. If your organization would like to schedule a live presentation of the Law and Disorder seminar for its members, email me at homeinspectorlawyer@gmail.com or call me at 215-854-6444.

I am also in the process of digitizing the seminar on a series of videos which will be accessible on line via subscription and which you will be able to view in the privacy of your own home, as often as you like.

The Costs of Defending a Lawsuit (Part 2 of 2)

One of the more unpleasant experiences in life is answering your door and finding the county sheriff or one of his deputies on your doorstep asking if you are one of the defendants named in the copy of the Complaint that he is holding, a Complaint that has been filed by one of your home inspection clients who is claiming that you failed to uncover certain defects during your inspection and that lapse on your part is now costing him a lot of money to rectify.

This is especially disturbing when it is the first inkling that you have that this particular client had any beef with you whatsoever. This is, perhaps, the only time when no news is not good news. As I have written elsewhere on this website, while it is still possible for me to persuade the plaintiff’s attorney to voluntarily dismiss you from the suit, it is less likely when there has been a substantial calorie-burn on the attorney’s part. And it goes without saying, I trust, that it is impossible to do so once your insurance company has appointed defense counsel because their financial incentives are contra.

If voluntarily dismissal is thus foreclosed, you will soon discover that litigation is one of the most expensive endeavors known to exist. The problem with litigation in the context of a residential real estate transaction is that the aggrieved home buyer is operating in a target-rich environment. In the buyer’s mind, multiple parties could possibly be responsible for his troubles: the seller [in my experience, generally the most culpable because they so often do not disclose critical issues], the seller’s agent and broker, the buyer’s agent and broker and the home inspector and, if the inspector operates as a corporation, the inspector’s corporation.

With that many defendants, the Complaint itself is a megillah - multiple parties, multiple counts, hundreds of allegations. It can easily cost thousands of dollars just to respond to the Complaint. Then you have to respond to all the cross-claims that will surely be brought against you by other defendants.

Suffice to say that even the most routine matter is preposterously expensive. The more parties, the more expensive because you have to respond to all of their filings; serve them document discovery requests and respond to theirs; take depositions of the parties and their witnesses; defend your own deposition; and attend scheduling, settlement and pre-trial conferences. And you are charged for everything: travel, filing fees, copies, postage. All of that before you ever get near a courtroom.

Any wonder why insurance companies are so willing to throw you under the bus? And while that is often a win-win situation for them, it is always a lose-lose proposition for you.

They get rid of the case within your deductible or a multiple or two above it which they will recoup via surcharges on your subsequent renewals. You, on the other hand, a. are out your deductible [at a minimum]; b. have a scarlet letter “C” [for claim] on your chest; and c. will be paying hefty surcharges for a few years to a company that you are stuck with because their mishandling of your claim has made you persona non grata to every other insurer on the planet.

The trick is to get rid of the claim before it ever blossoms into a lawsuit, something I have done over 150 times in the last four-and-a-half years, including several cases where the first notice of claim was a lawsuit.

Fortunately, for home inspectors, there is a new insurer that is completely on board with my approach to responding to these ridiculous claims. For a quote visit: http://inspectors.locktonaffinity.com or call 800-803-9552

The Costs of Defending a Lawsuit (Part 1 of 2)

As a frequent contributor to online inspection forums, I regularly get private email from professional home inspectors seeking my opinion on legal matters. Recently a reader wrote:

"Joseph, So, absent an E&O policy, inspectors are exposed to the realities of defending a claim, which in 98% of the cases you have seen, are without merit. What do you estimate the cost to the inspector are to defend themselves, considering court costs, attorney, depositions, etc?"

Fortunately, not every claim involves a lawsuit. Most claims begin life as a complaint from a disappointed client. And most experienced business persons have had to deal with customer complaints at one time or another in their careers, and have no problem whatsoever rectifying a legitimate complaint to the customer’s satisfaction.

The problem arises when the claim is not legitimate, a condition that obtains in 99% of all claims against home inspectors. You read that correctly. In four-and-a-half years, I have seen exactly 2 legitimate claims.

When a claim is not legitimate, it must be resisted. Politely. But firmly. Even when, as is often the case, “legal action” is threatened. Caving in to illegitimate claims is a terrible business model, especially in an industry that generates so many of them.

When “legal action” is threatened should you not knuckle under to your client’s preposterous demand, you may receive a demand letter from a local attorney or a summons from your local Small Claims Court. If the latter, you can generally get the claim dismissed due to lack of jurisdiction, as I discuss elsewhere on this site and if you’ve been following my advice regarding Arbitration Clauses.

If, instead, the "legal action" threat manifests itself via a demand letter from an attorney, say a prayer of thanksgiving. Why? Because the attorney is not emotionally involved in the case. He’s financially involved in the case. And the minute he learns from me that there’s no case; that there are multiple defenses to the claim; that his client has no damages; and that the defendant will vigorously defend the claim, that is generally more than enough disincentives to prompt him to advise his client to move on with his life. And they generally do.

