Emergency Texas Legislation

Home Inspection Bill

HB 2911 is a pending TREC cleanup bill that affects home inspection. The companion bill has passed the Senate. The house will vote this Tuesday April 23, 2013. This is the midnight hour. At risk is the possibility that home inspectors may not be able to negotiate limits of liability in their contracts. Texas courts have previously upheld limits of liability however laws passed since 2007 offer an opportunity for that to be eliminated. I repeat “opportunity”. A senior Administrator affirms the risk.

HB 2911 can potentially cause the requirement that every home inspection is guaranteed with $100,000 against any TREC Standards omission. You cannot miss anything on the inspection. You must be perfect. ASHI and TAREI home inspection associations support the insurance and TPREIA does not.

The Bill can be read at

You can view inspector association support or opposition to the bill on these YouTube links. These are short and fascinating to watch. I have annotated them with my opinions and there are those who will argue I am not presenting a balanced picture. You make up your mind.

ASHI - http://www.youtube.com/watch?v=VIqBYL9PRbw
TAREI – http://www.youtube.com/watch?v=WKx5RUOV3ak
TPREIA – http://www.youtube.com/watch?v=WKx5RUOV3ak
TREC - http://www.youtube.com/watch?v=BzOc44O3JnE

TREC is trying to help find a solution to potentially unavailable insurance but they allow $100,000 in liability to continue. The TREC explanation made one thing frighteningly clear. No insurance and your out of business. If you continue to work TREC will fine you $10,000 per inspection. Texas appears insensitive regarding our investment in this job. I found the license revocation comments offensive. Already 2,200 inspectors have been put out of work by the 2007 bill. Good for business, yes . . but it can happen to you also. Inspectors have not “settled into” the regulation, they have been decimated by it. Governor Perry explained it as onerous in 2007 and he was correct. The fact is home inspection continues to be burdened with a $100,000 risk that far exceeds compensation received. A home inspection is about 43 times less than a typical 6% broker fee.

LIMITED LIABILITY is not a dirty word. The Courts have allowed it. It is an item the consumer can negotiate with the inspector. Every inspector uses the clause, even inspector committee members. A simple solution is to add what the Appeals Court has approved more than once to this legislation.

“The inspector may negotiate liability limits with the consumer with a written contract”.

This will encourage insurance to remain in Texas and be affordable. It’s not too late. It is very important to comment to both but especially the Governor within 8 hours.

You can contact your representative at

You can contact the Governor at

John Cahill
2006 former TREC Inspector Committee Chairman
I support inspection excellence; regulatory verification and assistance in education and industry improvement; consumer protection that is reasonable.

TREC has replied with a response indicating they feel I misrepresent the testimoney. I agreed to post anything they say. Here is their response and my reply to the response follows.

I will amend the YouTubes ASAP to indicate TAREI and ASHI do not oppose $100,000 per claim liability and to accept that Mr. Phillips could represent TREC until I have time to research the agendas, votes and minutes.


**From: **Douglas E. Oldmixon, Administrator

**Date: **April 22, 2013

**RE: **HB 2911 & SB 1296

This memo is being offered as a resource to correct misinterpretations contained in the annotated video commentary prepared by John Cahill regarding testimony on HB 2911 before the House Committee on Licensing and Administration.

$100,000 of E&O coverage for each inspection performed
Mr. Cahill contends that those speaking in support of the bill endorse insuring each inspection performed by an inspector for $100,000. This is a fundamental misreading of the proposed text. The law currently requires an inspector to carry insurance that provides a minimum of $100,000 of coverage per claim not per inspection. The proposed bill language does not alter that requirement in any way and simply provides clarification. It does this in three ways:
· It specifies the types of companies authorized to write the coverage. This guarantees that the coverage is written by an entity subject to some regulatory oversight.
· It clarifies the type of liability coverage that must be provided by the policy. The lack of clarity regarding the type of liability coverage resulted in the agency previously seeking clarification from the Office of the Attorney General of Texas. This language merely codifies the outcome of that opinion.
· It confirms a minimum annual aggregate of $100,000 per policy. This text provides a statutory minimum cap on the amount the overall E&O policy must cover. The existing statute is silent on aggregate limits, leaving it open to insurance company setting various limits. The inspector is free to choose a larger aggregate limit, as many do.

**Authority of the Chair of the Texas Real Estate Inspector Committee **
Mr. Cahill states that Brad Phillips does not have the authority to speak on behalf of the Texas Real Estate Inspector Committee (the Inspector Committee). This is not true. As current Chair of the Inspector Committee, Mr. Phillips does have the authority to speak on its behalf. Mr. Cahill also contends that Mr. Phillips changed who he was representing when prompted by Representative Geren. This is not true. Mr. Phillips had actually registered both representing himself AND as a resource witness representing the Inspector Committee. Representative Geren was simply seeking clarification for the record from Mr. Phillips regarding that fact. Previously, Mr. Phillips had spoken on his own behalf.

Endorsement by the Administrator of the Texas Real Estate Commission (TREC)
Mr. Cahill comments that the TREC Administrator gives a speech endorsing the bill. This is not true. As a state agency, TREC is prohibited from lobbying for or against a bill before the legislature. Mr. Oldmixon clearly states that he was there as a resource registered “on” the bill and was available to answer any questions the Committee had with regard to the prior testimony presented. He only provides further explanations about the various aspects of some provisions in the bill when asked to do so by members of the Committee.

