in California, using any contract that limits the liability to the cost of the inspection is, IMO, very risky.
Per California law:
“Contractual provisions that purport to waive the duty owed pursuant to Section 7196, or limit the liability of the home inspector to the cost of the home inspection report, are contrary to public policy and invalid.”
The belief that making the limit of liabilty to $1.00 above the cost of the report, or 1.1111% of the report, or 1.5% will be viewed by the courts as consistent with the legislative intent of the statute is hopelessly misguided and wishful thinking at best.
What you don’t understand is that in states that have such a statute, you’ve just tripled your exposure. First, under California statutes, you’ve just violated California’s UnFair Business Practices Act by contravening the legislative intent of this statute. By having it established that you’ve violiated the statute, you’re now liable under Unfair Business Practices Act for the consumers attorneys fees (a remedy specifically listed as a remedy under that statue). Secondly, that statute allows for an award of triple the actual damages. Thirdly, you’ve exposed yourself to tort liability, which is a separate and different measure of damages than the companion claims brought under your contract. Finally, you’ve provided counsel for the claimant a platform to allege your bad faith attempt to skirt the law, which acts to disparage you, and which can have a negative impact on otherwise meritorious defenses.
More good stuff: The above quoted statute falls under the category of statutes intended to promote an important public policy…ie, consumer protection. California courts have a long history of interpreting such statutes very broadley and liberally…and not strictly, as the authors of this “not more than 1.5%” contract verbiage must have thought when it was inserted and promoted as a good risk management step.
Bottom line: incorporating this limit of liability on California consumers has a very high probability of coming back to bite you in a big way. So for those in California who employ this language, good luck with that. Just understand that the plaintiffs bar here in California is very happy to see you have verbiage that dramatically expands yor exposure.