Article: How to improve your marketability with referring party indemnification

[InspectorPro Insurance]

On 8/23/2019 at 4:32 PM, Bill Kibbel said:

Some folks never need to "manage" anyone's expectations.  They're the ones that consistently and assiduously exceed all expectations.

There seems to be some of those types of folks here at the Inspector's Journal.  It's evident in replies to this topic and many others.

I think the main reason we have concerns about managing or setting expectations is because 80% of our claims we've received over the last decade go in what we call the "meritless" category. For us, that means the inspector's technical inspection was accurate but their client still filed a claim. Most of these claims have to do with a misunderstanding of the scope of the inspection. For example, a home inspector gets a claim for mold when they don't inspect for it. Or, an inspector gets a claim for a defect that arises later that they had no way of predicting. We hope that, when we write about setting and resetting expectations, that we can help home inspectors avoid misunderstandings that result in frivolous claims.

On 8/24/2019 at 6:28 AM, Les said:

I agree with you.  The "real" issue, to my mind, is Marc and Sephanie are not finding a clear cut avenue to agreement.  I cringed with she wrote about their statistics and no correlation between claims and relationships with agents.  much more complex than that.  However, she may have done a statistical analysis on the question and there are factors she is not talking aout.

I'm not sure that the fact that we disagree is really an issue. I think that agent referrals are a more polarizing topic than I previously understood but, as stated earlier, we need more information on our end before we discourage or endorse realtor referrals from our end. As stated earlier, we don't have enough data on realtor referrals alone to do as thorough an analysis we'd want to to make any concrete claims about agent referrals. However, based on the statistics we do have and the anecdotal evidence we've received, we haven't found a correlation between claims and agent relationships that we feel comfortable backing. If it is something that inspectors would like more information regarding, we encourage them to share the experiences they have so that we can look at the issue more in depth. As with all of our data and information, we rely heavily upon home inspectors to provide the numbers and the stories since you're the ones in the field actually having these experiences.

On 8/24/2019 at 7:56 AM, Marc said:

I learned something important about the issue in my exchanges with Stephanie. Something that refines my understanding of it and tempers my disgust with agents that I've carried for over a decade.

Maybe she'll learn something too.  Takes time.

I, too, have learned a lot of things from our dialogue that will inform a lot of the topic choices and writing decisions we make going forward. I'm also considering how to take some of the points made here on the forum regarding potential ethical and liability issues associated with realtor relationships and share them with our claims team to see how we might study the issue out further on our end. I think having these conversations is productive and I appreciate the time you and others on the forum take to articulate your thoughts and concerns.

On 8/24/2019 at 8:45 AM, BADAIR said:

the above statement alone is disgusting...

teaching others how to ride on an insurance policy is absurd...

relying on this tactic to gain referrals is appalling...

to me

hth

As stated earlier, the intent of the article wasn't to endorse agent marketing or argue that all inspectors should market to agents. Rather, the intent was to explain a common insurance policy endorsement through the lens of something we know a lot of inspectors are doing: marketing to realtors. We hope that, by putting referring party indemnification in this frame, we can both better engage our readers and increase their understanding of how their policy applies outside of the "named insured."

We don't advocate "riding on insurance policies" or even relying on referring party indemnification as a way to gain referrals. However, we do recognize that there are some agents concerned about receiving claims for work that home inspectors perform, and referring party indemnification endorsements can provide peace of mind and resolve such concerns.

[Marc]

12 hours ago, InspectorPro Insurance said:

I think the main reason we have concerns about managing or setting expectations is because 80% of our claims we've received over the last decade go in what we call the "meritless" category. For us, that means the inspector's technical inspection was accurate but their client still filed a claim. Most of these claims have to do with a misunderstanding of the scope of the inspection. For example, a home inspector gets a claim for mold when they don't inspect for it. Or, an inspector gets a claim for a defect that arises later that they had no way of predicting. We hope that, when we write about setting and resetting expectations, that we can help home inspectors avoid misunderstandings that result in frivolous claims.

