NACHI arbitration service provides complaint resolution.

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21

Originally Posted By: Nick Gromicko
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Canadian inspectors are currently overcharged because there are so few companies that write it (supply & demand). If we get more insurance companies in the game, we’ll get free market forces working for us. The big problem has been that we have so few Canadian members. Now that we’re getting more Canadian inspectors to join, we’ll get more E&O competition.


Nick

22

Originally Posted By: Chris Butler
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Nick:


With all due respect, there is no actuarial evidence that an arbitration clause decreases insurance losses. Certainly there are people out there who believe it does, but there is no evidence to support this contention. We will do anything we can to reduce members fees… it’s our duty to get the best rates for inspectors, but the addition of an arbitration clause will not achieve that.


The vast majority of a program’s losses comes from defense costs. An arbitration clause is usually only invoked as an affirmative defense AFTER a suit has been filed.


Sometimes a claimant will seek arbitration befire filing suit, but only sometimes. If it is non-binding arbitration the claimant can disregard the ruling. If it is binding arbitration there is always the horrendous possibilty that you get an arbitrator who knows how to arbitratew dog-bite cases, but he doesn’t have a clue about inspections…and then you are left with his decision if it goes against the inspector however stupid it may be.


By the way, public policy in most jurisdictions upholds the belief that a consumer can not be coerced into signing away their legal rights to a legal remedy so sometimes the courts just ignore the arbitration clause.


Regrettably there is no margin for a reduction in premium where the PIA (pre-inspection agreement) contains an arbitration clause.


More importantly, (and this is a point you often swerve into but never fully develop) insurance premiums are based on projected losses. There is safety in numbers so in practice the more people in the program the less the premium will be. You often assert that if the growing number of NACHI members will “force” the carriers to reduce premium. We have also been beating the safety in numbers drum . We now have more than 9,000 members and THAT IS WHY our fees are the lowest in the industry (and why we have the lowest deductible). A well- known competitor of yours tried for years to get their own program together but never had the numbers to make it succeed. Look at the major franchises who all, at some point in time, tried to get programs for their franchisees only to realize that they are in the inspection business and NOT the insurance business. They left well alone and allowed their franchises to go with the market forces. FREA, because we have the best program, has been able to pick up most of these people and continues to do so. FREA rates have only increased 12% in nearly 3 years…unprecedented when compared to other insurance rate increases across the board (from health to homeowners to E&O) in a similar period.


Remember, we are not the big bad insurance wolf. We are an association that specializes in finding the best programs for inspectors. If there are better rates out there, we will find them for you.


Have a great trip to to Canada. The OAHI is a great organization and we are impressed by their professionalism.


If you have any questions I’d love to try and answer them for you.


Best wishes,


Chris


cbutler@frea.com

23

Originally Posted By: Blaine Wiley
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Nick,


When I joined FREA last year, the advertised price on the website was the cheapest I could find by about $100. That was until the $300 financing fee was added in. After signing up, I noticed that one quote which was in the ballpark went 10 months, and the fee was included in the quote.

Now this year, I see that for a class C member (300K coverage) the fee is $2495 for E&O, which is up $300, plus $450 for General Liability. If financed, which I have always done with any insurance company, add an additional $350? That's a total of $3295 for decent coverage. In my market, that is about nineteen inspections just to pay the insurance. After not getting open until April of this year, I have yet to do 19 inspections in a month!

Is there any help out there????????????????????

Blaine ![icon_cry.gif](upload://r83gSGUzNOacIqpjVReDwcR83xZ.gif)

24

Originally Posted By: psabados
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Chris


Excluding adds-ons such as G/L and others. Based on 9000 enrolled members at 2495.00 ea totals out to 22,455,000.00.

Thats a lot of money paid in and if one PIA isn't properly filled out, no coverage. Who's kidding who now.

You're already showing talking points about further increases in premiums.

My point is that I have homeowners insurance, car insurance and health insurance. All of these policy writing companies allow me to set what coverage I want and the amount of the deductible that I am willing to pay. I my opinion premiums can be lowered with the use of a varying or adjustable deductible. Why the resistance to being flexible. I am a client and would like to know also.

Paul

25

Originally Posted By: Nick Gromicko
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Chris:


Thanks for your thoughts. That's why I love this board. Perhaps I haven't been clear, I'll try to be now.

