E&O Insurance

[Homespect]

Is there still a lot of you that still operate without insurance? or are most of you insured.

The reason I ask is that for a new inspector to get insurance is just about impossible without at least 2 years of experience as a home inspector.

So what is the solution to this problem, maybe some of you can give me some ideas.

[homnspector]

Hi, I would be scared to death to operate without E&O. Check out FREA, I think they are OK with new inspectors. One point to remember, when you choose a "claims made" policy, you are pretty much married to it forever as coverage has to be in effect when the claim is made (possibly a long time after the inspection). If you switch companies, you are generally not covered for prior inspections. "Occurance" coverage is hard to find and even more expensive.

[John Raffensberger]

Benny,

Haven't really investigated it yet but the National Assoc for Self Employeed (NASE) also offers O&E insurance, that could be an option. I currently am a new inspector (6 inspects)and am covered by FREA. There are criteria and it's $$$$ but it's better than not being covered.

[Scottpat]

It's mandatory in my state, with that said I don't think I would operate without it. But as the prices keep going up and up, I can understand why a person would think long and hard about it. If you're not a full time home inspector, the cost is just about prohibitive.

[Jack Ahern]

It is a requirement in the Great Commonwealth of Mass.

No E&O-No license- No Work (legal work).

Jack Ahern Needham on the Charles

[Homespect]

Thank you for all the great inputs.

Yes I'm part time and the cost is just about impossible to manage.

[homnspector]

You may want to talk to an accountant or lawyer about becoming an LLC to limit your personal liability and pick up the insurance when you become full time or can afford it. Still a bit risky.

[Jim Katen]

Originally posted by Homespect

Thank you for all the great inputs.

Yes I'm part time and the cost is just about impossible to manage.

I earnestly suggest that, if you're new and part-time, the cost of not having E&O is much greater.

Another sobering fact: if you can't afford it, your business is, without question, undercapitalized. Have you considered a small business loan?

- Jim Katen, Oregon

[rookieinspector]

I would like to piggy back on this question. I am a new inspector and was wondering if I incorporated or formed an LLC do you think that E&O would still be necessary since you are some what shielded personally?

[kurt]

The perceived protection of the corporate veil doesn't really work for single employee corporation; there are many, many ways around it.

[Paul MacLean]

FWIW When I met my wife 12 years ago, she said we're not getting married unless you get E&O. I got E&O.

She owns an apartment building and knew that if we got married and I got hit for a big claim, it could cost her. Even with E&O, we maintain totally separate financial accounts and don't commingle funds. All it takes is one bad screw-up.

[Jerry Simon]

What the heck...my 2 cents.

I'm about 100 jobs shy of 5,000 inspections, over 12 years in business (full-time), absolutely zero lawsuits, and only one threat of a lawsuit that went (completely) away when they found I did not carry E & O.

[slinger2k]

OREP is the a good choice to go if you are new to the field and/or < $100k in revenue.

FREA is reasonably priced for the coverage amounts (that is who covers my company)

Target Capital is far too difficult to deal with (have to work thru a broker, blah, blah, blah).

Allen Insurance provides occurence if you want it (and want to pay for it).

rookie...if you are not incorporated or an LLC, you are at a risk I'm personally not willing to take. And the tax advantages as an LLC are too numerous to list on the forum. Talk with your attorney and your acct.

Finally,,as a last resort you could operate as an LLC, with no insurance, get sued, lose, shut the business down, not pay the judgement and restart fresh (kinda like some of the lower tier builders and developers do out in these parts).

Jerry...I spent five yrs living in Crystal Lake IL....whereabouts? Kinda miss Around the Clock on a Sat nite (or Sun AM - depends on how you look at it).

[Jerry Simon]

Jerry...I spent five yrs living in Crystal Lake IL....whereabouts? Kinda miss Around the Clock on a Sat nite (or Sun AM - depends on how you look at it).

Slinger..."or Sunday AM"...you must be younger than me. Been here 'bout 15-years, now live in Woodscreek Sub...SW part of city. Moved from SW side of Chicago. Hard to tell you're gone, seeing that we now have four frickin McD's in lovely small-town Crystal Lake.

[chrisprickett]

I've always carried E&O and it's cost me, on average, about $3000 per inspector per year. I never had even a sniff of a claim, until I started hiring employees. Even with employees, I've paid out $,1669 (two incidents). Both were paid out of pocket, never even called the insurance company.

Our state only has a bond requirement that costs about $300 per year. I'm for mandatory E&O, just to keep the bottom feeders from over running the market.

That being said, the prices for E&O these days are friggin' nuts!

In hindsight, if I was starting out again as a one-man-show, I'd probably just do the bond.

[Homespect]

Thank you all for all the great responses. I see that the majority of inspectors still favors the E&O Insurance. I will discuss this further with my lawyer and see which way we go.