Unfortunately, many claims begin life as a fully formed lawsuit and the first notice that an inspector gets of the claim is when the county sheriff knocks on his door and serves him with a lawsuit accusing him and a multitude of others of having harmed his former home inspection client.

That’s when the expenses begin. That discussion, next time.

Thoughts on Thermal Imaging Devices and Visual Inspections

Joe - Could we get a legal view on the use of thermal imaging devices during home inspections.  A number of guys are touting the relative blindness of those not using them in an effort to promote their new "x-ray vision."

“My opinion? As with any extra-sensory equipment, from electronic induction moisture meters to gas sensors, this technology is subject to many variables such as quality, on-site conditions and, last but not least, the ability of the inspector to accurately interpret the data.  Further, I know of no precedent that requires a seller to act on these findings by allowing invasive follow up deconstruction to verify inside walls what was inferred by the inspector's report.

“Lastly, what added dimension of legal liability does the use of these devices open up to the home inspector?”

Many home inspectors have added thermal imaging to their menu of services in recent years in an effort to increase revenue in the wake of an inspection market devastated by the implosion of the underlying residential real estate market.  This development has been fueled by the precipitous decline in the price of thermal imaging cameras, a circumstance that has, itself, engendered a technological arms race among home inspectors that has tended to undermine the advantage and market hegemony of the early adopters and will, almost certainly, through increased supply and competition, erode the ability of practitioners to maintain pricing discipline.

In the Law and Disorder Seminar, one of the skills that I encourage home inspectors to acquire is the ability to manage the expectations of their clients as to what they can reasonably expect to learn about a property from a limited, non-invasive, visual inspection.  Most home buyers have absolutely no idea what a home inspection entails and to the extent that they do have an idea, it is generally unrealistic.  I sometimes think that some of them believe that you are not only going to be able to detect everything that is currently wrong with the property but also everything that has ever been wrong with it and everything that ever will be wrong with it.

And that is one problem that I anticipate that the widespread adoption of thermal imaging by home inspectors is going to exacerbate.  People’s already unrealistic expectations will become more so, especially if they have read some of the wildly exaggerated claims made about thermal imaging on many inspectors’ websites.

I do not believe that thermal imaging, in and of itself, will increase an inspector’s liability to a buyer, however.  It is still, after all, a limited, non-invasive, visual inspection that is being conducted.  If the thermal imaging reveals a reportable issue, take a photo of it and report it.

I can, however, foresee potential issues with a seller if an inaccurate interpretation of the data were to induce a buyer to abrogate an Agreement of Sale.  Or if the seller does do verification deconstruction on the basis of a false positive.

The real problem that I foresee with a widespread adoption of thermal imaging by home inspectors is mission creep.  Is thermal imaging going to become the new normal in home inspections?  And are you going to be able to charge more for it, if everyone is doing it?

Using a Written Agreement to Dismiss Cases in Small Claims Court

If you operate a business in the United States of America, sooner or later you are going to end up in Small Claims Court, either as a plaintiff trying to collect on a delinquent account or as a defendant defending against the real and imagined grievances of your customers. So it is important to understand how Small Claims Courts operate.

Small Claims Courts exist to alleviate the logjam of civil suits that would otherwise be adding to the existing avalanche of cases that already clog our courts by removing those cases where less than, say, $10,000 is at stake. Most of the litigants in these forums are not represented by attorneys, though by procedural rules, corporations must be represented by an attorney. Since many home inspectors operate their businesses through corporations, they should be aware of this requirement, lest they be defaulted for failure to defend.

Most of these courts also require that litigants try to come to some settlement on their own by submitting to a mandatory mediation process. As discussed elsewhere in this blog, home inspector defendants should be very wary of mediation because a. their clients seldom have a valid claim and b. if they have been paying any attention whatsoever to me, they have a signed pre-inspection agreement with the plaintiff that requires that any dispute arising from the inspection be brought in arbitration, thus rendering Small Claims Court - or any court, for that matter - an inappropriate forum for this dispute.

Once the mediation charade has concluded, the litigants will then appear before the judge to present and argue their cases. Your demeanor at this time should be that of the totally poised professional that you are.

When the judge takes the bench, he generally has no idea what the case is about and, since Small Claims Court Complaints are generally light on particulars, reading the Complaint is unlikely to enlighten him in any meaningful way.

He should then ask the plaintiff if he has an Opening Statement. An Opening Statement is designed to give the finder of fact - in this case, the judge - an idea of what the dispute is about.

Your plaintiff might say something like this: “Your honor, I hired Mr. Home Inspector to inspect the house that I was buying and two months after I moved into the house, the heat pump stopped working. I called a heating contractor and he told me that the unit needed to be replaced at a cost of $3500 and that this is something that Mr. Home Inspector should have discovered when he inspected the house. So, I’m suing to recover the cost of the new heat pump.”

Now, hearing this nonsense will very likely set your teeth on edge but this is when you need to summon every self-control mechanism in your arsenal of character traits. Let your client say his piece because it will likely be the last thing that he gets to say on this day and because you are going to be walking out of there very shortly.