1. With respect to FREA and OAHI. Don't get bent out of shape. I have never mentioned FREA or OAHI... ever. The only place I ever mentioned FREA was when I put you at the very top of http://www.nachi.org/insurance.htm above all other insurance companies. FREA is still ther to this day. This despite your Communicator treating NACHI very poorly allowing an article to run which refers to NACHI's Home Inspection School as a "diploma mill". The fact that we don't operate a home inspection school nor do we issue diploma's didn't stop you from running that article.

2. As for OAHI, I know nothing about OAHI except that I received a few horrible emails from their die-hard members which one could consider threatening. This occurred only after we announced http://www.nachi.org/ontariochapter.htm This despite NACHI membership being free to Canadian Inspectors, our Chapters being free, and the Ontario meeting being free. Perhaps your definition of "professionalism" is different than mine.

3. With respect to there being "no actuarial evidence that an arbitration clause decreases insurance losses", all I can say is you're right...that's the problem our http://www.nachi.org/insurancesurvey.htm is solving. This data/evidence is going directly to the actuaries.

3. With respect to the "horrendous possibility that you get an arbitrator who doesn't have a clue about inspections...and then you are left with his decision if it goes against the inspector however stupid it may be," don't worry. NACHI has this problem solved. Our arbitration service is ONLY for home inspection disputes and our panels ONLY handle home inspection cases, unlike current arbitration associations that handle everything including dog bites.

4. With respect to "a well-know competitor of ours trying for years to get their own program together but never had the numbers to make it succeed," I must remind you who we are. We are NACHI. We've done everything that everyone else said couldn't be done. I don't know who the "competitor" is you mention. We don't really have much competition. And I don't know what kind of "program" you are talking about. Honestly, NACHI doesn't look at where many others failed. We don't let other's failures hinder us. Like the athletic shoe commercial goes, we "just do it."

5. With respect to you "finding better rates if they're out there", you missed the point altogether. We aren't seeking better rates by shopping. We are going to get better rates because we are making companies like FREA more money by reducing the number of claims, the number of judgements against the inspector, and the size of those judgements. Our arbitration service is free to our enrolled members so your comment about "defense costs" is moot. We also have our client's hold the agents harmless. We also have a limit on the maximum awards. We also are doing a few other things which will result in less claims, less judgements, and smaller judgements. This all adds up to more profits for companies like FREA, which we will ask they pass on, in part, to NACHI members by way of reduced premiums.

I think FREA is a fine organization. The Communicator is toilet paper. And I know nothing about OAHI other than the "professionalism" they've recently displayed. My personal opinions.

Onwards and upwards.

Nick

26

Originally Posted By: rking
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Nick,


I had thought of putting my puny two cents worth in, but I could not have done it as professionally and as neatly as you have!
Well done ![icon_exclaim.gif](upload://kW92MliyHA8ygoXI0UsgtBSn4ZO.gif)

--
Muskoka Home Inspections
"Wisdom is the Anticipation of the Consequences"
Steering Committee Member At Large

27

Originally Posted By: Nick Gromicko
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Hey Robert, I’m glad you chimed in,


What can you tell us about this OAHI group? Why are they so nervous, or so it appears to me?

Nick

28

Originally Posted By: rking
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Nick,


I really do not have an answer for that.
My speculation, and it is strictly speculation, is that OAHI is afraid of the competition and losing due paying members.
I am not one for politics, but that is what I believe the big problem is up here. There is one group that wants to control the profession on it's own.
Sound familiar??

--
Muskoka Home Inspections
"Wisdom is the Anticipation of the Consequences"
Steering Committee Member At Large

29

Originally Posted By: cmccann
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I have been looking at all options as far as E&O, I would have to say that I was leaning towards FREA because of the Realtor coverage for referrals, but after reading all of this I’m more confused then ever. Frea seems to be making quite a bit of money off home inspectors and not really passing the savings to it’s members.


Is there anyway to have E&O for strictly NACHI members that meets the needs of the membership. How hard would it be for NACHI to have it's own coverage for it's members? If it would be anything like the Association I feel we would be the king of all Associations. Is this not possible?

--
NACHI MAB!

30

Originally Posted By: Joseph A. Ferry
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Chris -


That there is no evidence that arbitration clauses reduce insurance losses - an averment, the truth of which you do not document - may be due to a variety of reasons having nothing to do with the issue: the sample may be too small to warrant tracking, for example.

