Article: With A Little Help From My Friends: A Home Inspection Insurance Pre-Claim

[InspectorPro Insurance]

Hi TIJ readers,

Every few months or so, we try to share a story from our pre-claim and claim archives. By choosing cases representative of the allegations coming in, we hope to help you manage your own business' risk against similar complaints.

Enjoy!
Stephanie
 

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With A Little Help From My Friends: A Home Inspection Insurance Pre-Claim

The following is a real home inspection insurance pre-claim from our insurance claim archives. In order to protect the insured's identity, all identifiable characteristics—including names, associations, and locations—have been omitted or removed.

A year after their inspection, a client began to perform renovations to their recently purchased property. Upon removing some exterior siding by the basement entrance and some insulation in the basement ceiling, the client discovered some powder post beetle damage.

The client asked their home inspector to take a look at what he'd uncovered. When the inspector returned to re-inspect the property, the inspector took photos of the damage. Additionally, the inspector explained that, because of the siding and the insulation, the beetle damage was not visible during the inspection. The client resolved to ask the sellers to compensate him for the damage.

Two months after the re-inspection, the client called the home inspector again. He hadn't heard back from the sellers, he explained, so he had reached out to some lawyers to ask what to do. The lawyers advised that he redirect his complaint to the home inspector. The inspectors' insurance, the lawyers said, should cover the cost to repair the damage.

The Response
Having heard about pre-claims assistance in a recent newsletter, the home inspector reached out to our pre-claims team for assistance. Because his client's complaint lacked a written demand for money—which is how his insurance policy defines a claim—the inspector's incident qualified for free legal help stifling the grievance. Additionally, should the complaint escalate to a claim after pre-claims assistance tried to help, the inspector would qualify for up to 50 percent off his deductible through his policy's Waiver of Deductible endorsement. (You can learn more about pre-claims assistance here.)

The home inspector discussed the issue with pre-claims assistance over the phone. During the conversation, the home inspector was able to tell his side of the story and receive helpful risk management tips.

"[My pre-claims agent] explained to me that, the faster you deal with these situations and get [a response] out to the client so that they understand what the limitations of the inspection are, the better chance you have of them not following up further with litigation," the home inspector told us in an interview for this article.

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[Marc]

Keep the stories coming.

[Jim Katen]

Once again, the article starts off great and then goes off into the weeds. 

Instead of advising people to never exceed the standards of practice, here's an idea: 

Take the time to find the problems and tell your customers about them. 

 

[Marc]

3 hours ago, Jim Katen said:

Once again, the article starts off great and then goes off into the weeds. 

Instead of advising people to never exceed the standards of practice, here's an idea: 

Take the time to find the problems and tell your customers about them. 

 

That approach is designed to avoid the situation that would bring the insurance company into the picture in the first place.  It's unreasonable to expect an insurance company to adopt such an approach as policy.

Having said that, the number of substantial client complaints I've had in over 16 years can be counted on the fingers of one hand.  I credit that on satisfying whatever client needs I can reasonably offer, even if it means exceeding the SOP.

The SOP, without an educational standard and a mandated writing style to go with it, is a ridiculous standard upon which to base a quality inspection/report.

JMHO.

[InspectorPro Insurance]

8 hours ago, Jim Katen said:

Once again, the article starts off great and then goes off into the weeds. 

Instead of advising people to never exceed the standards of practice, here's an idea: 

Take the time to find the problems and tell your customers about them. 

 

Hi @Jim Katen. I think that both are important. Yes, we want home inspectors to stay within the SOP, but we want them to take the time to find problems and tell customers about them, too.

In this particular scenario, staying within the SOP is extremely relevant. Note that the beetle damage wasn't visible during the inspection; the client only discovered the beetle damage during renovations. Thus, our primary argument in defense of the inspector was that a home inspection is a limited, non-invasive, visual inspection that cannot see through walls or predict the future.

But, let's say the home inspector had exceeded that definition in another way. Perhaps he moved furniture and belongings during the inspection. Or maybe he probed the wall to identify water intrusion. If he had exceeded the SOP in those instances, the claimant and their lawyer could have argued that he should have exceeded the SOP in others, too.

The SOP helps set customer expectations and determine inspection scope. But, when inspectors go above or below those standards, things can get muddled.

[Marc]

Ya know, I wonder:  I have an IR attachment to my iphone that I deploy when, and only when, visible conditions suggest a moisture issue.  It's for confirmation of the issue.  Without that visible evidence, the attachment stays in my truck.  So what do you think?  Bad practice?

Edited September 18, 2019 by Marc

[InspectorPro Insurance]

9 minutes ago, Marc said:

Ya know, I wonder:  I have an IR attachment to my iphone that I deploy when, and only when, visible conditions suggest a moisture issue.  It's for confirmation of the issue.  Without that visible evidence, the attachment stays in my truck.  So what do you think?  Bad practice?