The judge will then turn to you and say “Mr. Home Inspector, do you have an Opening Statement?”

Here’s what you say:

“I do, Your Honor. And while I obviously dispute Mr. Client’s version of events, I wish to make a preliminary motion to dismiss Mr. Client’s Complaint because prior to performing my services for Mr. Client, he and I agreed in writing that any dispute arising from the inspection had to be submitted to arbitration by the American Arbitration Association. Therefore, I move the Court to dismiss plaintiff’s Complaint due to lack of jurisdiction.”

The judge will then ask if you have a copy of the Agreement with you - which, I hope it goes without saying, you had better have - and ask to see it. Since you will have resourcefully placed a Post-it with an arrow pointing to the Arbitration Clause and another with an arrow pointing to the plaintiff’s signature on the Agreement, the judge should then ask the plaintiff, if that is his signature on the agreement. When he sheepishly admits that it is, the next thing you should hear is the judge dismissing the case and telling the plaintiff that he has to bring this claim in arbitration.

Please Mr. Home Inspector, Will You Pay For My Renovation (Part 3 of 3)

After getting an indefinite extension of time to respond to the Complaint and, thus, eliminating any possibility of a default, I wrote to the inspector’s insurance company to timely advise it of the claim.

I enclosed a complete copy of the Complaint, a copy of my letter to the Plaintiffs’ attorney that delineated all the defenses to the Complaint together with a cover memorandum that explained that the attorney wanted time to discuss the matter with his clients and expressed my professional belief that the plaintiffs would voluntarily dismiss the inspector from the lawsuit.

I also suggested to the claims manager that the insurer refrain from appointing counsel for the time being to give the seed I had planted in the plaintiffs’ attorney’s mind time to germinate. In my experience, decisions by opposing counsel to do the right thing can take up to a month during which time you generally want to leave them alone - no sudden moves - with a gentle status inquiry every week or so.

Also, in my experience, they eventually do conclude that keeping defendants, who do not belong there, in the suit is a really terrible idea for the following reasons: one, you will not prevail against them and, two, their pesky habit of poking holes in your case against them often has the altogether annoying consequence of weakening your case against legitimate defendants.

Alas, in this case, the insurer did not take my suggestion and immediately appointed defense counsel. A year-and-a-half later, the inspector recently told me, the case is still unresolved. He did advise me, however, that the defense attorney was very grateful to have had all of the defenses laid out for her.

Therein lies the difference between the claim response techniques that I have pioneered and the approach followed by the legacy defense bar. My interest lies in getting rid of the case, usually before it ever blossoms into a suit. Their interest lies in keeping it going once it does.

I’ll be very surprised if the perseverance of these unmeritorious plaintiffs is not ultimately rewarded.

Please Mr. Home Inspector, Will You Pay for My Renovation (Part 2 of 3)

So I wrote a rather lengthy letter to the plaintiffs’ attorney that explained in considerable detail exactly why he would be better off - and his clients would be immeasurably better off - without having the home inspector hammering away at length the manifold reasons why he was not responsible.

I first pointed out that the inspector had called out a lengthy litany of issues with the property, to wit: the roof was beyond its design life range and showing signs of deterioration; the gutters were clogged; the flashing was tarred; there was siding contact with the soil, a condition that could lead to the very issues of which his clients were then complaining; the exterior water had been shut off; there were settling cracks in the foundation; the toilet in the bathroom was loose; there were popped nails and tape separations throughout the interior; and efflorescence and condensation on the foundation walls.

Had any of the defects of which his clients were now complaining been extant and observable at the time of the inspection, I told him, they would have been reported by the inspector. That is the nature of a limited, non-invasive, visual inspection. One can only report what is observable at the time. Thus, the inspector was not negligent.

I then pointed out that his clients’ failure to follow up on the inspector’s findings and recommendations was, itself, negligent, a condition that would bar any recovery from the inspector.

I then explained that it could easily be demonstrated that his clients had lied about the termite “swarm”; that the video that he had magnanimously - if stupidly - included as an Exhibit to the Complaint not only completely exonerated the inspector but thoroughly impeached the credibility of his expert witness.

I also advised him that the claimed damages were vastly overstated and that the depreciation applicable to the forty-six year age of the home would diminish the damages to a de minimis level not worth crying about.

If that were not enough, I directed his attention to the fact that a recent and very well-reasoned lower court opinion held that the state home inspection licensing law had pre-empted all common law claims against home inspectors.

Finally, I advised him that even if the inspector had been negligent - which he had not been - and even if there were no recovery-barring contributory negligence, and even if his clients had actual damages, and even if a court had not ruled that the Home Inspector Licensing Law preempted his clients' claims, their recovery would be limited to the fee charged by the inspection.

Then I told him that, even though the case against the inspector was riddled with difficulties - the absence of negligence, the admissions by both the plaintiff and his expert that the damage was “hidden”, the contributory negligence problem, the contractual time limitation on bringing the suit, the recovery limitation, and the licensing law pre-emption - the case against the sellers had none of those difficulties. And I suggested that he drop the suit against the inspector and instead use the inspector as a fact witness for the plaintiffs against the sellers.

