Expensive Errors and Omissions Insurance

Originally Posted By: jruppert
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FREA Wants $2,795 for $300,000 in coverage with a $2,000 deductible. (Claims made versus per occurrence). This is for a March 1 renewal.


Does anybody know of a better deal?


Originally Posted By: escanlan
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James,


Unfortunately the market is bearing the price only because no company wants to bring HI insurances to a reasonable level as long as they can ride the gravy train. I was discussing this just Monday with my Dentist. Her medical malpractice insurance, $1.5 million only costs her $2000.00 a year and she also teaches and this includes coverage for that as well. Go figure, she can drill in to deep and paralyze my jaw/face and her malpractice is much less than our E&O.

If you wish I can email you a list of agencies that handle HI E&O and you can check with them for pricing? Let me know.

Manny (Emmanuel) Scanlan


Originally Posted By: cbutler
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Mr. Ruppert,


are you a member of NACHI?


if so, your rate for $300,000 is not $2,795.00 but $2,525.00.


Make sure you denote that you are a member of NACHI on question #4 which asks are you a member or a professional organization or have you recently joined one.


Call me if you have any questions.



Sincerely,


Chris Butler


(Former) Director of Membership @ FREA


chris_butler32@yahoo.com

Originally Posted By: ksitzes
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Hi,


I think everyone is tried of high E & O Insurance. Why can't the Assoc. figure out some way to provide a reasonable rate insurance for all it members. I would think with as many members as NACHI claims we have that there is some way to come up with Insurance program that is a more affordable for it members. I don't understand why it is so high? Maybe the Assoc. should set up a insurance plan that only member could buy that is cheaper the the commercial compy. have for us.


Originally Posted By: dgreen1
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After great consideration I have determined that Home Inspector E&O Insurance is nothing more than a scam. I have been inspecting houses for nearly 20 years and have completed over 10,000 inspections. In this time I have been insured for 3 of those years and had less than 10 claims and less than five of them resulted in payment of funds to the client. Of those that were paid only one was over $500 and that one was the only one paid by an insurance company and was paid against my wishes. It involved a client who claimed that I failed to tell him that his furnance had a cracked heat exchanger even though I reported an abnormal flame pattern in the burner chamber indicating a possible cracked heat exchanger and recommended further evaluation. He wanted $1800 to replace the furnance and the E&O Insurance company said that it was cheaper FOR THEM to pay the claim… cheaper for them in that I had a $1500 Deductable so they paid the $1800 and made me pay them $1500 back… all they were out was $300. Some protection…huh. That was about 12 years ago and I paid $3500 in premium that year plus got the pleasure of paying 99% of the only claim I had. So the insurance company made $3200 profit off me. The next year the company refused to renew my policy because I had a claim!!!


Last month Allen & Associates informed me that to renew our $300,000 policy we got last year, the premium would increase double to nearly $6500 a year for two inspectors and the deductable would increase from $1000 to $1500 per claim. This with no claims last year. I don't think the Insurance industry can justify charging this kind of premium for E&O. Insurance rates are suppose to be based on actual statisitcs of the risk insured. I challenge any insurance executive to produce the claim figures that justify such an increase and justify rates that exceed that of the medical profession.

The insurance industry is getting States to make E&O mandatory so they can charge whatever they want and you have to pay it. Recently we got word here in Kentucky that the Insurance industry was going to try and amend our recently passed license law to require E&O...over my dead body!!!! I am going to become the home inspectors E&O insurance industries biggest critic...none of them are any better than Mr. Napadoe or whatever his name is from Nations Hazard...they are all robbing my industry... taking the food out of our kids mouth for what...are they really providing you any protection. They are giving inspectors a false sense of security that they are really protected. But are you really? They are continually putting loop holes and exclusions in the policies that protect them not you. Read your policy or have an attorney decifer it for you and you will discover that you likely don't have the coverage you THOUGHT you were paying for!!!!! And if they double a premium without having a claim...just think what they will do if you have a claim!

I am starting a letter writing campaign with other KY inspectors to the Kentucky Department of Insurance asking them to begin investigating the E&O Insurance Companies business practices here in KY and I recommend home inspectors in all states start demanding that the regulatory authorities in their states begin checking into them. Also stop doing business with them... Get a Pre-paid legal membership that gives you trial representation if you are sued and create a claim fund by investing the money you would be giving to the insurance company into a money market account.The good thing about this is if you don't have any claims the money is still yours! Develop a liability management procedure for your company. Make sure your contract is legally binding, use an arbitration clause to keep you out of court, above all do the best inspection you can. Just don't let these guys rob you and your family!!!!

