Originally Posted By: rsims1 This post was automatically imported from our archived forum.
Joe,
I would like to get your legal opinion on the NACHI inspector?s agreement. Are there any areas that could improved or be removed for the contract? My E&O insurance made me insert an arbitration clause before they would insure me. Reading your posts it sound like the liability clause may not be worth the paper it is written on.
Originally Posted By: jferry This post was automatically imported from our archived forum.
rsims1 wrote:
Joe,
I would like to get your legal opinion on the NACHI inspector?s agreement. Are there any areas that could improved or be removed for the contract? My E&O insurance made me insert an arbitration clause before they would insure me. Reading your posts it sound like the liability clause may not be worth the paper it is written on.
The United States has 51 different court systems, each of the fifty states and the federal system. Limitation of liability clauses will be enforced if they are negotiated between sophisticated parties with equal bargaining power. It's hard to imagine a scenario in the home inspection context where those circumstances would obtain.
I am glad that you have purchased E & O insurance. You really owe it to your client and yourself to do so. You don't want to find yourself in the position of saying to your client after your mistake has caused him tens of thousands of dollars in damages "Don't worry. I'm going to give you your money back!"
As I told a chapter meeting in Castle Rock, Colorado last night, the vast majority of professional liability suits result in defense verdicts because, by and large, professionals take their jobs very seriously and are not negligent or, if they make a mistake, the mistake is not the proximate cause of the damages.
Your contract language can provide you with dispositive defenses but it will not prevent you from being sued. That is the main reason that you need E & O coverage - to cover your legal expenses.
Anyone with $150.00 and a word processor can sue you. In the home inspection context, you will be one of many defendants, along with the real estate agent, the seller, the buyer's agent and whoever else is in the line of fire.
So, you will eventually be exonerated but it will be a Pyrrhic victory because your legal expenses will vastly exceed your E & O insurance premium.
I was asked at the Castle Rock meeting how much it would 'typically' cost to defend a suit. That is the $64,000 question. The problem is that you don't have very much control over costs. In a case where you have multiple defendants, the actions of the other parties will affect your costs. The more parties there are, the higher costs for depositions, discovery, discovery motions and on and on. Then there is the Court. Judges are fond of calling the parties in to knock heads at multiple 'conferences': scheduling conferences, status conferences, pre-trial conferences and on and on.
And ... if the case actually goes to court ... everybody loses.
And ... it may still not be over: post-trial motions and argument, appeals. Oy!
Originally Posted By: gbeaumont This post was automatically imported from our archived forum.
Joe Ferry wrote:
The United States has 51 different court systems, each of the fifty states and the federal system. Limitation of liability clauses will be enforced if they are negotiated between sophisticated parties with equal bargaining power. It's hard to imagine a scenario in the home inspection context where those circumstances would obtain
Joe, I know that my former home state of Massachusetts does not allow limitation of liability clauses in contracts, is this unusual or do other states also not allow these clauses?
Originally Posted By: jferry This post was automatically imported from our archived forum.
gbeaumont wrote:
Hi to all,
Joe Ferry wrote:
The United States has 51 different court systems, each of the fifty states and the federal system. Limitation of liability clauses will be enforced if they are negotiated between sophisticated parties with equal bargaining power. It's hard to imagine a scenario in the home inspection context where those circumstances would obtain
Joe, I know that my former home state of Massachusetts does not allow limitation of liability clauses in contracts, is this unusual or do other states also not allow these clauses?
Regards
Gerry
Gerry -
I would be very much surprised if Massachusetts law barred limitation of liability clauses generally. It has to do with the freedom to contract.
Possibly, it bars them in home inspection agreements. The issue with limitation of liability clauses is whether or not they are actively bargained for, a rarity in home inspection contracts.
Originally Posted By: gbeaumont This post was automatically imported from our archived forum.
MGL 146 wrote:
attempting to limit liability for negligent or wrongful errors or omissions by use of a clause within a performance contract that limits the cost of damages for negligent or wrongful errors or omissions
Originally Posted By: rwand1 This post was automatically imported from our archived forum.
A POV from Ontario.
Generally the Limit of Liability Clause will have validity if the Limitation is brought to the attention of the contractee before inspection. I have also heard that having your contract on your website is a good idea from a legal POV? Gerry have you any comments on that?
Of course no contract will exonerate you if you have been negligent.
Gerry brings up a very good point. Any one can sue you. All they have to do is feel "wronged" and bingo. The unfortunate aspect is that is it costs big bucks to prove your innocence. On the other hand how many inspectors have been found negligent by a court and what were the penalties?
Thank you.
-- Raymond Wand
Alton, ON
The value of experience is not in seeing much,
but in seeing wisely. - Sir William Osler 1905
NACHI Member
Registered Home Inspector (OAHI)
http://www.raymondwand.ca
Originally Posted By: gbeaumont This post was automatically imported from our archived forum.
Hi Ray,
Limitation of liability clauses are illegal in the Commonwealth of Massachusetts as part of a home inspection agreement. In fact a freind of mine was initially refused a license as he had a contract which included such a clause.
Originally Posted By: rwand1 This post was automatically imported from our archived forum.
Bummer!
I have heard one work around which depends on how the limitation is worded. If the Limit of Liability is restricted to the fee its a no-no according to some states. But if your contract states that your liability is limited to (lets say) $500-$1000 you could get around that legislation.
I believe the thinking up here, anyway by the courts, is that people should have the right to contract freely for services, providing the limitations are clearly spelled out.
Personally I wouldn't like the state telling me that I cannot limit my liability via contract providing there has not been negligence on my part.
Cheers,
-- Raymond Wand
Alton, ON
The value of experience is not in seeing much,
but in seeing wisely. - Sir William Osler 1905
NACHI Member
Registered Home Inspector (OAHI)
http://www.raymondwand.ca
Originally Posted By: jferry This post was automatically imported from our archived forum.
Quote:
gbeaumont wrote:
Hi to all,
Joe Ferry wrote:
The United States has 51 different court systems, each of the fifty states and the federal system. Limitation of liability clauses will be enforced if they are negotiated between sophisticated parties with equal bargaining power. It's hard to imagine a scenario in the home inspection context where those circumstances would obtain
Joe, I know that my former home state of Massachusetts does not allow limitation of liability clauses in contracts, is this unusual or do other states also not allow these clauses?
Regards
Gerry
Gerry -
I would be very much surprised if Massachusetts law barred limitation of liability clauses generally. It has to do with the freedom to contract.
Possibly, it bars them in home inspection agreements. The issue with limitation of liability clauses is whether or not they are actively bargained for, a rarity in home inspection contracts.
Joe
gbeaumont wrote:
Hi Joe,
yes I should have been more specific:
MGL 146 wrote:
attempting to limit liability for negligent or wrongful errors or omissions by use of a clause within a performance contract that limits the cost of damages for negligent or wrongful errors or omissions
Originally Posted By: Nick Gromicko This post was automatically imported from our archived forum.
inspector’s contracts to include a limitation of liability for negligence, just not gross negligence or willful misconduct.
" 18 (a) Prohibited provisions.--The following types of provisions in a contract with a home inspector for the performance of a home inspection are contrary to public policy and shall be void:
(1) a limitation on the liability of the home inspector for gross negligence or willful misconduct;"