When I called the attorney after having given him a few days to digest the unwelcome news I had delivered, he seemed very amenable to doing the right thing and dismissing the claim against the inspector. He then requested time to “discuss the issues” with his clients and gave the inspector an indefinite extension of time in which to respond to the Complaint.

“Sure” I said, “take all the time you need.”


The result next time.

Please Mr. Home Inspector, Won't You Pay For My Renovation (Part 1 of 3)

When one has consulted on close to 200 home inspection claims, there is a powerful temptation to conclude that one has seen every goofy claim that there could possibly be and I was really beginning to think, back in the summer of 2009, that I had. Then I got a call from an inspector friend in a populous Mid-Atlantic state.

As sometimes happens, the first notice that the inspector had of the claim was when the county sheriff served him with the lawsuit. Now it is not impossible to persuade a lawyer to drop a claim against a home inspector once a lawsuit has been filed and I have succeeded in doing so a number of times but it is considerably more difficult once there has been a substantial calorie-burn on the part of the plaintiffs’ attorney, as there was in this particular case.

But before undertaking my own calorie-burn, I wanted to ascertain the plaintiffs’ attorney’s willingness to be persuaded. To my considerable delight, he vindicated my lofty notion of my personal charm by agreeing to forebear taking any adverse action against the inspector until I had assembled a compelling litany of reasons why he should drop the case against the inspector.

Then I took a closer look at the Complaint which revealed that what the Plaintiffs were aggrieved by was the inspector’s alleged failure to detect termite damage that the plaintiffs, themselves, did not discover until 11 days shy of a year after the original inspection.

Leaving aside the fact that you have to wonder how apparent this problem really was when the folks living in the house do not notice anything for close to a year but what was really remarkable about the Complaint, itself, was that it contained not only dispositive proof that the termite damage had been concealed at the time of the inspection but also assertions by plaintiffs that could not possibly be true, thus, impeaching their credibility in their very own words.

For reasons that I hope I live long enough to understand, there are a lot of lawyers who must think that they have to prove their cases in their Complaints. And so they include, as exhibits to the Complaint, every shred of evidence in their possession in the apparent belief that it makes their case more compelling. The reality is that it seldom does and, in an astonishingly large number of cases, can actually be quite damaging to the plaintiff’s case. It certainly was in this one.

For one thing, in their Complaint, the plaintiffs maintained that they “first learned of the severe termite infestation and . . . damages on or about March 8, 2009” when the plaintiff husband discovered “over five-hundred (500) swarming termites” in the lower level laundry room.

There’s one problem with that averment. It does not comport with the well-established behavioral ecology of termites. Termites require high temperatures and long days in order to “swarm”, two conditions that did not obtain in the date range averred.

Far more devastating, however, was the plaintiffs’ lawyer’s decision to include, as an Exhibit to the Complaint, a digital video disc of the plaintiffs’ “discovery” of the termite infestation that conclusively demonstrated that the damage could not have been discovered in a limited visual inspection. Indeed, the plaintiff husband, himself, twice remarks on the video that “I can’t believe it was all hidden.” Plaintiffs’ expert engineer also agrees with that observation, saying “ I can’t believe how they [the sellers] hid [the damage].”

Later in the video, the husband further opines that “There were no signs whatsoever!” And, again, the expert engineer agrees with that observation, stating “Yeah, [unintelligible] I call it [unintelligible]. That’s what people do.”

Those colloquies between the plaintiff and his expert witness demonstrated beyond peradventure that the damage was effectively concealed from both the plaintiffs and their inspector. They further demonstrated that the infestation would have remained “all hidden” because “there were no signs whatsoever” for ages had the plaintiffs not decided to remodel their home and that they were, in fact, not “victims” of a negligent inspection but bald-faced opportunists looking to stick the inspector with the tab for the renovation.

To be continued.

The Law of Damages (Part 2 of 2)

To be an effective advocate for his clients, a lawyer often needs to call upon skills quite apart from a thorough working knowledge of the substantive and procedural law. And if he practices in the northeastern section of the country, as I do, one skill that he will find to be of inestimable utility is a working knowledge of Yiddish. And, particularly so, if he is an Irish-Catholic.

With that bit of information as background, let us return to the most recent post, briefly. Please recall that I had responded to a claim from a home inspector’s client by informing the client that he had no claim because the inspector had executed his duty to him in a professionally reasonable manner, that the client had acted unreasonably in light of the inspector’s findings and that, in any case, his damages were, at best, de minimis.

A week or so later, I received a letter from the client’s lawyer. After reading the attorney’s letter, I immediately telephoned the attorney and greeted him thus:

“Wayne, it’s Joe Ferry.” Pause. “What . . . are you doing . . . with this farkakte case?”