Thanks again

[homnspector]

Benny, let us know the lawyers opinion if you dont mind.

[paul burrell]

FYI:

Just read FREA article in Communicator Magazine.

They are lowering deductible from $2,000 to $1,000 as of August 1, 05.

Paul Burrell

--------------------------------------------

Is there still a lot of you that still operate without insurance? or are most of you insured.

The reason I ask is that for a new inspector to get insurance is just about impossible without at least 2 years of experience as a home inspector.

So what is the solution to this problem, maybe some of you can give me some ideas.

[Les]

I am almost as old as Kurt, but much better looking. Unfortunately there were no responses to his wise advice. I come from the legal community and make about 50% of my income from inspection litigation (expert witness*). You have NO protection with an LLC if the amount is worthwhile. Just the mere fact you are an LLC, for liability sake, is a pretty good indication to the Judge and Jury that you are "irresponsible". That being said, I operate as an LLC for many tasks. You on the other hand might want to have the proper education, do a good inspection, not engage in puffery, be fair and honest, admit to any mistakes, respond immediately to any complaints and not have insurance. Just don't BS your client and market yourself as a ##### Certified Inspector. 'Cause when someone like me is brought in to help hang you, I/We will find out exactly what you did/do or represented. It ain't one world out there anymore!

I come from the background of no insurance for years, Lloyd's of London for years, FREA, Kamakazi Mutual, etc.. If at all possible, do good work and get insurance.

*weeks when we are slow!

[kurt]

Les IS better looking than me. I simply must start going to the spa again on a regular basis........

Anyone using FREA? I know there are, but want to bring it up again. I'm up for a new policy in November w/BRP, but would like to change over to FREA. Any comments? Folks satisfied, or not?

I'm not really looking for the magic bullet here; I've had insurance for about 16 years and am aware of the basic ins & outs. Just looking for a little confirmation from the brethren before switching companies.

[homnspector]

Kurt, Before you switch, find out if you are covered for prior acts. You may need to keep your old policy going for several years. The premiums suck but double premiums suck worse.

I have been with FREA for about 8 years, figure I have paid them about $25,000 and had no claims so I can't tell you much about their service level. They tack on a big service charge if you pay monthly, I think about $500 which is irritating.

Do you know who offers the bonds? I would like to explore that option.

Maybe we should all get together and self insure, sort of a Lloyds of London approach.

[Richard Moore]

Originally posted by homnspector

I have been with FREA for about 8 years, figure I have paid them about $25,000 and had no claims so I can't tell you much about their service level.

I went with Allen because it was simpler, at the time, to satisfy my state's requirement with occurrence insurance. As I also have never had anything approaching a claim (touch wood) I have nothing good or bad to say about them, other than they take my money and my wife sleeps a little better at night.

The real test of an insurance company would seem to be how they deal with the claim process. Do we have anyone here that has had to file a claim, or with good knowledge of someone else who has? How was it handled? What happened to insurance/rates after?

[monte]

I might be wrong on this, if I am someone well straighten me out. "Claims Made" is cheaper then "Occurance" because of the longer exposure to the insurance company. We have "Occurance" from Allen because they to not write a "Claims Made" for Nevada. If you have a claim from some inspection that you did in past and switch carriers you would have to report that claim to your old insurance company if that inspection was done under a "Occurance" policy other wise it would not be cover under "claim made" policy because of the date of Inspection to policy coverage.

I just got some E & O insurance for a Inspector in North Dakota and it only costs $1200.00 per year, in Nevada it runs about $3500.00 first Inspector and $2750 per Inspector after that. The North Dakota policy is not with Allen's (Allen's wanted another $2750). The reason the Agent from ND gave me for the lower rate was because the State limits the liablity to one year just like the building contractors warranty.

I think that all Home Inspector's and there different organizations should work toward getting there State government's to limit our exposure to the same time frame has the builder's, then we would see a hell of a decrease in our E&O costs.

[Brian G]

Originally posted by monte

The reason the Agent from ND gave me for the lower rate was because the State limits the liablity to one year just like the building contractors warranty.

I think that all Home Inspector's and there different organizations should work toward getting there State government's to limit our exposure to the same time frame has the builder's, then we would see a hell of a decrease in our E&O costs.

I like that idea, it makes sense. We have to sweat it for three years here, but builders only one. No sense in that.

Brian G.

More Liable Than the Guy Who Built It Wrong [:-boggled

[Paul MacLean]

I have been using BRP for several years now and while their deductible is high ($5000) they have treated me fairly. A couple years ago, I had a missed termites claim. KP Claims, who handles settlements for BRP, drug out the process for over two years and has just settled for $17,000. I just mailed my check for 5 grand (ouch), but in the process BRP has renewed my policy twice with no premium increase. The interesting thing is that the original claim was for $13,000, so it cost BRP another $4000 for dragging it out.