E&O Survey

Minor problem in that we would then be in violation of our state license laws. Simple rule…if you are doing an inspection for a potential buyer or a seller in a real estate transaction then you are bound by TREC rules. TREC rules say we follow their SOP. If you want to keep your license you’ll have to pay the piper or your insurance man whichever the case may be.

If you take the approximately 4,000 inspectors in Texas X approximately $2,500 per policy then that’s $10,000,000 per year in premiums that some lucky insurance company stands to make. I’m in the wong business!

Then how do certian people get away with using a departure procedure which allows them to inspect to the ASHI SOP?

I have no idea, maybe John can explain.

I’ll post then repost this with comment

(c) Departure Provision. (1) An inspector shall exclude from the inspection any part, component or system which the inspector is not competent or qualified to inspect. (2) An inspector may exclude any part, component or system required for inspection by the standards of practice which is inaccessible, cannot be inspected due to circumstances beyond the control of the inspector, or the inspector’s client has agreed is not to be inspected. (3) This departure provision does not prohibit an inspector from specializing nor require the inspector to specifically exclude other parts, components or systems not ordinarily considered a part of the inspector’s specialty. However, the inspector shall comply with the standards of practice for the items being inspected. (4) If an inspector excludes any part, component or system listed in the standards of practice, other than one which the client has agreed is not to be inspected, the inspector shall: (A) advise the client at the earliest practicable time that the specific part, component or system will not be included in the inspection; and (B) state in any written inspection report that the excluded part, component or system was not inspected.

This could include any poorly defined or ambiguos SoP requirement. For example, your not required to inspect to code but you must report “proper” combustion air. Hmmm, so what do you do? You request a legal interpretation from TREC then depart from the provision until TREC answers.

Another example: Inspector shall report conditions that “may” affect foundation. Define conditions that “may”. Until then I depart from this.

Inspectors can ask a ot of questions of TREC regarding interpretations. That is why we were trying to pass a concise SoP that empowered inspection professionals to write their own company policy. That is shot down. We must ask TREC to interpret becasue our opinion is not enforceable per General Counsel.

Easy enough

OK

This is the important wording. There are two options in this.

  1. You can depart from anything without client approval as long as you give advance notice and state it in the report appropriately.
  2. IF however the client gives approval you can depart without advance notice or putting it in the report.

I am fairly certain Past Chairman Foster departed from the SoP in its entirety. Write a letter to TREC and ask him. He is on committee now.

I believe it is possible to use NACHI SoP but I would expect resistance from TREC. The best thing to do is create an example and ask for written permission. I am certain they will rewrite the rule if a lot of people do that. But then rewriting the rule denies the consumer choice. Its a pickle.

The fun thing is your still bound by the E&O because departure is part of Section G. But, interpretation of the SoP falls into NACHI hands and not TREC Enforcement. TREC will hate that.

My advice is be very careful about doing full departure. Better to do partial departure with client permission. For example: Your selling a job: I do the TREC inspection but I depart from comparing your home to code in any manner. In your report you state in the furnace section “Inspector departs from inspecting for proper combustion air per a code reference. The inspector looks for obvious performance related results of improper combustion air provisions.”

The current SoP are loaded with traps. Maybe I’ll teach a seminar on how to avoid some of them.

Conclusion: Consult an attorney before following any of these ideas. I guarantee one thing. TRECs job is to protect the consumer and that means “get you”.

I sat with my wife yesterday and decided to stop production inspection as soon as I can. It may take a year or so but I am leaving. I will do inspection coaching and litigation work.

These statistics are held and closely guarded by the insurance companies.

While E & O premiums are calculated by region, based upon the payouts in these regions, no one will admit to knowing how many lawsuits are actually filed, go to court, and/or result in judgment by the court versus out of court settlement.

What you are left with is the WAGs (wild-a$$ guesses) of the vendors peddling their anti-litigation products. From these, you are to expect 1/3, 1/4th or all home inspectors to be sued within (a) the next twelve months to (b) their careers.

Good luck.

Here is a point to ponder…

When an inspector inspects and reports by the state mandated SOP, he should expect the state to back him up on complaints that fall within that protected guideline.

If he is insured, his policy does not cover him for (a) items not covered by the SOP, and (b) items not inspected in accordance with the SOP.

Thus, mandatory E&O in a state that has a mandated SOP is redundant.

Thanks for the info John, and I hate to see you go.

Here is the thing-
To use the Towers & Perrins E&O through NACHI
The Terms of use states you have to use the NACHI Inspection Agreement
The NACHI inspection agreement states that the inspection is performed to current NACHI standards (SOP).

I am unsure if Towers & Perrins would allow for any alteration of the NACHI Inspection Agreement. Especially changing it to TREC SoP, in effect putting enforcement into the hands of TREC Enforcment.

So- inorder to get the E&O
I would have to depart from the SoP to remain compliant to state law.
And since Towers & Perrins does offer E&O coverage in the state of Texas, TREC would have to pass a ruling which said that I could not use T&P for E&O.

And if I must have E&O (required by the state) and the carrier I want to use requires I use the NACHI agreement, and the NACHI agreement states I preform my inspection to the current NACHI SOP, and TREC allows a departure procedure from the SOP-

How could TREC (a state org.) stop you from doing that- They don’t have to like it (But they made the rules).