His reaction was exactly what I expected. Like every other Jewish lawyer on whom I have essayed that gambit, he started laughing like hell. For two reasons. One, he knows that this is a very weak case. Two, he cannot believe that this son of Erin is telling him exactly how crappy it is in Yiddish!

Then, thrown thoroughly off balance by that disarmingly accurate assessment of his case, he immediately started walking back the size of the claim.

“Look”, he began, “I know that he’s not entitled to a new roof . . .”

Now at the time, there was a video on NACHI TV of me talking about the Law and Disorder seminars that were then upcoming. I told him to watch the video and call me back.

When he called back, he said “So. You handle these claims all over the country.” I told him that I did and, furthermore, if the claim actually had merit, I would be the first person to suggest to my client that it be settled.

He then asked me to see if my client was willing to throw “any money” to settle. I said that I would ask.

I asked the inspector if he was willing to give his ex-client “anything to go away.”

He replied “Joe, I trust you. I’m willing to give this guy up to $1,000 to go away.”

So I wrote to “Wayne” and basically repeated the letter that I had sent to his client: we were not negligent; you were negligent; even if we were, which we weren’t and even if you weren’t, which you were, you don’t have any damages . . . BUT . . . blah, blah, blah . . . GOOD WILL GESTURE . . . blah, blah, blah . . . CLOSURE, here’s $500.

When I proof-read the draft of that letter, I suddenly had a WTF moment! If we were not negligent AND he was negligent AND he doesn’t have any damages . . . WHY ARE WE GIVING HIM ANYTHING?

So I didn’t.

I re-wrote the final paragraph thus:

“For $350, a home inspector does not take a house apart and put it back together again. No reasonable person expects that. My client put your client on notice of issues with this property that should have prompted him to seek a more intrusive inspection. His decision not to do so was unreasonable in light of those findings and would bar all recovery under familiar principles of the Law of Negligence. Accordingly, his claim is rejected.”

I never heard from “Wayne” or his client, again.

The Law of Damages (Part 1 of 2)

Whenever I read the Letters to the Editor of the New York Times or my local newspaper, the Philadelphia Inquirer, I often find myself wondering whether mathematics is still a requirement for graduation from high school. The overwhelming majority of those correspondents appear to truly believe with every fiber of their being that it is entirely possible for the government to provide massive new entitlement programs to tens of millions of previously unentitled individuals without increasing the size of government or affecting the national economy in any meaningful way.

Similarly, whenever a home inspector engages me to neutralize an unhappy client and I read the demand letter from the claimant’s attorney, I often find myself wondering whether the nation’s law schools are still teaching the Law of Damages. Consequently, I am continuously finding myself in the position of having to give short tutorials to professional colleagues on exactly what level of damages their clients might be entitled to in the altogether highly unlikely event that their claims have any merit in the first instance.

A couple of years ago, one of my inspector clients inspected a sixty-something year-old house and reported that the roof was “near the end of its life expectency” and really would need to be replaced in the not too distant future. As it happened, excessive clutter prevented any meaningful inspection of the attic. In fact, all the inspector was really able to do was to pop his head into the space and shine his flashlight around.

Sometime after taking possession, the buyer found that the roof was leaking in a spot just beyond the farthest rafter in the attic which the inspector could not have seen due to the attic’s inaccessibility at the time of the inspection.

The client sent the inspector a letter demanding a new roof and the inspector asked me to respond. I told the client “Fuhgeddaboudit!”

First of all, the inspector told you that the roof needed to be replaced. Secondly, he couldn’t get into the attic to inspect it and disclaimed any responsibility for that. Third, even if he had been negligent - which he wasn’t - you would not be entitled to a new roof. All that you would be entitled to is to have the “leak” repaired - a process that might require the replacement of a one square foot section of shingles. Finally, the cost of replacing that one square foot section would have to be depreciated by the sixty-something year age of the roof. In other words, next to nothing.

Sadly, he didn’t fuhgeddaboudit and a week or so later I heard from his lawyer.

That story next time.

What You Need to Know About Pre-Sale Inspections

Reader Gary Baldridge writes: I have heard many comments on the pros and cons of pre-sale inspections and what liability may differ from doing a buyer inspection."

Now that sellers are being encouraged to obtain professional home inspections prior to listing their properties for sale, a development that I not only applaud but also believe will become increasingly popular and commonplace, home inspectors need to be careful of potentially exposing themselves to liability to non-client third parties.

Normally, actors are only potentially liable to individuals to whom they owe a duty of care. Motorists, for example, owe a duty of care to their passengers, other motorists and their passengers and bicyclists and pedestrians. They fulfill that duty by obeying traffic laws and conventions, maintaining their vehicles in a safe condition, maintaining adequate insurance and driving carefully.

When performing a service for a client pursuant to a contract, a service provider would normally owe a duty, and thus be potentially liable for professional lapses, only to her client. She fulfills that duty by performing her duties in a professional manner.

