Arbitration Clause in Home Inspection Is Enforceable

Real Estate Law [size=6] [FONT=Times New Roman]Pennsylvania[/FONT][/size]
[FONT=Times New Roman]Court: Arbitration Clause in Home Inspection Is Enforceable [/FONT]

Alan Nochumson, The Legal Intelligencer April 10, 2017 | 0 Comments
Most, if not almost all, ­writtenagreements of sale to ­purchase residential real estate in Pennsylvania areconditioned upon a satisfactory property inspection. If the ­written agreementof sale, indeed, contains a ­property inspection contingency, the prospectivepurchasers will undoubtedly retain the services of a home inspector.
From my experience, prior toreceiving the written home inspection report from the home inspector, mostprospective ­purchasers are unwittingly asked to sign a home inspectionagreement which, among other things, requires them to address any disputes theymay have with the home inspector in connection with the home inspection throughalternative ­dispute ­proceedings and, in most cases, the home inspectionagreement also contains a clause limiting the liability of the home inspectorto the fee paid for the home inspection.
In Fellerman v. PECO Energy,2017 Pa. Super. LEXIS 209 (March 30, 2017), the Superior Court of Pennsylvaniaexplained why an arbitration clause contained in such a home inspectionagreement was enforceable as a matter of law.
In Fellerman, Stanleyand Carol Fellerman retained the services of Historic Home Inspection, d/b/aWIN Home Inspection to perform a home inspection in connection with theirpurchase of a personal residence in New Hope, Bucks County, the opinion said.
In doing so, they executed an"inspection agreement," which outlined “the scope of theinspection, exclusions and limitations of liability,” the opinion said.
The inspection agreement alsocontained a clause titled, “Dispute Resolution,” which provided inpertinent part that the ­"parties … agree that any dispute between theparties, except those for nonpayment of fees, that in any way, directly orindirectly, arising out of, connected with, or relating to the interpretationof this agreement, the inspection service provided, the report or any othermatter involving our service, shall be submitted to binding arbitrationconducted by and according to the accelerated arbitration rules and ­proceduresof constructive dispute resolution services."
The property purchased by theFellermans ­contained four utility poles that supported PECO power lines,Comcast cable lines and a PECO transformer.
After their purchase, theFellermans “discovered that the pole closest to their residence, ­supportingthe PECO ­transformer, had fallen to the ground in their ‘heavily wooded andleaf-covered front yard’ near their
According to the Fellermans,“the pole fell due to ‘severe rot, decay and deterioration.’”
Even worse, ­according to theFellermans, they notified PECO of the incident, but, prior to PECO’s arrival,Stanley Fellerman noticed that the fallen transformer as well as the power andcable lines had started a fire and, when he attempted to extinguish the fire,he was shocked, burned and severely injured, allegedly by the PECO power line.
The Fellermans subsequently fileda lawsuit in the Philadelphia County Court of Common Pleas against Historic andothers due to the property and personal injury damage ­sustained by them.
In the lawsuit, the Fellermansasserted a breach of contract claim against Historic due to its alleged failureto discover or disclose the deteriorated condition of the utility pole inbreach of the inspection agreement as well as causes of action for negligentmisrepresentation, fraud and violations of Pennsylvania’s Uniform TradePractices and Consumer Protection Law.
Historic then filed preliminaryobjections claiming that the trial court lacked jurisdiction to adjudicate thelawsuit between the parties based upon the terms and conditions of thearbitration clause contained in the inspection agreement.
The trial court overruled thepreliminary objections.
Historic then appealed the trialcourt’s ruling to the Superior Court.
In an opinion written by JudgeAnne E. Lazarus, the Superior Court order reversed the trial court’s ruling andremanded the case back to the Philadelphia County Court of Common Pleas forproceedings consistent with the dictates of that opinion.
Quoting Elwyn v. DeLuca , 48 A.3d 457 (Pa. Super. Ct.2012), Lazarus “employed a two-part test to determine whether the trialcourt should have compelled arbitration.”
Citing to Pisano v. Extendicare Homes , 77 A.3d 651 (Pa.Super. Ct. 2013), Lazarus indicated that Pennsylvania courts first"examine whether a valid agreement to arbitrate exists" and then"determine whether the dispute is within the scope of the agreement."
As to the first part of the test,Lazarus ultimately concluded that Historic and the Fellermans entered into avalid agreement to arbitrate any disputes between them, other than a disputeabout payment for services so rendered by Historic.
In challenging whether a validagreement to arbitrate existed between Historic and them, the Fellermans arguedthat the arbitration clause was invalid because it was unconscionable.Specifically, the Fellermans claimed that the arbitration clause was illegibleand not conspicuous and, as a result, they were not put on adequate notice ofthe rights they were waiving.