I'm not sure that the fact that we disagree is really an issue. I think that agent referrals are a more polarizing topic than I previously understood but, as stated earlier, we need more information on our end before we discourage or endorse realtor referrals from our end. As stated earlier, we don't have enough data on realtor referrals alone to do as thorough an analysis we'd want to to make any concrete claims about agent referrals. However, based on the statistics we do have and the anecdotal evidence we've received, we haven't found a correlation between claims and agent relationships that we feel comfortable backing. If it is something that inspectors would like more information regarding, we encourage them to share the experiences they have so that we can look at the issue more in depth. As with all of our data and information, we rely heavily upon home inspectors to provide the numbers and the stories since you're the ones in the field actually having these experiences.

I, too, have learned a lot of things from our dialogue that will inform a lot of the topic choices and writing decisions we make going forward. I'm also considering how to take some of the points made here on the forum regarding potential ethical and liability issues associated with realtor relationships and share them with our claims team to see how we might study the issue out further on our end. I think having these conversations is productive and I appreciate the time you and others on the forum take to articulate your thoughts and concerns.

As stated earlier, the intent of the article wasn't to endorse agent marketing or argue that all inspectors should market to agents. Rather, the intent was to explain a common insurance policy endorsement through the lens of something we know a lot of inspectors are doing: marketing to realtors. We hope that, by putting referring party indemnification in this frame, we can both better engage our readers and increase their understanding of how their policy applies outside of the "named insured."

We don't advocate "riding on insurance policies" or even relying on referring party indemnification as a way to gain referrals. However, we do recognize that there are some agents concerned about receiving claims for work that home inspectors perform, and referring party indemnification endorsements can provide peace of mind and resolve such concerns.

I believe the issue begins not with the agent but with the naivete of the buyer.  The widespread practice of this conflict of interest is aided by the blind ignorance of some agents and home inspectors alike.  Since buyers aren't the clients of insurance companies like yourself, the only policy change I can see from where you sit, is one of promotion.  You could encourage your policy holders to suggest to their clients that they not rest their laurels on an agent's referral, that they independently screen the referred inspector to confirm their satisfaction of that choice of inspector.  Hard to blame the referral party when you've screened that referral yourself.

Screening inspectors is best accomplished by skimming sanitized versions of the prospective inspector's recent reports.  Nothing else comes even near as good.

Edited August 27, 2019 by Marc

[Jim Katen]

10 hours ago, InspectorPro Insurance said:

However, based on the statistics we do have and the anecdotal evidence we've received, we haven't found a correlation between claims and agent relationships that we feel comfortable backing.

Of course you don't. Here's how it works: The agent wants the home inspector to find all of the important defects but then report them in a way that discloses the defect, but downplays its significance in such a way that it won't kill the deal. Later, when the home buyers realize that they have serious problems with the house, there's little that they can do because the home inspector did, in fact, find the problem and report on it, but then he downplayed it in a thousand little ways - none of them too obvious. This doesn't, of course, apply to all agents or all home inspectors, but it's the agents' ideal world. In places like Texas, where agents control the home inspector rules, it's baked into the laws. When this paradigm is successfully executed, it never comes to the attention of the insurers because there's no claim - just a disappointed home buyer. 

Check out Herner vs. Housemaster. It's very telling case in which the judge found the real estate agent to be the "client in fact" and where he called the inspection report "pablum." Unfortunately, this model of agent/home inspector relationship is still very widespread. 

 

 

[Les]

Herner v Housemaster should be required reading.  I am not aware of any condensed version of the entire case and the outcome.  In lieu of reading the entire file, just read the judge's comments.  Because this case is very old, it often is not fully considered.  

Every class/seminar/presentation about the legal aspects of inspecting has been lacking.  Mostly it is impossible to present the information on a national basis because of local laws etc.  

The one part of Marc's comments I disagree with is the validity of reading a report to measure or gauge an inspector's skill.  Linking a report to behavior or skill set is very difficult.  The minute you "sanitize" the report you remove the good stuff.  I have learned the report can not be considered a stand alone product. 

https://casetext.com/case/herner-v-housemaster-of-america

 

[Jim Katen]

33 minutes ago, Les said:

The one part of Marc's comments I disagree with is the validity of reading a report to measure or gauge an inspector's skill.  Linking a report to behavior or skill set is very difficult.  The minute you "sanitize" the report you remove the good stuff.  I have learned the report can not be considered a stand alone product.