However, a service provider could also be held liable to third-parties if her negligence could foreseeably cause harm to others as, for example, when an auto mechanic’s negligence causes the unexpected failure of her client’s brakes resulting in injuries to an innocent third-party. That potential for being sued by unknown third-parties is why bartenders will refuse to serve obviously intoxicated customers, take away their car keys and call taxis for them.

When performing a home inspection for a buyer, a home inspector normally would only owe a duty and thus, be potentially liable, to his buyer-client for issues that she “unreasonably” fails to discover and/or report - that is, she failed to discover them but should not have - and that failure - that unreasonable professional conduct - caused her client damages. That’s certainly fair enough. I don’t know any professional home inspectors who have a problem with that.

A potential problem arises, however, when someone with whom the home inspector does not have a contract claims to have been harmed by the alleged negligence of the inspector. I recently had a case in Philadelphia involving an inspector who had performed an inspection for a young husband and wife in their twenties who were buying their first home. Some eighteen months later he got served with a lawsuit by the father of the wife claiming that he had conducted a negligent inspection that had caused this man damages.

The couple had apparently failed to qualify for a mortgage and so a new Agreement of Sale was drawn that listed the wife’s father as the sole purchaser and more than a year later, this purchaser, a stranger to the home inspection contract, was claiming that the inspector had failed to discover certain issues that were causing him damages.

Pretty ridiculous, right?

Sure but the problem is quite common and generally arises when the home inspector’s client exercises his right to terminate the Agreement of Sale based upon the inspector’s findings. When the property goes back on the market, the real estate agent will often hand the inspector’s report to a new prospect who does buy the property and then wants to sue the inspector some time down the road when problems inevitably arise.

The problem can be muted somewhat by prominently noting that only the individuals who hired the inspector may rely on the inspector’s findings and that anyone else who relies on his report does so at their own peril. The inspector my still get sued but will easily be able to demonstrate that the subsequent buyer’s reliance on the report was "unreasonable."

And that brings us to Gary's question regarding pre-listing inspections conducted on behalf of a seller. The purpose of these types of inspections is to make the seller aware of issues that he either needs to correct or disclose to a potential buyer or perhaps both. The idea is to reduce the seller’s exposure to suit, not to reduce the buyer’s anxiety.

Hence, to avoid any surprises, Inspectors should make sure that their pre-listing inspection clients know that this report is for their information only and that they may not use it to allay their buyers’ anxiety. Pre-listing inspection agreements should also stress this point and include a provision requiring the seller to defend and indemnify the inspector should a buyer subsequently claim that he relied on the inspection report to his detriment.

Is Your E&O Insurance Company Stuck on Stupid?

One of my home inspector clients in California recently wrote to me about a claim that was being brought by a client for whom he had performed an inspection about three months earlier. The client was experiencing some leaks due to recent heavy rains. The leaks were discovered only after removing baseboard and flooring to do some remodeling. After opening the walls they found that the leaks were due to the fact that the vapor barrier had been torn in several areas.

A review of the inspection report demonstrated that the inspector had noted that “stains were observed at baseboard, dry at time of inspection, unable to determine cause, advise review with seller.” Photos of the area taken at the time of the inspection completely support the inspector's position.

The clients were quite upset and were unwilling to grasp the fact that, since the defect was not visible during the inspection, the inspector was not liable. They subsequently threatened to file suit if the inspector did not refund the fee.

Since he was clearly not responsible for the clients' problem, he refused to refund the fee and the client followed through on the threat and filed a claim in small claims court.

In addition to being an extremely capable professional, the inspector is also a sophisticated businessman who carries E&O insurance for this very contingency and he reported the claim, as required, to his insurer.

Unfortunately for this inspector, his insurance company - a major player in the home inspection professional liability insurance market - is both brain-dead and stuck on stupid.

The inspector understandably wants to defend the claim because a. the claim is completely defensible and b. he doesn't want to lose his deductible which is substantial.

The clients are demanding $6500 and the insurer has offered $1500 - easy for it to do, since that is well within the insured's deductible.

The inspector wants to defend the claim himself and the insurer has taken this position: The inspector can withdraw the claim and handle it himself. However, if he wins and the plaintiffs appeal to a higher court and he then seeks coverage from the insurer, the insurer will treat it as a late report and deny coverage under the policy.

The inspector forwarded to me the insurer's response for my information. I wrote back to the inspector:

"Why [this insurer] would even consider offering $1500 to settle a claim that has absolutely NO merit whatsoever is a locus classicus of the very thing that is wrong with the home inspector professional liability insurance marketplace, to wit, a facile willingness to throw money at bogus claimants as long as it is within the insured's deductible and a pathological unwillingness to take meritless cases to verdict, if doing so would cost more than knuckling under to meritless claims.

"For [this insurer] to present you with the Hobson's choice of a. personally defending a completely meritless claim in order to save your deductible and, thereby, ensuring that, if the claimant appeals the verdict, [the insurer] will deny coverage or b. allow [the insurer] to dangle your deductible in front of these meritless claimants to rid itself on any responsibility is the quintessence of bad faith."