Conceding that the arbitrationclause was “not easy to ready,” Historic emphasized that theFellermans signed it without asserting that it was illegible at the time ofsigning.
Relying upon a previously rulingby the Superior Court in Hinkal v. Pardoe , 133 A.3d 738 (PaSuper. Ct. 2016) (en banc), Historic asserted that “parties to a contracthave a duty to read the document before signing it, and the failure to do so isnot an excuse or defense.”
In reviewing a copy of theinspection agreement included in the reproduced record, Lazarus concluded"that, while it is not the clearest document, it is legible and capable ofbeing understood."
Lazarus also emphasized that theinspection agreement “contained a conspicuous statement at the very top,written in bold, capital letters and surrounded by a text box, which reads asfollows: Prior to the inspection, please read carefully before signing.”
In reaching her conclusion,Lazarus noted that “if, as the Fellermans argue, the agreement was’smudged, blurry, in small print and incomplete,’ they could have requestedthat he be provided with a legible copy prior to signing”, which they didnot.
Lazarus then addressed whetherthe dispute between Historic and the Fellermans fell within the scope of thearbitration clause.
Citing to Callan v. Oxford Land Development , 858 A.2d 1229(Pa. Super. Ct. 2004), Lazarus emphasized that Pennsylvania courts providethat: “Arbitration agreements are to be strictly construed and notextended by implication; and when parties have agreed to arbitrate in a clearand unmistakable manner, every reasonable effort should be made to favor theagreement unless it may be said with ­positive assurance that the arbitrationclause involved is not susceptible to an interpretation that covers theasserted dispute.”
Lazarus stated that thearbitration clause contained in the inspection agreement “provided thatthe parties agree that any dispute between them, except those for nonpayment offees, that in any way, directly or indirectly, arising out of, connected with,or relating to the interpretation of the inspection agreement, the inspectionservice provided, the report or any other matter involving our service, shallbe submitted to binding arbitration.”
Lazarus pointed out that"the Fellermans’ claims against Historic are all grounded in Historic’salleged failure to properly provide services, in breach of its contract withthe Fellermans," in that they sustained injuries as a result of Historic’salleged failure to disclose certain information regarding the power pole, inbreach of its obligation under the contract.
Since the Fellermans’ tort claimsall arise from duties they claim were owed them by Historic pursuant to theinspection agreement, Lazarus reasoned that “the facts which support atort action also support a breach of contract action and the tort claims aretherefore subject to the arbitration clause contained within theagreement.”
As an aside, in the opinion,Lazarus also referenced the argument made by the Fellermans that thearbitration clause should be void because the inspection agreement unreasonablyfavors Historic by seeking to limit damages to $780, the amount paid by theFellermans to Historic for the inspection fee.
In doing so, the Fellermansrelied upon the Superior Court’s decision in Carll v. Terminix International ,793 A.2d 921 (Pa. Super. Ct. 2002), in which the Superior Court held thatan arbitration clause was ­unconscionable and, therefore, unenforceable whereit contains a limitation of damages.
Unlike the arbitration clause in Carllwhich was "inextricably intertwined with the agreement to arbitration, thearbitrator’s authority in Fellerman in awarding damages against Historic wasnot limited in any way.
Since the same contractualprovision that directs arbitration did not limit the authority of thearbitrator in Fellerman, Lazarus refused to void the arbitration clause onthose grounds as a matter of law.
With that being said, Lazarusleft the door open for the arbitrator to ultimately strike the damagelimitation portion of the agreement upon public policy grounds, as the SuperiorCourt did in Carll, during the alternative dispute proceedings.
In a footnote, Lazarus alsorejected the Fellermans’ argument that arbitration was now not an appropriatevenue, as there are other defendants which are not a part of the agreement toarbitrate.
In making their argument, theFellermans indicated that, if the agreement to arbitrate was enforced, theywould be obligated to fight their dispute with the defendants separately inarbitration and judicial proceedings which would require “separatediscovery” and “enormous expense for all involved, and delay theultimate resolution of the matter.”
Lazarus nonetheless stated thatthe mandates of the Federal Arbitration Act, 9 U.S.C. Section 1 et seq.“favoring arbitration trumps notions of judicial economy and efficiencyand requires that otherwise valid arbitration agreements be enforced, evenwhere enforcement results in related disputes with multiple defendants beingadjudicated in separate forums.”