Empirical evidence suggests that it does, to judge from the growing popularity of such clauses in other contractual contexts. See, for example, your uninsured motorists coverage, your underinsured motorists coverage, your credit card agreement and a myriad other agreements. That insurance companies insist on arbitration clauses is pretty good anecdotal evidence that they reduce costs. Reduced costs = lower premiums.

Your contention that the vast majority of a program's losses come from defense costs would make sense ONLY if the vast majority of claims resulted in NO payment to the claimant. Defense costs are a subset of Loss Adjustment Expenses [which include all claims service costs]. LAE generally represent about 20% of total claims costs, actual payments to claimants making up the other 80%.

A client once told me that "if you go to court, you both lost". That is an accurate statement of fact. No one 'wins' in court. To understand the benefit of arbitration, one needs to understand the process of going to court.

Anyone with $250.00 and a piece of paper can file suit against you. It is easy to do. After a complaint has been filed, the defendant has to respond to it paragraph by paragraph. A defendant can represent himself, of course. UNLESS the defendant is a corporation. A corporation has to be represented by an attorney. The defendant files an Answer and Defenses and sometimes a Counterclaim to the Complaint and then the plaintiff files a Reply to the Answer. There then ensues an extended period of discovery: depositions, document exchanges, expert reports. Finally, you are ready for trial. You go on a list. You eventually get a trial date. There are then pre-trial motions, witness lists, document lists. Then you try the case before, usually, six to eight folks who were the LEAST OBJECTIONABLE of an array of mostly objectionable citizens. You've spent a fortune before the first witness is sworn.

Then you try the case for a day or two, hope that you got all of your evidence in, that it was understood, that it supported your theory of the case and that your attorney was able to explain how it all worked out to your benefit in his closing argument. Then the jury retires to consider all of this evidence. Then they render their verdict and GUESS WHAT?

It's not OVER. Not by a long shot. You've got post-trial motions, appeals and on and on. It's never over - until one party gets tired of paying legal bills and settles.

It's not fun and rarely delivers justice. Notwithstanding all of that, it's better than dueling.

That's why most commercial enterprises have embraced arbitration because it is AT LEAST as fair as the judicial system and because it is OVER in a reasonable period of time. CLOSURE is a vastly overused new-agey word but it has a lot of merit in dispute resolution. There is a lot to be said for putting things behind us.

If a claimant contractually agrees to arbitration, she is BARRED from filing suit. If she does, one need only plead the arbitration agreement to have the case dismissed. One would also be entitled to one's costs in filing that dismissal.

Moreover, there is no 'public policy' against arbitration clauses. On the contrary, they have been upheld in every jurisdiction.

Your concern about rogue decisions, while understandable, is misplaced. Under the Federal Arbitration Act, 9 U.S.C. Sect 10, an arbitration award may be vacated if procured by corruption, fraud, or undue means; or if an arbitrator exhibits "evident partiality", when misconduct by the arbitrator prejudices the rights of a party or if the arbitrator exceeded his power.

NACHI Arbitrators will be subjected to exacting standards of competence, experience and character and their decisions will be reviewed and subject to reversal by a rotating review panel using familiar appeal standards.

Joe Ferry
NACHI General Counsel

31

Originally Posted By: rking
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Mr. Ferry,


Boy am I glad to have you on our side ![icon_smile.gif](upload://b6iczyK1ETUUqRUc4PAkX83GF2O.gif)
It sure sounds like you know your stuff. This will definitely be a thread I follow, even if just to learn a few things

--
Muskoka Home Inspections
"Wisdom is the Anticipation of the Consequences"
Steering Committee Member At Large

32

Originally Posted By: jpope
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Correct me if I’m wrong, but an “arbitration clause” does NOTHING to limit insurance “claims.” As stated earlier, anyone can file a claim. It does, however, substantially reduce LEGAL costs.


Insurance premiums are based on the "cost of claims." This includes sanctions, damages AND the cost to defend an action. To defend even a minor allegation (beyond small claims), attorney fees alone will begin at $10,000 or more. If I'm not mistaken, this is why arbitration services began in the first place.

How can anyone say that an arbitration clause is not beneficial to an insurance carrier?

--
Jeff Pope
JPI Home Inspection Service
"At JPI, we'll help you look better"
(661) 212-0738

33

Originally Posted By: Joseph A. Ferry
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Jeff -


Multiple factors influence the size of a premium for a particular line of insurance. Legal expense represents only one of them. To the extent that legal expense is reduced, premiums should also reduce pari passu.