Fortunately, home inspectors no longer have to find themselves in this situation. In August of 2009, program administrator Lockton Affinity, an affiliate of Lockton Companies, LLC, the largest independently-owned commercial insurance broker in the world, approached me about developing a professional liability program exclusively for Home Inspectors. The program launched in April of 2010 and the insurer, whose financial strength is rated A+ XV by A. M. Best, completely supports the bogus claim preemption techniques that I have perfected over the last four years.

If you are enrolled under the Lockton Affinity program for Errors & Omissions Insurance, you are assured that I will be the one responding in the first instance to any claim filed against you. For a quote visit: http://inspectors.locktonaffinity.com or call 800-803-9552.

Home Inspection Claims and the Legal System

If you read home inspection industry message boards with any level of fidelity, you cannot fail to notice a general lack of confidence in our legal system among home inspectors. They never expect to get a fair shake in court. And especially in Small Claims Court.

To someone who has spent most of his adult life upholding the legal system, I find this overarching despondency troubling. And quite unwarranted in my experience. Nevertheless, I completely understand why home inspectors feel that way.

In the overwhelming majority of cases against home inspectors that I have handled, claimants and their lawyers are not only constantly vastly overestimating the level of their damages, they do not even recognize that they do not have a case in the first place. While I am not surprised that claimants might make those mistakes, I am continuingly astonished that their attorneys do.

As I stress in the Law and Disorder Seminar, the only cases that actually get to trial are those that are being erroneously evaluated by one or more parties and/or their lawyers. Either the plaintiff thinks that the case is worth a lot more than it actually is or the defendant thinks that it is worth a lot less than it actually is. If a case is being properly evaluated on the basis of established incontrovertible facts, it should either settle or be abandoned.

In my practice, I represent both plaintiffs and defendants and my cardinal rule when representing plaintiffs is this: I do not take plaintiff cases that a. I am not going to win and b. do not have enormous damages. That’s one for the “Duh File”, right? You would be surprised.

As an attorney, when representing a plaintiff, what you want to do is send a demand letter and get a check back by return mail. That is why demand letters from attorneys always stress that you should turn the letter over to your insurance carrier. They don’t want to deal with you, they want to deal with the guy who is going to roll over and send them a check. And if they can send a check that is within your deductible, well, it really doesn’t get better than that for an insurance claim examiner.

So hearing from me, rather than a claims examiner with a checkbook, really gums up the works. Fortunately, when I advise claimants’ attorneys that they do not have a case, generally for a litany of compelling reasons, for the most part their reaction is one of gratitude that I have spared them the trouble of pursuing a worthless claim.

Follow Your Standard of Practice

Something that I emphasize quite heavily in the Law and Disorder seminar is the importance of adhering to whatever Standard of Practice you happen to be following when you are conducting your inspection. In fact, it is one of the six key strategies that I teach for diminishing a home inspector's chances of being sued successfully.

I do not know how often inspectors have occasion to read their SOPs but I read them quite often in order to respond to the demand letters that my home inspector clients have received from their clients or their clients’ lawyers. And one thing that you cannot help noticing when you read those SOPs as often as I do is this: there are an awful lot of sentences in the SOPs that begin thus: “The home inspector is not required to:” followed by a whole host of matters for which the home inspector is not responsible.

Anyone who has ever attended the seminar will remember my saying, “Stay within the lines. The lines are your friends.” It is a line from an old Toyota automobile commercial from the early ‘90s that no one ever seems to recall. I only remember it, I suppose, because I once had a tennis partner who always seemed to be saying that to me, generally when one of my errant 100 mph returns went sailing over the opponents’ base line.

The reason I advise inspectors to “stay within the lines” - the SOP - is because in order to establish that the inspector had been negligent in conducting his inspection, a claimant has to show that the inspector did not act “reasonably”, that is, he did not perform his inspection in the manner that a “reasonable” inspector would have. In other words, he would have to demonstrate that the inspector failed to follow his own SOP.

A frequently asked question at the seminars is what effect does exceeding the SOP in one area or another potentially have on an inspector’s liability. The answer is: it increases it. Exceeding the SOP can and often does make you responsible for something that you otherwise would not have been.

So always follow your SOP. Your SOP is your friend.

Follow-Up Inspectors: Don't Ruin Your Credibility

I get a lot of mail from home inspectors offering their services, should the need ever arise, as expert witnesses in negligence cases against home inspectors. Fortunately, I never have a need for their expertise because the cases that I get asked to squash almost all go away secondary to a compellingly written letter that explains a. why the claimant has no case, despite what his expert claims; b. why, even if he had a case, he has no damages: c. why, even if he had a case and had damages, his claim would be barred because of his own conduct; d. why, even if he had a case and had damages and his claim were not barred due to his own conduct, his recovery would be contractually limited; e. that the claim, if brought, will be vigorously defended; and f. the retaliatory action that will ensue following the certain defeat of the claim.