 

I think that by "sanitize" he just means to remove the actual names and addresses from the report. That shouldn't remove any good stuff. 

I know some excellent inspectors who have less-than-excellent writing skills. Their customers still get a great inspection. No one excels at everything. Still, if you have nothing else to go on, the report can tell you a lot. It's really amazing how a person's writing reflects a person's thinking and vice versa.  

[InspectorPro Insurance]

21 hours ago, Marc said:

I believe the issue begins not with the agent but with the naivete of the buyer.  The widespread practice of this conflict of interest is aided by the blind ignorance of some agents and home inspectors alike.  Since buyers aren't the clients of insurance companies like yourself, the only policy change I can see from where you sit, is one of promotion.  You could encourage your policy holders to suggest to their clients that they not rest their laurels on an agent's referral, that they independently screen the referred inspector to confirm their satisfaction of that choice of inspector.  Hard to blame the referral party when you've screened that referral yourself.

Screening inspectors is best accomplished by skimming sanitized versions of the prospective inspector's recent reports.  Nothing else comes even near as good.

I agree that a lot of good could be done by educating home buyers themselves, but that duty rests primarily on home inspectors. Inspectors know who their clients are; we don't unless things go south. And, we recommend that we keep it that way simply because we have seen a correlation between advertising the existence of home inspection insurance to buyers and buyers filing claims.

I do think your comment selecting home inspectors based on versions of their reports is interesting. While I agree that reports are a great indicator of expertise, technique, priorities, etc., I wonder if the average home buyer has the skills necessary to compare inspection reports. Perhaps that's an item of additional education needed.

13 hours ago, Jim Katen said:

Of course you don't. Here's how it works: The agent wants the home inspector to find all of the important defects but then report them in a way that discloses the defect, but downplays its significance in such a way that it won't kill the deal. Later, when the home buyers realize that they have serious problems with the house, there's little that they can do because the home inspector did, in fact, find the problem and report on it, but then he downplayed it in a thousand little ways - none of them too obvious. This doesn't, of course, apply to all agents or all home inspectors, but it's the agents' ideal world. In places like Texas, where agents control the home inspector rules, it's baked into the laws. When this paradigm is successfully executed, it never comes to the attention of the insurers because there's no claim - just a disappointed home buyer. 

Check out Herner vs. Housemaster. It's very telling case in which the judge found the real estate agent to be the "client in fact" and where he called the inspection report "pablum." Unfortunately, this model of agent/home inspector relationship is still very widespread. 

 

 

You make an interesting point here about consumer fraud violations in relation to inspector reports that cater to real estate brokers. I would agree that such a practice, when it occurs, is definitely an issue. And if it is, in fact, as widespread as you claim, just not something that falls under our radar for some of the points you described, it's cause for concern.

Based on your acknowledgement of some state laws supporting the realtor referral system, and based on the fact that so many inspectors do rely on realtor referrals to stay in business, what would be your recommendations to mitigate the model of the agent/home inspector relationship you described?

1 hour ago, Les said:

Herner v Housemaster should be required reading.  I am not aware of any condensed version of the entire case and the outcome.  In lieu of reading the entire file, just read the judge's comments.  Because this case is very old, it often is not fully considered.  

Every class/seminar/presentation about the legal aspects of inspecting has been lacking.  Mostly it is impossible to present the information on a national basis because of local laws etc.  

The one part of Marc's comments I disagree with is the validity of reading a report to measure or gauge an inspector's skill.  Linking a report to behavior or skill set is very difficult.  The minute you "sanitize" the report you remove the good stuff.  I have learned the report can not be considered a stand alone product. 

https://casetext.com/case/herner-v-housemaster-of-america

 

Here's a decent opinion piece on the Herner v Housemaster case from a law firm for those looking for a quick overview: http://www.meislik.com/cases/herner_v_housemaster_america/.

