Several years ago there was an E+O case widely reported on the inspector boards where a client went after the inspector for about $10K because of an unreported chimney defect. Regardless of the merits of the case (the inspector did recommend a chimney sweep inspect it) fireplace repairs can be big bucks. Also liability can be quite large especially if a house fire is involved. A million dollar policy may not be enough especially if the occupants are injuried.
My feeling is that I am looking out for the best interests of my clients by recommending a level II inspection. If they choose not to do it, its by their choice. We still may be sucked into a suit but will have documented proof that we called it out.
Jeff