I am recently InterNACHI certified in Colorado. There are no state insurance requirements. Two acquaintances having differing opinions on whether or not to be insured with general liability and/or E&O or both. What is the industry standard out there? The arguments I’ve heard against it are, nothing will prevent you from being sued (no amount of insurance coverage) and a legally binding and executed inspection agreement can sufficiently limit your financial liability, which is all an insurance policy will do anyway. Also, if you are sued your insurance company will settle and then drop you from coverage and you’ll be back to square one. So I’m looking for a wider cross section of opinions and experiences out there. Any thoughts? Thanks!
See what the experienced Homies are doing .
You as a newbie might have a larger chance of being sued .
You need to decide what your risk tolerance is. If you don’t have insurance and you get sued what will it cost you?
On the other hand how many inspectors have been sued in the past 10 years in Colorado?
Another consideration is it appears that you are a franchised inspector. What does your franchisee require?
I am also in Colorado and I choose to have E&O as well as general liability.
You might want to ask your lawyer for his advise.
Insurance here is about 3600 for a Newbie. To retain a good lawyer for a case against you is 2500.
You do the math!
I would not even recommend the best seasoned inspector be without insurance and at the least they should sign up for protection from Joseph Ferry if not wanting full protection.
You should always carry liability insurance. That covers you if something goes wrong on an inspection and you damage something or some one gets hurt due to your negligence.
E&O is another story. It puts a bullseye on your back for those “some one must pay when something goes wrong” people. This type of insurance has come down considerably in the past couple of years. If you have it you may get sued just because you have it. It you don’t have it and you get sued, can you weather the storm? It is a business decision that only you can make.
I have never had E & O insurance and never will unless it is mandated by the state. Then again, I have never needed it in 20+ years of inspecting. GL is required in order to be licensed in Florida. Which is useless because in the real estate contract, the potential buyer is responsible for any damage you cause, and if you wish to keep that individual as a client, eventually, the cost to repair any damage will fall on you.
liability is only about 500 / year and would cover something like you ladder falling onto a clients 50k pickup truck or sports car. I would at least get that.
Mike, you have stated some myths about insurance and needs. there were also some good points made as well. It’s all about your comfort level with risk!! give me a call and I will be happy to consult you on every point of the insurance from coverage’s, claims, and how much they will cost you. As a newbie you might be surprised on my take for E&O but there is absolutely no reason every home inspector doesn’t have a small business general Liability policy to protect the SELLER/YOU when it only cost is $500 annually.
give me a call I’m here
It depends on what you are trying to protect with insurance. Your client? Your assets? Your inspection company? The money you’d have to spend on defense costs? Or do you just want insurance for marketing purposes?
Anyone that has to ask other idiots if they need insurance has no mental capability to answer ANY or your posted questions!
When are you going to teach “Business Basics” to these new inspectors that think their former boss was just pocking all that cash they were making for him/her?!
I’m with Eric. I have weathered phony lawsuits in the construction business and can personally say that once most attorneys find out insurance does not cover something, or there is none to speak of, they have no interest in continuing suit against you. Now, the other side of the coin is if you are in an area with diverse housing and don’t have a solid grasp of everything you inspect, perhaps E&O is worthwhile for a bit.
My response wasn’t designed to pick on a member, it was designed to make one think. Insurance is a way to manage risk. So first, you have to determine what risk you are attempting to manage.
Michael, you are in Colorado… come visit me in Boulder. Call me first so that I can make sure I’m in town. Cell: (720) 272-8578.
If you have a limited budget, I think I would first purchase general liability insurance over E&O insurance.
The best things you can do to limit your liability are (1) use the InterNACHI agreement, and (2) form an LLC or S. Corporation.
I have practiced in Colorado for years and have only personally been involved in two lawsuits against home inspectors.
I do think having E&O insurance can make you an attractive target, but as pointed out above, it’s about managing risk. If you have the extra money, go for it, but if you don’t, I would not lose too much sleep over it.
Interesting post Mark, thanks.
Eric, you bring up a great point! my question is and this is a worst case scenario, what if you should some how cause a fire in the SELLERS home and burn it to the ground? it’s a $200,000 claim. How can your contract make the BUYERS liable? How does their home owners insurance have a insurable interest in your business to cover that loss.
I honestly don’t have the answer and will be asking some questions to my other carriers. My point would be, that if they don’t and can’t insure your damage that you have caused, then why would you not have your own small business general liability policy for $500.00 a year with $1 million limit??
I agree with Mark Cohen. GL (which costs only a few hundred dollars) is what I would carry first because of reasons David points out. A GL claim can be huge, and life destroying. Your typical E&O-covered claim isn’t.
I know a lot of inspectors carry E&O but not GL which never made any sense to me.
“My” contract doesn’t. The real estate contract does.
In your hypothetical scenario, what would more than likely happen, is the homeowners insurance would cover the damage, while at the same time, determine the cause and it you were the cause, you may have a problem.
In the real world, these catastrophic scenarios don’t exist, at least I have never heard of them. The great fear propagated as that every time you break wind, you will be sued, which simply isn’t the case.
The last thing I broke during a home inspection was a pane of glass on a window that had a defective spring. I told my client I’d give him a free wind mitigation inspection and all was well. That is what happens in the real world. If you have insurance, the last thing you want to do is involve them…especially on matters that can be solved in about a minute and a half.
Just my opinion…
Eric, I tend to agree with you as most claims for general Liability are small. I have seen them in the tens of thousand with that said. And I do realize that most inspectors will repair the occasional foot through a ceiling. There is other coverage in most GL policies which is also medical payments coverage. ex. if you are up on a ladder and the buyer/seller climbs it and falls down and breaks an arm. You Gl policy will cover them with out a law suite and negligence having to be proven. Outside, Florida my policy will also include tools/business personal property, I even have a member who the policy has been paying for almost a year for him to lease office space as he lost his home to a claim.
The one thing I do go back on is the wording in the contracts from the realtor. It is very difficult to differ risk to someone else for your responsibility.
I appreciate your input Eric.
If I am buying your home and I bring in a contractor to measure for a new kitchen and he accidentally breaks the faucet and floods the place, I am responsible as I hired that contractor. It is the same thing when a potential buyer brings in a home inspector and he breaks something. I can tell you from firsthand experience.
As to the actual need for GL insurance, in over 20 years of performing inspections, I have broken the following:
1 coffee pot
1 window pane…
A grand total of $100.00 which was traded out for a wind mitigation inspection. The mirror was behind a refrigerator in a garage and the coffee pot, the guy said not to worry about it. I just happened to have a brand new Gevalia coffee maker and gave it to him. He called a month later for an inspection…
Everyone else is free to do as they wish.