Texas E&O / Recovery fund.

Distribute as desired.

Texas Real Estate Commission Inspector Commitee discussed the recovery fund and insurance last week with TREC.

I ask these questions

  1. Is the inspector expected to pay for things they miss? (is this why we have Recovery fund and E&O?)
  2. If it is determined the inspector has liability then does that supersede the Head v US Inspection limitation of liability permitted by Court rulings? Almost ALL inspectors limit liability to the report fee or a small multiple thereof.
  3. What is the least amount an inspector is not liable for or where does it start and stop? $1000 to infinity?
  4. Can small errors accumulate to form a justified claim?
The problem in Texas is the inspector can legally limit liability but TREC  and legislators wants recovery funds or insurance. The Head v US Inspect  limitation nullifies the purpose of recovery / insurance and is  grossly deceptive to the consumer. The question that  must be answered by the TREC and the legislators is "What is the Inspector liable  for"? 

Until we know our liability we cannot price our product properly. I would insist the law defines liability then recovery / insurance and the Standards can be evaluated. If we hide from this question we will only continue with a screwed up system.

In States where liability limitation is not allowed inspection fees and law suits both increased. TREC owes it to inspectors to answer this question before all others.

John Cahill

I think TREC can only speak to our liability as it relates to performance according to the standards. I don’t see how they could possibly address liability as it relates to civil matters.

Funny you bring it up though as I was just browsing the TREC disciplinary actions yesterday. It seems to me a good indicator as to how TREC judges inspector liability according to the SOP.

Your are correct John O.

Statute created the recovery fund. There are very few claims against inspectors. Surplus of fund goes to State. Its a hidden money machine.

TREC is suggesting an increase in the fund. That would have to be done statutorially. It can be done with a clean up bill sponsored by a TREC friendly legislator.

Now take mandatory professional insurance. It was created by statute. It implies the inspector has a liability, perhaps even more so than the recovery fund.

The courts have upheld limitation of liability via contract. Seems odd. Why do we have professioanl insurance and a recovery fund when the law says we can limit oour liability to the fee?

Do people want us to have more liability? If so how much more?

Soon a court will rule the inspector cannot limit liability. They will argue liability exists due to the presence of the recovery fund and professional insurance.

Its really really screwed up.

The proposed increase of the Recovery Fund is quid pro quo for getting support to sponsor the bill to eliminate E&O. I’ve been saying since last summer when this was first floated that the end result could be and may even likely be that the E&O elimination bill fails but the TREC Housekeeping bill passes in which case we get to keep both…mandatory E&O plus an increased Recovery Fund. Right now there are 4 bills in the legislature that Texas inspectors should be watching closely. I’ll try to keep up with and comment on them at my company blog.

No need to increase the fund. Current law says they can raise the assessment if the current fund runs short. Sounds like someone is screwing inspectors.

Its actually kinda like that now. :shock:

The proposal is to raise the $12,500 payout limit to $25,000 per occurrence/$50,000 total. It also raises the fund cap from $600,000 to $750,000. Additional Fund fees would be collected from renewals as well as new inspectors. The Housekeeping bill will also likely propose that TREC become semi-autonomous like several other state agencies. That would take them out of the appropriations process and require them to be self sustaining.

Ha, ha, I agree it’s screwed up John. Soon, Inspectors liability will be so tenuous that TREC will have to lower the test score passing rates to 50% to lure more victims into the profession.:smiley:

As most of you know by now, in Kansas several cases from various professions have ended up before the state appellate court AND the state appellate court agreed that 2 parties can limit contracts to less than allowed by state statute of limitations with a properly executed contract.

Trial Attorneys and Realtors in Kansas DID NOT like that clause being used in a real estate transaction by HOME INSPECTORS; so 2 yrs ago when they (assisted by a small group of inspectors near Wichita) shoved a registration bill (still have not seen the difference between licensure and registration) down our throats / They DROPPED a clause or 2 in the Bill that makes it illegal for a home inspector to use contract language that attempts to limit his liability to under $10,000.

NO other profession in a real estate transaction has this restriction (not the realtor, builder, contractor, termite inspector, engineer, appraiser, lender, chimney sweep, etc, etc).

By the way after 14 months of licensure in Kansas the HI board has had 2 complaints filed (I’m told both may have had something to do with the inspector NOT getting an Inspection Agreement to the clients before the inspection, etc).