Yes, we and others who discuss risk management techniques for the industry definitely struggle to make our content broad enough for a national audience while considering how local legislation can change the game entirely. For us personally, our aim is to give as accurate and thorough a look at an issue we can while noting places for further reading for inspectors impacted by local law that changes recommendations.

I agree with @Jim Katen's interpretation of sanitize.

[Les]

1 hour ago, Jim Katen said:

I think that by "sanitize" he just means to remove the actual names and addresses from the report. That shouldn't remove any good stuff. 

I know some excellent inspectors who have less-than-excellent writing skills. Their customers still get a great inspection. No one excels at everything. Still, if you have nothing else to go on, the report can tell you a lot. It's really amazing how a person's writing reflects a person's thinking and vice versa.  

How do you know, from the sanitized report, the inspector managed client expectations, their demeanor, mannerisms, verbal skill, etc? 

Your caveat, "if you have nothing else to go on",  takes away from your point.  

Most inspectors do not write anything.  They stumble around with templates, check some boxes, rely on myths and generally perform clerical tasks.  I have dozens of completed reports on my desk now that are worthless.  Some are serious errors and many contain just stupid stuff like double clicking type of furnace etc. 

I personally know several inspectors that write a crap report;  and have for decades.  Never get into trouble because they are verbally exquisite!  and vice versa.

[Marc]

5 hours ago, InspectorPro Insurance said:

...Based on your acknowledgement of some state laws supporting the realtor referral system, and based on the fact that so many inspectors do rely on realtor referrals to stay in business, what would be your recommendations to mitigate the model of the agent/home inspector relationship you described?...

If a legislature is going to regulate home inspectors with a home inspector board and intends that legislation to 'contribute to the health, safety and welfare of the people of the state', then by God, require public members on a majority of those seats, otherwise it's a joke.  Members with no association to the real estate industry.

Every seat on the Louisiana Board of Home Inspectors is held by a home inspector.  For 19 years they have 'contributed to the safety, health and welfare of the home inspectors of the state'.  Where this issue of agent solicitation has come before it, it has always ruled that there is no conflict of interest unless the home inspector is caught putting money into the agent's hands.  The very members of this Board would never have survived in business if not for agent solicitation.  They won't shoot themselves in the foot.

[Marc]

On 8/27/2019 at 10:22 AM, Les said:

How do you know, from the sanitized report, the inspector managed client expectations, their demeanor, mannerisms, verbal skill, etc? 

Your caveat, "if you have nothing else to go on",  takes away from your point.  

Most inspectors do not write anything.  They stumble around with templates, check some boxes, rely on myths and generally perform clerical tasks.  I have dozens of completed reports on my desk now that are worthless.  Some are serious errors and many contain just stupid stuff like double clicking type of furnace etc. 

I personally know several inspectors that write a crap report;  and have for decades.  Never get into trouble because they are verbally exquisite!  and vice versa.

Using recent reports as a litmus test is not an absolute barometer of inspector expertise.  That is a measurement that can never be perfect.  What I'm suggesting, what I feel certain about, is that there is no better indicator of inspector performance than his actual reports.  Licensure doesn't mean squat, passing the NHIE is just for entry requirements, none of the association designations are worth a damn when looking for a measure of expertise.

A newly minted inspector that joins TIJ is not going to post like you, Les, or like Chad, or Mike or Jim.  No one writes that way without first arriving at a high level of expertise.  That's my point.

Edited August 28, 2019 by Marc

[InspectorPro Insurance]

On 8/27/2019 at 2:06 PM, Marc said:

If a legislature is going to regulate home inspectors with a home inspector board and intends that legislation to 'contribute to the health, safety and welfare of the people of the state', then by God, require public members on a majority of those seats, otherwise it's a joke.  Members with no association to the real estate industry.

Every seat on the Louisiana Board of Home Inspectors is held by a home inspector.  For 19 years they have 'contributed to the safety, health and welfare of the home inspectors of the state'.  Where this issue of agent solicitation has come before it, it has always ruled that there is no conflict of interest unless the home inspector is caught putting money into the agent's hands.  The very members of this Board would never have survived in business if not for agent solicitation.  They won't shoot themselves in the foot.