Arbitration reduces legal costs because it streamlines the process of resolution. As one example, you are not spending a day - A DAY! - picking a jury. Likely savings in legal costs: $3,000.

That's still not the major benefit of NACHI Arbitration. Both parties will have their case arbitrated by arbitrators QUALIFIED to render a rational decision in a fair and impartial manner based on the particular facts of the case in a timely fashion that will not take over their lives for several years.

$10,000 is a good estimate of the cost of defending a routine matter in a metropolitan area.

Joe Ferry
NACHI General Counsel

34

Originally Posted By: rray
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I will stand to be corrected, but I believe Florida is very anti-arbitration clause. I think they have specific requirements that need to be met as far as informing a person exactly what signing an arbitration clause means.


Also, there are areas in California that are very anti-arbitration clause as well. We don't yet have any specific standards to live by, but the courts seem to be saying that we've got to get our agreement to the Client as far in advance as possible so that they have a reasonable opportunity to choose another inspector if they don't like our arbitration clause and we refuse to remove it.

Taking an agreement with an arbitration clause in it to the inspection and spending 10 minutes going over the agreement with the Client is not working in our real estate market. Consequently, as soon as I get an appointment, I fax or email a copy of my inspection agreement to them. I have had a few people balk at certain things, and I have cancelled one inspection because they kept altering the agreement, signing it, and faxing it back to me. I also have had one inspection cancelled on me because of the arbitration clause and the limit of liability clause. Limit of liability clauses, according to our Business and Professions Code, are null and void because they are against public policy. We still put it in there, though, because it seems to help cut down on the number of nuisance callbacks.

There is one court case that I read earlier this year that stated that the arbitration clause did not apply in the event of gross negligence. I don't remember whether it was a California case or some other state, but I didn't like that "gross negligence" term, which is why I remember it.

35

Originally Posted By: jburkeson
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Quote:
NACHI's arbitration service is another piece of the puzzle in our quest for less expensive E&O insurance and will offer our members and consumers a better option than the courts for dispute resolution.


Hi Nick,

Do these changes effect the wording of our current PIA?

Regards - Joe

--
Joseph Burkeson, RPI (Hooperette)

?Anyone who has proclaimed violence his method inexorably must choose lying as his principle.?
~ Aleksandr Solzhenitsyn
36

Originally Posted By: Joseph A. Ferry
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Russel -


California has enacted a law that requires arbitration clauses in contracts to convey real property to follow certain rules. The law is restricted to contracts to CONVEY real property. For example, the clause has to have all caps in certain point sizes and has to be initialed by buyer and seller. It does not prohibit arbitration.

The Federal Arbitration Act is hostile to state laws that attempt to prohibit arbitration and preempts all state laws for contracts that affect interstate commerce. If you read the case law interpreting the Commerce Clause of the US Constitution, you will ultimately conclude that there is hardly any activity that does NOT affect interstate commerce.

Joe Ferry
NACHI General Counsel

37

Originally Posted By: rray
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Useful explanatory information. Thanks, Joe.

38

Originally Posted By: Nigel A. Bonny
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Does anyone know if Joe Ferry is licensed to practice law in all 50 states?


Also, why does he cite federal legal authority when he refers to matters which fall under state jurisdiction ?


I wonder if he has E & O insurance which will defend him from giving out bogus legal advice in states where he is not licensed to practice law ?


Why does he use Latin phrases such as “pari passu” which are


a) irrelevant and


b) meaningless to 99.9999% of the population?


I know these pertinent questions will lead to a barrage of insults (and quite possibly a repeat of the Communicator= toilet paper comparison) but I do think that people should be informed rather than half-informed or worse still, totally misinformed.

39

Originally Posted By: Blaine Wiley
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Nigel,


We are very glad that you joined our board so that you could question the qualifications of our NACHI attorney and counsel.

Now, sit back, and enjoy the ride.

BTW, you didn't state your qualifications.

Blaine

40

Originally Posted By: Joseph A. Ferry
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Nigel ?


I have been admitted to practice law in three jurisdictions: Pennsylvania, New Jersey and the District of Columbia, though I am currently only active in Pennsylvania.

I would be interested in knowing what advice I have given that is bogus.

Pari passu is a common phrase whose meaning most educated people understand. If it is meaningless to you, may I suggest you make an investment in a good dictionary.

Joe Ferry
NACHI General Counsel