I would like to volunteer to create a NACHI Liability Manangement Task Force to develop liability management procedures and a training program to teach our members how to protect themselves and their businesses without E&O Insurance.


--
Michael Green
1-877-INSPECT/InspectorUSA
Kaesar & Blair Advertising Specialties Dealer

Originally Posted By: Nick Gromicko
This post was automatically imported from our archived forum.



Count me in.


We are working on all fronts on this thing:

We got FREA to give us a discount.
We formed the Consumer Recovery Fund/Legal Defense Fund in Canada: http://www.nachi.org/crf.htm
We formed our own Dispute Resolution System: http://www.nachiadrs.com/
We created a hold harmless clause http://www.nachi.org/harmless.htm
We rewrote our SOP and contract between inspector and client to protect you.
We are building our own E&O discount portal http://www.nachi.org/eo.htm
We took many steps to produce verifiable evidence for insurance actuaries to see that NACHI members are the lowest risk in the industry and deserve to be treated specially.
We push continuing education which indirectly results in lower risk http://www.nachi.org/inspectionexcellence.htm
We hired a Director at Large who is an internationally known liability minimization expert.
We even had several courses on this topic presented at our National Convention a couple weeks ago.
More to come.

Reducing risk for the inspector is a big part of what NACHI does.


--
Nick Gromicko
Founder
dues=79cents/day.

I much prefer email to private messages.

Originally Posted By: jfarsetta
This post was automatically imported from our archived forum.



Two offerings which may be of particular interest to NACHI members.


One, is the fact that we will soon offer substantial E&O discounts to NACHI members.

Two, is the fact that NACHIADRS, www.nachiadrs.com, is also very real.

As to FREA, I have nothing but good things to say about them. They are a top-notch organization. They offer a good product at a good rate, and do provide discounts to NACHI members.

As to the rate issue, competition may help the situation, but risk is always a reality. With risk, comes the need for some to carry insurance. It depends on your state, and whether or not your home is on the choppng block in the event of a lawsuit.

And, with folks like Lorne Steiner on board, NACHI just continues to offer more and more reasons why ths is the right organization to belong to.


--
Joe Farsetta

Illigitimi Non Carborundum
"Dont let the bastards grind you down..."

Originally Posted By: dgreen1
This post was automatically imported from our archived forum.



I know NACHI is making great inroads in this area… but I don’t think we will be successful until we speak and act in unison. We will continue to be bilked by this industry. I don’t think anyone can convience me that a policy with the maximum exposure of $300,000 should cost $6500 with a $1500 deductable. Even $3000 is a bit much when I can buy a $1,000,000 General Liability policy for $300 a year. Realtors, Appraisers, Lawyers, Engineers have reasonable professional liability insurance rates why do home inspectors have to pay so much for so little. Especially with the leaps in professionalism that this industry has made over my 20 years in it. We have state regulation, accepted Standards of Practice, professional training schools. Heck, when I started there was no such thing as a home inspection school…we had to learn everything on our own, with these reasons along with a substantial increase in numbers of inspectors, our rates should be going down not up!


Concerning FREA, I agree that they are a quality organization but they are not an insurance company...they are an agent..they don't set the rates and even their rates are high. I was insured through them a few years ago when they gave me a more reasonable rate than any others...problem is they also jacked the rates up almost double when it came time to renew and once again without any claims.

I don't think it is a matter of discounts, If I charge $3,000 for a home inspection when it should be $300 and offer my client a $10 discount, I'm still over charging. We need the industry to price their product more fairly from the start instead of trying to cover it with discounts.


--
Michael Green
1-877-INSPECT/InspectorUSA
Kaesar & Blair Advertising Specialties Dealer

Originally Posted By: ksitzes
This post was automatically imported from our archived forum.



I due not know want it would take but NACHI needs to start there owe


E&O Insurance. The Assoc. needs to be self Insured. I think that as many member we have that we should be able to pull it off. just a though


Originally Posted By: jruppert
This post was automatically imported from our archived forum.





In the earlier years, perhaps home inspectors were not held to the same standards that they are today. In addition, the value that home inspectors bring to the residential real estate transaction is far, far, far more then the meager fees that we actually charge.