Thanks Roy. Good read.

Yet to be proved in Canada.

Gilles would have to verify this but from what I remember, InterNACHI Quebec members agree to an arbitration process if/when litigation arise among members.
Hope Gilles pops in to explain.

Whether or not it has been disputed in a court of law, I would not want to be the inspector

I have and continue to use Joe Ferry’s Clams Intercept. At least with Joe behind you your chances of success are 99.7% to have the claim dismissed.

Still can not understand why Ontario homies did not reach out to, and promote, Joe’s valuable service.
No use shopping around when the best is willing to defend you for the price of one home inspection per year.

For Canadian Inspectors

Much thanks Claude for all three links.
You’re the best.

As to, the Supreme Court of Canada Allows Parties to Escape Arbitration Clause and Pursue Class Action, I was hoping, wishing and looking forward to, Gilles Larin enlightening InterNACHI on Quebec InterNACHI, or InterNACHI Quebec requirements.


Here’s one where the Arbitration clause (boiler plate) was rejected in Ontario Claude

However, in Ontario, and from a laypersons (me) perspective, it appears as long as the contract (and arbitration clauses) comply with the Arbitration Act of Ontario ( the clauses should be upheld to ensure Arbitration is taken as a precedent to court action.

Obviously, local jurisdictional legal advice should be sought to ensure the contract is valid and supports what you are trying to do to protect both parties in the contract.

A plaintiff should have choice.
Arbitration should not supersede court action.

When in arbitration for home inspection errors or omission you are subject to non legal persons with little training, very little!!!
This is why I am no part of InterNACHI Quebec. I have heard the members are subject to arbitration in case of a claim.

It’s bad enough lawyers are shallow on the home inspection E&O claims, along with provincial MMP’s.

I will take my chances with Joe Ferry defending me and quashing the claim by instructing the plaintiff’s attorney to FACT.

Over 1600 claims. 99.7% successfully defended home inspection cases with most not even entering a courtroom.

Inspect without worry.
Retain Joe Ferry Home Inspector Lawyer.
He’s the best!!!

Has Joe Ferry ever defended you, or are you simply indicating your trust in him doing so?

I would have to believe that Joe would need to work with a licensed lawyer to do so in your province.

I’m not doubting Joe’s ability, but more so questioning the “right to practice” in that jurisdiction. Certainly I respect he would be the first “go to” guy!

Good afternoon Claude.
Hope you are in good health and spirits today.

As to your question, no I have defended myself on several occasions before any request went out to Joe to intervene on my behalf.
Both successfully.

As for how he would defend me is up to him.
From my understanding, and I am just assuming.
1: You send him an email and the report in question.
From there he advises you.
2: He contacts the plaintiff’s lawyer, introduces himself and explains the legalities (THE LAW OF CONTRACT) in depth.
I can imagine he further explains how difficult and long a claim may last, and how costly an endeavor it can become, but again I am assuming.

Talks go on behind the scenes over telephone conversations. As in court, much discovery is done behind the scenes before being presented.

If representation is required, I am certain there would be legal representation acting as legal counsel. I am sure Mr. Joe Ferry would be at the table beside you if push came to shove. Joe will defend you!

Over 1600 hundred home inspectors. 99.7% of his claims successfully defended. No small accomplishment.

Joe gave a Law and Disorder seminar in Ontario in 2011. Remember?
So why would anyone attend if his legal expertise did not transcend borders?

I trust Joe Ferry and regard him highly. As well, I have had offers from other legally astute InterNACHI member saying they would act as expert witness or legal counsel as well.

As Iron Sharpens Iron, So One Person Sharpens Another. It’s prophetic.
Those words drew me to InterNACHI. As a Christian, I understood the prophetic message and how it works.

I hope I answered your questions.
Best of luck with your endeavors.
Best regards.
Robert Young.
Robert Young’s Montreal Home Inspection Services Inc. Our company motto; Putting information where you need it most, “in your hands.”