Nevertheless, I do get to see a lot of reports from would-be “experts” for claimants. Usually, these individuals are not experts at all - that is they were not hired to give an “expert opinion” on established facts. They are merely professionals re-inspecting the same property several weeks and often several months after the original inspection and not infrequently after the massive destructive probing that first allowed the defect to be, literally, “uncovered”.

By and large, they have done no spadework whatsoever, such as reading the original inspection report, ascertaining weather conditions in the weeks preceding the original inspection and subsequent thereto, ruling out other causative factors, ascertaining the condition of the property at the time of the original inspection or even mentioning the Standard of Practice that is implicated in the case.

And there is nothing these would-be experts like more than impugning the competence of the original inspector. Their reports are riddled with absurd credibility-destroying observations like this one made in a case I squashed in Washington state: “the magnitude of floor structure damage to this home would have been difficult to overlook during an inspection, even to the most untrained observer”.

Really? Well, if that’s the case, Mr. Expert, shouldn’t the presumably very “untrained observers” who had been living in the house lo, those many years have not “overlooked” the “magnitude of floor structure damage” and noted it in their sellers’ disclosures? Or - here’s an idea - shouldn’t they have repaired it while they, themselves, were living in the house?

What this would-be expert should have done after seeing the “magnitude of damage” that “would have been difficult to overlook” by even the “most untrained observer” is ask himself this question: how the hell did this inspector ever miss this defect? what could have prevented this inspector - duly licensed by the State of Washington - from seeing this defect? Was it concealed somehow? Were there any signs that would warrant invasive probing? Was the area accessible at the time of the original inspection?

As a follow-up inspector you have to recognize that you are inspecting an entirely different house than the original inspector. The vast majority of claims against home inspectors, in my experience, are for after-discovered defects that were concealed at the time of inspection but are not concealed when inspector # 2 conducts his inspection.

And the real problem for inspector # 2 - and the poor sap who hires him - is the nigh universal inability of such "experts" to resist such credibility-destroying dudgeon as “the magnitude of floor structure damage to this home would have been difficult to overlook during an inspection, even to the most untrained observer”.

If you're the "expert" inspector and you're uncovering "obvious" defects, someone is definitely leading you into a pick. And you should make sure that your "expert" report is laden with disclaimers so you don't undermine your credibility with reckless statements about the original inspector's ability because chances are that, had you been the original inspector, you very well might have been prevented from seeing them, too.

How This Niche Became a Voice for All Home Inspectors

A couple of years ago, Lady Agag (my lovely wife) and I were invited to a cocktail party that was being held at a restaurant in the Chestnut Hill section of Philadelphia. The restaurant was actually closed that evening to all but those who had been invited to the party. The hosts of the party had “won” it by outbidding others at a silent auction to benefit Norwood-Fontbonne Academy, the private Catholic grade school that our two boys had attended.

Because of that provenance, the guests were, by and large, well-established habitants of the middle-class with a vast overrepresentation of lawyers. Lady A and I, about fifteen years senior to the gathering’s statistical mode, were clearly skewing the assemblage geezerish. Nevertheless, due to our surpassing young-at-heartness and preternatural gregariousness, we were warmly received by our fellow guests.

I was introduced to a couple, whose male component I had been reliably informed, was also a lawyer. After establishing that I was a colleague, he asked me what sort of law I practiced. My spontaneous response surprised even me.

“I’m a cult figure in a niche industry” I answered. It was a response that not only has the twin attributes of being both whimsical and accurate, but absolutely mandates explication.

Here it is.

The day before Thanksgiving in 2006, I received a call from a home inspector in Florida who had just received a demand letter from an attorney representing one of his clients that was seeking damages from an inspection that he had conducted some 22 months before. He wanted to know what to do.

I asked him if he had E & O Insurance. He said that he now had it but did not have it then. He then asked if this was something that I could handle or did he need to get a lawyer in Florida. My mind reeled at the thought of this inspector having to seek an attorney in Florida at random, explain to him exactly what a home inspection is - and isn’t - and then explain why he was not responsible for the claimed damages. So I said “Why don’t you send me the demand letter together with your pre-inspection agreement and your inspection report? After I review those documents, I’ll be in a better position to advise you.” So he did.

I got the documents the day after Thanksgiving. After reading the attorney’s letter, which was rather substantial and included a supporting report by a subsequent inspection company, I noted all of the issues that his client was aggrieved by.

I then took up the inspector’s original report to read and began to experience déjà vu all over again. Every issue that the claimant was complaining about had been pointed out by the inspector in his report.

I was incredulous and called the inspector and said “This is unbelievable. Everything that they’re complaining about, you found!!” He said, “I know.”

So I suggested that he let me write a letter to the attorney which I would run by him. If he liked the letter, I would send it out and charge him for my time accordingly. If he didn’t like the letter, I would not charge him and he could find his own attorney in Florida.

The home inspector loved the letter that I had written and it went out on December 1, 2006. We never heard from that attorney again. Following that success, I began to hear from home inspectors all over the country asking for my help in responding to the ridiculous demands that were being made upon them by former clients.

Close to 200 claims later, I am batting .970 at terminating them with just a letter.