Think about it, the meager fees that we charge, (even in the New York City regional market where everything is higher than the rest of the country) represent a tiny, miniscule, percentage of the transaction. This fee simply does not reflect anywhere near the true value that we bring to our clients.

Even if the fees are doubled, it's still too cheap!

We are the eyes and the ears for our clients regarding the entire physical plant involved in the transaction. Not only do we give our clients critical information regarding their immediate purchase decision, but we also give them a blueprint for what they need to do with their real estate in the future in order to preserve what is likely the largest investment they will ever make in their lifetimes! We are all underpaid! ![icon_exclaim.gif](upload://kW92MliyHA8ygoXI0UsgtBSn4ZO.gif) ![icon_exclaim.gif](upload://kW92MliyHA8ygoXI0UsgtBSn4ZO.gif) ![icon_exclaim.gif](upload://kW92MliyHA8ygoXI0UsgtBSn4ZO.gif)

In my opinion, one of the reasons why we are underpaid is because so many people have construction and technical knowledge, but very little or no business experience. Then, they venturing out in the business world, possibly for the first time, as beginning home inspectors. As a result of their "newness", they are scared, and they mistakenly offer their services at a huge discount. This very plain and simple error in judgment depresses the entire home inspection market throughout.

Home inspectors throughout the continent should wake up and think like professionals and smart business people.


Originally Posted By: jruppert
This post was automatically imported from our archived forum.





In the earlier years, home inspectors were not held to the same standards that they are today. But have our fees increased accordingly? In addition, the value that home inspectors bring to today's residential real estate transactions is far, far, far more then the meager fees that we actually charge.

Think about it, the low fees that we charge, (even in the New York City regional market where everything is higher than the rest of the country) represent only a tiny, miniscule, percentage of the transaction. This fee simply does not reflect anywhere near the true value that we bring to our clients.

Even if the fees were doubled, it's still too cheap!

We are the eyes and the ears for our clients regarding the entire physical plant involved in the transaction. Not only do we give our clients critical information regarding their immediate purchase decision, but we also give them a blueprint for what they need to do with their real estate in the future in order to preserve what is likely the largest investment they will ever make in their lifetimes! We are all underpaid! ![icon_exclaim.gif](upload://kW92MliyHA8ygoXI0UsgtBSn4ZO.gif) ![icon_exclaim.gif](upload://kW92MliyHA8ygoXI0UsgtBSn4ZO.gif) ![icon_exclaim.gif](upload://kW92MliyHA8ygoXI0UsgtBSn4ZO.gif)

In my opinion, one of the reasons why we are underpaid is because so many people have construction and technical knowledge, but very little or no business experience. Then, they venture out in the business world, possibly for the first time, as beginning home inspectors. As a result of their "newness", they are nervous and mistakenly offer their services at a huge discount, thinking that they will get more business as a result. This is a very plain and simple error in judgment, but it depresses the entire home inspection market. Lets get smart!

Home inspectors throughout the continent should wake up and think like professionals and smart business people. Let's join the 21st century and charge fees that truly represent the value of our services!


Originally Posted By: jfarsetta
This post was automatically imported from our archived forum.



The other reason that we don not charge more is due to the attitude of some that our inspections are worth about $250 and that they should take about an hour to complete.


If you think about the cost of homes in this area of NY, and multiply the sale price by 1/10 of one percent, its pretty average. Change the figure to 2/10 of one percent, and we'd be earning a whole lot more.

The realtor gets an average of 5% to 6%. Using 5% on a home selling for $400,000, that's $20,000. 1% is $4000. 1/10 of 1% is $400. 2/10 is $800.

But, just try and do it. See the pushback you get. Especially from the realtor. Ask them if they'd be willing to sell the home and, after all is said and done, would have done it for $800.

Doubtful.


--
Joe Farsetta

Illigitimi Non Carborundum
"Dont let the bastards grind you down..."

Originally Posted By: jhagarty
This post was automatically imported from our archived forum.



jfarsetta wrote:


Two, is the fact that NACHIADRS, www.nachiadrs.com, is also very real.



Is there any Case history and/or operation within any Industry where the viability and effectiveness of this option can be reviewed?


--
Joseph Hagarty

HouseMaster / Main Line, PA
joseph.hagarty@housemaster.com
www.householdinspector.com

Phone: 610-399-9864
Fax : 610-399-9865

HouseMaster. Home inspections. Done right.