Arbitration has been around for centuries. It is controlled by statutory acts in Canada. There are Provincial derivatives based on the same principles.

One thing to remember that the awards (findings) are binding and can be enforced as if it were based in a decision in a Court of Law. The other thing to consider is the arbitrator’s role is quasi judicial. Their decision is final unless there’s grounds on the procedures being unfair, partial or fraudulent.

Again the opinion of the arbitrator on the evidence presented at the hearing represents the judicial opinion of the arbitrator. Again the award of the arbitrator is final in that it is not subject to appeal on its merits and the evidence cannot be reviewed in an appeal to a higher court.

Morning Claude, et al…

There are several legal venues a plaintiff can/may take to resolve a complaint. Through the judicial court system, small claims court, or trail. Arbitration another vehicle.

Marc Cohen, general counsel, and Nick Gromicko, InterNACHI founder, and The King and a hell of a great guy as far as everyone is concerned, have written an article on this very subject.

I remember this contentious issue arriving on the MB and certainly wanted homies to understand what arbitration is/meas to you as a home inspector.
**If your contract requires arbitration through the AAA, you will be stuck with an arbitrator selected by the AAA. The only requirement to serve as an arbitrator for the AAA is to complete some mandatory training. **

I am still awaiting Gilles Larin to clear up a questions I have asked. “Are Quebec InterNACHI members bound by AAA arbitration?”

It seems arbitration has become a mainstay in resolving legal disputes. But is arbitration right for you?
There are many pros and cons NOLO…and in my business model, not for me.

Very interesting post thanks Robert .

To me it would only make logical sense to have a “contract” clause in your home inspection agreement that complies with the inspectors jurisdiction. In my case Ontario, and Robert in your case would it not be Quebec?

Just saying…would it not be open to appeal otherwise?

This is a very important subject ,I am surprised more Canadian home inspectors do not post their ideas and thoughts .

Morning, Claude, much thanks Roy.

I use InterNACHI PIA.
It outlines, if litigation arise…

  1. The parties agree that any litigation arising out of this Agreement shall be filed only in the Court having jurisdiction in the County in which the INSPECTOR has its principal place of business.
    a. In the event that CLIENT fails to prove any claims against INSPECTOR in a court of law, CLIENT agrees to pay all legal costs, expenses and fees of INSPECTOR in defending said claims. CLIENT further understands that any legal action against InterNACHI itself allegedly arising out of this Agreement or Inspectors relationship with InterNACHI must be brought only in the District Court of Boulder County, Colorado. No such action may be filed unless the plaintiff has first provided InterNACHI with 30 days written notice of the nature of the claim. In any action against INSPECTOR and/or InterNACHI, CLIENT waives trial by jury.

9 a. The CLIENT agrees to pay all legal and time expenses incurred in collecting due payments, including attorney’s fees if any. If CLIENT is a corporation, LLC, or similar entity, the person signing this Agreement on behalf of such entity does personally guaranty payment of the fee by the entity.

Hope that helps.

I’m not.

So if you are not surprised, then as the founder of a home inspection association, should you not be doing something about it?

I personally have seen and heard endless moaning and groans from members, mostly new, about HIGH insurance premiums. You are one of those, or at least I have read posts as to where MANY played upon their fears. “Join us to lower you insurance.”
Much posted on insurance premiums and HUB pricing.
A lark of a complaint if you ask me as a previous business owner. Try multiplying by ten for 2 men with myself uninsured.

So now members have their low insurance premiums lowered by joining certain groups or chapters but are forced to take part in AAA arbitration?
You do not think this topic requires conversation and arguments?

It appears if Mr. Cooke says black, you instinctively say white. Hmm…

So if you are not surprised, then as the founder of a home inspection association, should you not be doing something about it?

I personally have seen and heard endless moaning and groans from members, mostly new, about HIGH insurance premiums. You are one of those, or at least I have read posts as to where MANY played upon their fears. “Join us to lower you insurance.”
Much posted on insurance premiums and HUB pricing.
A lark of a complaint if you ask me as a previous business owner. Try multiplying by ten for 2 men with myself uninsured.

So now members have their low insurance premiums lowered by joining certain groups or chapters but are forced to take part in AAA arbitration?
You do not think this topic requires conversation and arguments?

It appears if Mr. Cooke says black, you instinctively say white. Hmm…