Enjoy this new educational thread. Learn how to limit liability and manage risk.
I welcome anyone’s questions/concerns that pertain E&O insurance, Liability insurance, general risk management issues, etc., etc. Please do no hesitate to ask!
Nick also posted it the education section you might want to post there as you might get lost/buried by other topic here. Just trying to be helpful.
OK, Ben, it seem like a number of new inspectors are coming online, how about a rundown on why new (for that matter, even the well established) inspectors needs E&O insurance (do all states require it), liability insurance (how much is enough or to much) etc., etc.
Hopefully that will get a discussion going.
Why does the insurer always settle in court without supporting the inspector for those more than obvious frivilous lawsuits?
Dare I answer for Ben? Economic imperative.
How many law suits went to court last year against home inspectors?
Well that didn’t take long now did it? To address the issue of new inspectors needing insurance, it’s pretty basic. You’re more prone to make a mistake due to lack of experience. And therefore you’re more likely to get sued. Not any fault of your own really. For all the new guys, finding a carrier who will write a NEW INSPECTOR might be difficult. FREA CAN AND WILL WRITE THEM! But insurance is not necessary for JUST the new guys. The “seasoned” inspectors need it too. From a statistical standpoint, each inspector will get sued at some point during his/her career. It’s just a matter of how big and when. Having said that, experienced inspectors can’t really afford to go without it either.
Not all states require E&O, but more and more are looking into it. Tennessee, New York, New Jersey, etc., etc. Some require just GL (New York), whereas some require just E&O (New Jersey). Nick has a page devoted to the insurance licensing requirements on NACHI’s site somewhere. Keep in mind, insurance requirements are not just limited to the States. Different franchises may have requirements too.
Keith is right on target with his reply about settling out even if the claim is frivilous in nature. Economically speaking, why would an insurance company want to spend $20,000 to litigate when they can potentially settle out for a fraction of that cost? Follow the money.
Looking for number of claims, whether they went to arbitration, court or were settled for the year 2005 in the State of Washington ONLY.
I understand the economics of the settlement, but isn’t that when many inspectors get the boot? Because the insurer had to spend money to protect an innocent home inspector that was paying $5000 per year on insurance? In my personal opinion this is why so many inspectors do not have insurance. It’s going to cost them one way or the other.
I thought it was 1/3. Man, this figure goes up every time someone asks. By next week, we should all be out of business.
How many total cases actually went to court last year, Ben?
If an Inspector gets frivilous claim after frivilous claim, they might take a look at who the common denominator is, even if the claims are frivilous in nature. And if you get a $1,000,000 claim for some major “error” or “ommission,” I think it’s safe to say that you won’t be renewed. But any decent carrier (yes, go ahead and tell me that a ‘decent carrier’ is an oxymoron) should not “boot” you for one or two claims that have no merit.
Give me some time on the data you’re requesting. I don’t have access to my database from home. Stay tuned.
How about a “ballpark” figure…
I would think that the number of suits that go to court would be very closely monitored. If you don’t have 2006 yet, how about 2005?
Not suggesting FREA gives the boot after a settlement. Someone posted the other day about getting the boot after their first claim (another compnay). I can try and find the post or the inspector may catch this thread and chime in. Richard Moewe was it you?
Follow the money indeed! Thank you for this candid response. Can you see why there are inspectors that take issue with the way frivilous (to use your own word) claims are handled by the insurance providers who should be fighting for their insured? We have had earlier threads on this topic where our own attorney-at-large, has steadfastly denied that insurance companies would settle frivilous claims in this manner because they would be acting in bad faith toward their insured.
Well Mr Ferry, what say you now?
Now…imagine working in a state where E&O is a requirement to be licensed. It will be the insurance company, not the state or the market, who will decide whether or not you stay in business.
Ben, you said that the “good” company would not drop you for one or two “merit-less” claims. How many frivolous claims, exactly, would it take?
True. That’s why you fight these kinds of requirements. Oregon has licensing, but does not require that certified h.i.'s carry E&O. If our legislators tried to pass it, the local h.i.'s would be all over it. And now, thanks to our friends from FREA, I have a post from one of the providers of this insurance that they do not and will not act in good faith toward their own insured.
The answers to most of these questions pertaining to claims and how many it will take before an insurance company will terminate you are circumstantial. Every situation is different, every insurance carrier has different underwriting guidelines, and different policies when it comes to renewing their insureds. So it’s difficult for me to say.
An insurance company does not, with malicious intent, take the stance of “We are going to settle ANY frivilous claim because we don’t want to pay out.” Again, it’s a case by case basis. But again, economically speaking, in many cases a settlement is the most cost effective route to take. So before jumping to the general conclusion that insurance companies “do not and will not act in good faith toward their own insured,” let’s try to understand why.
How about an answer to the question that is purely statistical…A number at the tip of the tongue of every actuary in the insurance business?
How many home inspectors were sued in a court of law (not small claims) in 2006 and/or 2005?
If you are refusing to answer, please say so.
Come on now. I would never refuse to answer a question. I will not, however, post data on this forum that I can’t say without complete certainty. Definitely not avoiding the question. Only deferring it until I can get the appropriate facts.