Originally Posted By: jfarsetta
This post was automatically imported from our archived forum.



Statistically, mediation is effective in aproximately 85% of situations where comparative negligence is established with both parties. Additionally, many judges will try and convince the defendent and plaintiff to seek a mediated or arbitrated settlement prior to, or in lieu of, a trial. Sometines, if you agree to the judges suggestion, you are lead to an adjoinng room, where an arbitrator waits.


Statistics are available on the internet. I believe that AAA may even publish something.


--
Joe Farsetta

Illigitimi Non Carborundum
"Dont let the bastards grind you down..."

Originally Posted By: jhagarty
This post was automatically imported from our archived forum.



I am familiar with Arbitration, Mediation and court proceedings on Local, State and Federal Levels.


My question is directly related to the program offering by NACHI.

NACHIADRS www.nachiadrs.com


--
Joseph Hagarty

HouseMaster / Main Line, PA
joseph.hagarty@housemaster.com
www.householdinspector.com

Phone: 610-399-9864
Fax : 610-399-9865

HouseMaster. Home inspections. Done right.

Originally Posted By: cbutler
This post was automatically imported from our archived forum.



To all concerned,


we are NOT an agency, we are a membership organization in which we have a master policy issued to us and we re-issue as a membership policy to an individual.


Thanks for the continued support of FREA.


FYI


Regarding pre-paid legal…


prepaid legal will pay your defense costs, but it will NOT pay any damages awarded against you.



Sincerely,


Chris Butler


(Former) Director of Membership @ FREA


chris_butler32@yahoo.com

Originally Posted By: dgreen1
This post was automatically imported from our archived forum.



I agree we are probably under charging for our services but we can only get what the market will bare. You can’t raise your prices because in many cases the customers would just forego the inspection all together or take a less qualified inspector more inline with their budget.


Chris... Thanks for correcting me on that, please understand what I said was not aimed at FREA...you have to charge your rates based on what the insurance company charges you for the master policy.

I'm just tired of the insurance industry taking advantage of my industry. This industry is full of one and two person operations, most of which are just trying to support their families with a decent living...to do that they have to work like hell and then to have an insurance industry that charges premiums based on how much we gross instead of how much risk they are actually assuming is just wrong. Anyone that crunches the numbers in this business knows that we all work on a very thin profit margin and to pay a insurance company $3000 or more for coverage that is basically very little coverage compared to other industries and types of insurance. When you basically net 25,000 to $30,000 before taxes and have to support a family that $3000+ will go along way.

Concerning NACHIADR, I think it's a great idea but I would never be able to use it...for one reason, it's too cheap for customers to file a claim. If what I read was correct...a customer pays $45 to file a claim. I use Construction Arbitration Services, Inc. for two reasons, first they are experienced in this type of arbitration and second, they charge $500 to file a claim. This gets rid of frivolous claims about dripping faucets and batteries in smoke detectors. If a client has to pay $500 to file a claim they have to be pretty serious about that claim. And they will generally deal with those things that would be considered general maintenance in any other situation. Once again we must learn to control and limit our liability to something more reasonable for the money we are being paid. I would recommend making it a bit more expensive but keeping as fair as possible.

Just my opinion.....


--
Michael Green
1-877-INSPECT/InspectorUSA
Kaesar & Blair Advertising Specialties Dealer

Originally Posted By: jfarsetta
This post was automatically imported from our archived forum.



Mike,


Filing fee is $200.


--
Joe Farsetta

Illigitimi Non Carborundum
"Dont let the bastards grind you down..."

Originally Posted By: dgreen1
This post was automatically imported from our archived forum.



Joe,


Thanks for correcting my mistake.... ![icon_lol.gif](upload://zEgbBCXRskkCTwEux7Bi20ZySza.gif) I not sure where I got $45 but I could have swore I read that on the website That makes it a much better deal...but I would still like to see it around $500.


--
Michael Green
1-877-INSPECT/InspectorUSA
Kaesar & Blair Advertising Specialties Dealer

Originally Posted By: jfarsetta
This post was automatically imported from our archived forum.



If the filing fees are out of whack with the value of the claim ($500 filing fee for,say, a $600 water heater replacement), a judge may actually set aside the arbitration clause, as it could be considered burdensome to the plaintiff.


It costs a mere $150 to sue anyone in NY state...


--
Joe Farsetta

Illigitimi Non Carborundum
"Dont let the bastards grind you down..."