Sorry for the delayed response on this and thanks for the insight. I think your recommendation that the public weigh in is an interesting one as it would solve more problems than one. I'll be interested to see if some of the new states adopting home inspection regulation employ this method.

[Marc]

22 hours ago, InspectorPro Insurance said:

Sorry for the delayed response on this and thanks for the insight. I think your recommendation that the public weigh in is an interesting one as it would solve more problems than one. I'll be interested to see if some of the new states adopting home inspection regulation employ this method.

Ohio just enacted a chapter on regulating home inspectors that has 2 public member seats out of 7 total.  It's an improvement but a majority of public members seats is needed, otherwise the inspectors have a majority and will simply do whatever they want.

Edited September 5, 2019 by Marc

[hausdok]

On 9/4/2019 at 9:59 AM, Marc said:

Ohio just enacted a chapter on regulating home inspectors that has 2 public member seats out of 7 total.  It's an improvement but a majority of public members seats is needed, otherwise the inspectors have a majority and will simply do whatever they want.

Marc,

That hasn't been the case here in Washington state. We now have ten years of licensing behind us, our state's seven-member board is 100% home inspectors, and home inspectors' reputation and consumers' overall impression of inspectors here is far better today than it was prior to licensing. It used to be common to hear of consumers complaining about inspections or suing inspectors here - now it's a rarity. Virtually every one of the dire predictions made about all of the self-serving things that licensing and a licensing board would cause have never transpired.

Give some credit where credit is due - believe it or not, not everyone who chooses to serve on such boards is a self-centered jerk only concerned with feathering his or her own nest. Some actually advocate strongly on behalf of consumers. After all, many of those consumers are their families, friends and co-workers. If the board they serve on is always making choices that benefit the inspector and screw the consumer public, doesn't that mean they'd be voting for choices that will screw their own families, friends and co-workers?

ONE TEAM - ONE FIGHT!!!

Mike

[inspector57]

On 9/4/2019 at 11:59 AM, Marc said:

Ohio just enacted a chapter on regulating home inspectors that has 2 public member seats out of 7 total.  It's an improvement but a majority of public members seats is needed, otherwise the inspectors have a majority and will simply do whatever they want.

I get your meaning and perspective but I can see problems the other way, such as in Texas where heavy handed TREC establishing rules without any power of the inspectors themselves. Lawyers and realtors who run the show giving mandates without the need to consult the inspectors they rule over. And since there are about 10 x more realtors than inspectors, there is no check on their power. Slip in consumer to replace Realtor in the above scenario  and you have the same issues.

In my experience, inspectors tend to be harder on themselves than the public on disciplinary actions but are more realistic when instituting laws and rules that govern the industry.

"Pure democracy is like two wolves and a lamb deciding on what is for dinner." 

Having a pure majority deciding on issues concerning someone else needs to be tempered with the people affected having some real power.

[Marc]

2 hours ago, inspector57 said:

I get your meaning and perspective but I can see problems the other way, such as in Texas where heavy handed TREC establishing rules without any power of the inspectors themselves. Lawyers and realtors who run the show giving mandates without the need to consult the inspectors they rule over. And since there are about 10 x more realtors than inspectors, there is no check on their power. Slip in consumer to replace Realtor in the above scenario  and you have the same issues.

In my experience, inspectors tend to be harder on themselves than the public on disciplinary actions but are more realistic when instituting laws and rules that govern the industry.

"Pure democracy is like two wolves and a lamb deciding on what is for dinner." 

Having a pure majority deciding on issues concerning someone else needs to be tempered with the people affected having some real power.

The public members that Ohio stipulates must not have any ties whatsoever with any area of real estate.  That's written into the statutes.  The Ohio and Louisiana regulatory structures for home inspectors bears no resemblance to Texas'.

Mike, It's great that it works in Washington State but it doesn't work here.  The governor decides who sits on our Board and he follows a process suggested by the original Board members of 20 years ago.  It practically guarantees the status quo in Board member appointments.