Hey everyone, I am new in the industry (actually just getting close to licensing and what-not). I have some questions regarding insurance and legal liability. I am trying to protect my personal assets (family home, pension, etc…). Can anyone give me any information about how things work if an inspector misses an issue, such as a bad roof? I am looking to set up an LLC and obviously carry insurance. If I miss an bad roof and the client then comes after me, does insurance pay for that (minus the deductible)? If a lawsuit occurs, I just want to keep my family’s security intact, I’m not willing to risk that. Thank you in advance for any info you can give.
Josh, start by checking to see if your state has a law on home inspectors/inspections. If so, you will want to follow it closely The best advice I can give you is to find yourself a business attorney who is skilled at forming business entities (LLC, Sole Proprietorship etc) in your state. General liability insurance is a must and in some cases E & O can be beneficial. As a member of InterNACHI, you can also participate in the Buy Back Program at a reasonable cost. InterNACHI keeps a list of state licensing requirements, use the search feature on the website to find your states requirements if any.
The reality of the situation is that a large number of clients believe that if they have had a home inspection that nothing will break down or need repair or replacement. If that happens the inspector will pay to have the repair… etc. completed. In your example of a roof you may be responsible for a REPAIR not total replacement.
Your MAJOR job is to clearly manage your client’s expectations. Be sure they are clear that your inspection is only about what is visible on the date and at the time of the inspection. I used to tell clients that once I leave the property liability ends. Was never sued successfully.
Hope this helps
Thank you guys, I appreciate all the help I can get. It seems to me that between the Buy back program, liability insurance with E&O and being licensed as an LLC, my “personal” liability should be next to none. I understand that the business may be responsible in the case of neglect and the like, I just want to protect my family from the effects of a business mistake. Thanks again.
Josh, if you are up on a roof and the wind blows down your ladder and it hits the sellers kid in the head and he is a vegetable for the rest of his life, your measly $1 million E&O and Gen. Liability isn’t going to help you from them taking your personal assets that may be awarded above that $1 million dollar mark.
You MUST take responsibility for securing your ladder and taking control of the people that are around the house when you are inspecting it e.g. the buyer and his/her group they bring with them.
It is called managing your clients expectations. I would not allow more than 2 or 3 people including my client to be in the house if occupied…maybe more if it was empty.
I have left jobs where the seller would not control their kids from messing with my equipment.
When a buyer calls and books an inspection, talk to them about who they want to bring and if it is too many, nip it in the bud then and there.
Set up an LLC & operate it appropriately. Do not co-mingle anything business with anything personal. If you do, a good attorney will “pierce your corporate veil”. This will make you & your company one in the same which translates to you being personally liable alongside the company in the event of a lawsuit.
Manage your client’s expectations.
Adequate professional (E&O) & general liability insurance.
It’s important to note that you don’t have to make any mistake at all in order to be dragged into litigation. There are some unreasonable people out there that are always looking for a pay day. From what I’ve heard, the majority of claims against inspectors are meritless. But your carrier may pay out either way to make the issues disappear. It’s an unfortunate fact.
After reading a bunch of legal articles and case studies🤦🏼♂️ It seems as if it takes some doing to pierce the veil, including an attempt to commit some sort of fraudulent business. I’m sure a lawyer could paint that kind of picture, but without malice it seems more difficult. But, I have read multiple papers and articles stating info very similar to what you are saying about commingling. Combing the internet is a bit scary, it seems that there are a lot of people willing to sue. It’s almost making me second guess getting into inspections. I’m sure there are effective ways to deal with the risk and I’ll keep researching, just makes me nervous. Thanks again for all the help you guys are providing.