Mine doesn’t.

This is directly off the T&P site in the members only area
"Underwriting Requirements

  • Signed application
  • Loss history, if any
  • Resumes for any inspector with less than three years of experience
  • Use of a NACHI pre-inspection contract required
    "

This might not have been in place at the time you got your coverage. But to get E&O now, I would be bound to use a NACHI inspection agreement for my coverage to be vaild

It is a ugly staircase of logic

but again-

State Mandated E&O
E&O through T&P (unless the state wants to dictate who an inspector can secure E&O coverage from)
T&P requires NACHI Agreement
NACHI Agreement specifies NACHI SOP
TREC allows for a departure procedure (which I would have to envoke to keep the mandated E&O coverage (from the provider of my choice) that the State requires. And with TREC being a government enitiy they would either have to violate their own laws (or change them which would then remove or limit my rights as a consumer) or go against the State’s decision that Inspectors must have E&O coverage.)

I am guessing but, I am sure T&P’s decision to use the NACHI agreement was based upon it’s defendability and limitations concerning claims; which would be totally removed if you were to use the TREC SOP.

I didn’t make this ugly barrel of fish,I’m just trying to stay afloat.

George…you are exactly right. When I originally obtained my E&O thru Towers Perrin/Lexington that was not a requirement and neither my binder nor actual policy mentions that. I talked to a rep at TP this morning and she indicated that they only require that whatever SA you use to be blessed off by Joe Ferry. She did not indicate the NACHI SA was an absolute requirement. So, there appears to be continued confusion on this issue. I’ll try to call Joe today to get clarification.

p.s. I’ve left a voice message for Joe.

Thanks for the clarification-
But, I am pondering this question-

If there is a way to limit liability\exposure, by removing one more org (legally-based upon their own departure procedure) that can slap me with a fine, suspension, or label me ‘neg & incomp’ (on top of claims or lawsuits)- why not?

George, I talked to Joe F and clarified the Towers Perrin SA requirement, at least to some degree. To keep from contributing to thread drift on this topic here I will communicate that to you directly.

On the departure topic…we’ve all used that particular provision to some degree I’m sure. I’m also sure it was never intended to allow complete departure but rather to be able to exclude certain items or systems when the case warranted. Now, like others on the board profess, if there is a ‘loop hole’ that will allow complete departure from the TREC SOP then, you’re right, why not? But also, like John states, “My advice is be very careful about doing full departure.”. I’m certainly not going to be the test case for that. :slight_smile:

Oh…and BTW, I hand delivered mine and two other opposition letters to Sen. Shapleigh’s and Sen. Brimer’s office this morning. Let’s hope they read them prior to the upcoming SB914 vote this week.

John C…best I can tell from the Legislature’s website it was Rep Brian McCall from your area (Plano/Frisco/Allen/N. Dallas) that authored this amendment. Maybe his constituents ought to call his office’s either in Plano or Austin to voice their opposition.

That is correct! The following link provides the recent amendments to the bill. If you view the Doc/PDF next to McCalls name you will see his work.

http://www.legis.state.tx.us/BillLookup/Amendments.aspx?LegSess=80R&Bill=SB914

Also if you read page 4303 of the journal below it also shows McCall as the one sponsoring the amendment.

http://tlo2.tlc.state.tx.us/hjrnl/80r/pdf/80RDAY77FINAL.PDF

The amendment has been “Adopted” already but has it been finalized? By that I do mean mean are there further proceedings for a full House vote yet?

I would be very interested in knowing just who, or what organization(s), placed the bug in McCalls ear to propose the amendment? Is McCall associated with any insurance or real estate concerns?

Manny, I’ve been trying to decipher the Texas Legislature website to better understand the status of SB914 and HB3250. Best I can tell HB3250 has already passed the House and now the ball is in the Senate’s court to act on SB914. Apparently Wednesday is the last day for the Senate to vote on this in this regular session of the legislature.

I also just received this as part of the TAR Legislative Liason newsletter where they are already taking credit for getting SB914 to Gov. Perry for signature. So, where does SB914 stand? I can’t tell for sure but I do not think it has been sent to the Gov. yet.
Texas Association of REALTORS®
*The Texas Association of REALTORS® legislative agenda is coming along very nicely. Last week, the TAR lobby team was able to successfully send several bills to the governor’s desk for his final approval: *

His family had an insurance company. He could care less about inspectors. He is trying to gain power in Texas and my bet is the trial lawyers are supporting him. You can bet I’ll vote against him next time.

Been sent the Gov. He cannot line item this bill. Its a done deal.

If I read this right . . . . TREC can slap you with anything they want any time they want. TREC is NOT there to protect you. TREC exceeds the nature of the complaint and looks for violations to get you on. A form pagination error or some other minor thing. If your agreeable they usually go easy. If you resist they increase the penalty to get you to go along. One person had a form violation and was supposedly rude to TREC; they went for his license. He is one of the few survivors; the judge would not take his license for a form violation.

That’s just the way it works. You cannot beat them. They have a much bigger budget.