Contractual Limitation of Liability
Contrary to Mr. Cahill’s contention that the bill would impact inspectors’ ability to limit their liability by contract, the bill simply does not address this issue. In this regard, inspectors are free to follow whatever practice they do currently.

Consideration of bill provisions by Committee & Commission
Both the Committee and the Commission, in prior open meeting sessions over the past year, have either recommended or approved the contents of the bill. The only variance to this is the addition of the option for a bond, which was later introduced and included to address a concern expressed by TPREIA.


My response to the response

Thanks for the memo. My comments:

1st comment
Inspection versus possible claim versus actual claim. Very interesting. I learned something new. In the home inspectors world every inspection is a possible claim but law only cares about actual claims. I invite you to live in our world of risk. I would now interpret ASHI and TAREI do not oppose 100,000 liability per claim.

2nd comment
I do not recall this bill being discussed and voted on by the inspector committee. When I was on committee General Counsel made us attend open meeting classes and sign acknowledgement agreements. GC enforced the open meetings agenda with vigor. Not on the agenda? No discussion. On the agenda and discussed? No vote allowed unless “possible action” stated on agenda. No vote taken? Discussion could not be forwarded as a recommendation. Maybe I missed the discussion and vote. I’ll check the minutes one day. It’s of little concern now, day is done.

In 2007 the inspector committee attempted to discuss the E&O legislation. Long story short the inspector committee was told by TREC that pending legislation was beyond the scope of their service and volunteer Chairman Davis was severely reprimanded by TREC. When the inspector committee was statutorily required (early 2007) they were not allowed to discuss pending legislation. When the statute requiring the committee was eliminated (late 2007) it seems they can now discuss pending legislation. Seems confusing but such is life.

3rd comment
You stated clearly you were a resource witness. I will take it that TREC has no position on the bill therefore would not be offended if the industry tried to make last minute changes through the Governor.

You mention inspectors are free to practice whatever it is they do now. Texas courts have upheld liability negotiation. It is what inspectors do now. This bill would be much more acceptable if the words “the inspector and client may negotiate liability in a written contract” were added. It is completely honest representation of accepted commerce practices.

Thanks for your help and concern regarding home inspection. The Governor summed it up when he signed the E&O bill in 2007 by saying “this is onerous”. It has proved to be a challenge for everyone. I remain convinced that TAREI and ASHI testimony can be used against any member of their group in the event of a claim. Just an opinion.

I know you are not permitted to lobby this bill so I petition others by suggesting one simple line be added to the bill “the inspector and client may negotiate liability in a written contract”? Thank you for the response.

Here are inspector committee agendas. Perhaps some discussion of ride alongs. I see no discussion about the bond, elimination of the recovery fund, redirection of recovery fund money to the State ($300,000?) in a way that reduces the Commissions financial responsibility to the State. (Inspectors are paying for TREC autonomy?) Check me out but it seems the inspector committee did not discuss this bill so how could the Chairman say they supported it?

Another concern. It is explained that TREC cannot lobby or create legislation. They serve as resource witnesses only. How then could the IAC Chairman state he represented TREC and support the bill? :roll:

Thread deleted. Time line to respond expired. Bill will pass.

I sent a letter to my rep

Take this survey https://docs.google.com/forms/d/1Yg5MCH8hxsJLT5Fr0LJqrsn-_S5i8y3qWA7CuTTKc5g/viewform

I noticed you had inserted negotiated or limited liability in the videos. Would you mind giving me a brief explanation of that versus non-limited or whatever the opposite is called? Unlimited? Is that it?

I am not a lawyer and 99% of them disagree with me. About half of inspectors do.

Limited liabilty has to be reasonable IF the State your in allows it. Texas does . . . so far. You might limit liability effectively by charging $10 for a report and you may not if you charged $5,000. The judge or jury is going to determine, in part, if it was reasonable based on service provided for fee received.

Part of reasonable limits is the right for the client to negotiate additional liability and your right to charge a fee for such.

In the end, limits of liability needs to be a negotiated liability. Both parties must agree and the client must understand the options. I want the client to tell me their expectations and I want the court to believe the contract was negotiable. (understand = part of the reason inspectors keep doing longer reports in defense mode)

There are many examples of the option to negotiate additional services and liability.

Like I said. A zillion lawyers will oppose this. Some States do not allow it. The most important thing is to explain to the client what you do and do not do; inspect hard; tell em point blank whats wrong; put it in a written report. Also, make darn sure your lawyer and insurance company agree on policy.

Joe Ferry does a great job helping inspectors if your insurance provider will let him work for you. I am not sure of those details.

I think the main thing this bill will make us do is review our contracts and reports.

Bill passed as expected. Governor may sign soon. New Standards perhaps adopted in May and implemented September. It was interesting to shake the cage to see what inspectors thought. Every one of them was emailed. 2200. To my knowledge 12 replied. Of those who replied none supported the legislation. Did all I could do to hear any kind of voice. Onward.

I sent an email to the governor

Great. Its wonderful to have a voice although we may not change minds. America remains the best regarding free speech. Win some lose some.