Great question. The answer remains to be seen. So far, we haven't run into any issues with courts arguing that IR exceeds the SOP of a visual, non-invasive inspection. That doesn't mean we never will. But, IR isn't something our claims team or carrier are concerned about at the moment. In fact, we've seen many instances in which the use of IR helped prevent or defend against claims.

[Les]

getting pretty close to inspecting for insurance coverage.  'bout the same as bowling for dollars!

 

[InspectorPro Insurance]

2 minutes ago, Les said:

getting pretty close to inspecting for insurance coverage.  'bout the same as bowling for dollars!

 

I get your point. We argue that a balance is possible: You can provide a stellar service to your inspection clients while still managing your risk. But, we recognize, too, that there are plenty of instances where what best serves the client and what best protects the inspector seem to be in conflict. In these situations, as insurance providers, it's always our job to always advocate for what's most likely to avoid claims. It's then up to the inspectors individually to weigh the options and decide what's best for their businesses.

[Jim Katen]

8 hours ago, InspectorPro Insurance said:

But, we recognize, too, that there are plenty of instances where what best serves the client and what best protects the inspector seem to be in conflict. In these situations, as insurance providers, it's always our job to always advocate for what's most likely to avoid claims.

I think your just plain wrong here. There are, of course, times when those conflicts are present, but they're rare. In the vast majority of instances, the thing that best protects the inspector is for him or her to do that thing that best serves the customer. In other words, cover the client's butt and yours will be covered automatically. 

By the way, the people who framed the original standard of practice for this profession clearly intended for that standard to be a *minimum*, not a maximum. 

An inspection report that doesn't exceed the standard of practice is a piss-poor report. 

[Les]

"An inspection report that doesn't exceed the standard of practice is a piss-poor report. "

 

Dear James Katen, 

Please tell us how you feel about home inspector standards of practice and what purpose they serve.

Thank You

Leslie Van Alstine

[Marc]

51 minutes ago, Les said:

"An inspection report that doesn't exceed the standard of practice is a piss-poor report. "

 

Dear James Katen, 

Please tell us how you feel about home inspector standards of practice and what purpose they serve.

Thank You

Leslie Van Alstine

It serves the state legislatures that had to come up with some sort of standard to round out their regulatory chapter but had only one choice on the shelf: ASHI's SOP.

I don't mock the SOP.  My gripe is that not a single new-born HI regulatory body in this country has yet to 'grab the ball and run with it' by following up with educational and report writing standards.

It's by these two standards that the bar is raised.  The SOP can't do it.

JMHO

Edited September 19, 2019 by Marc

[hausdok]

On 9/17/2019 at 10:25 PM, Jim Katen said:

Once again, the article starts off great and then goes off into the weeds. 

Instead of advising people to never exceed the standards of practice, here's an idea: 

Take the time to find the problems and tell your customers about them. 

 

Absolutely the best advice ever. I carried E & O for the first 4 - 5 years and dropped it after a nutcase threatened to sue me for obvious earthquake damage and the insurance company agreed, after soaking me for a $1000 deductible, to refund her the $350 fee.

For the next 18 years I never went to any arbitrations, never had to go to small claims court, and was never sued. I figure I saved the equivalent cost of an M class Mercedes by not carrying E & O and simply concentrating on doing the absolute best damned home inspection I could, calling everything out, documenting it, and letting the chips fall where they may without giving even one second's thought to whether or not my being "too picky" would affect the number or future referrals or cause agents to lose my phone number and forget my name.

ONE TEAM - ONE FIGHT!!!

Mike

[InspectorPro Insurance]

9 hours ago, Jim Katen said:

I think your just plain wrong here. There are, of course, times when those conflicts are present, but they're rare. In the vast majority of instances, the thing that best protects the inspector is for him or her to do that thing that best serves the customer. In other words, cover the client's butt and yours will be covered automatically. 

By the way, the people who framed the original standard of practice for this profession clearly intended for that standard to be a *minimum*, not a maximum. 

An inspection report that doesn't exceed the standard of practice is a piss-poor report. 

Hi, @Jim Katen. I agree that, in many instances, what protects the client and the inspector are the same thing.

As for the SoP being a minimum rather than a maximum, that's just not how we've seen the SoP interpreted by attorneys, arbitrators, and judges. That's why we recommend staying within the SoP rather than exceeding it. Whether meeting rather than exceeding the SoP was what the people who framed the SoP intended, I can't say. But, I can say that's not how the SoP is regularly being used in both claims filings and defense.

24 minutes ago, hausdok said:

Absolutely the best advice ever. I carried E & O for the first 4 - 5 years and dropped it after a nutcase threatened to sue me for obvious earthquake damage and the insurance company agreed, after soaking me for a $1000 deductible, to refund her the $350 fee.

For the next 18 years I never went to any arbitrations, never had to go to small claims court, and was never sued. I figure I saved the equivalent cost of an M class Mercedes by not carrying E & O and simply concentrating on doing the absolute best damned home inspection I could, calling everything out, documenting it, and letting the chips fall where they may without giving even one second's thought to whether or not my being "too picky" would affect the number or future referrals or cause agents to lose my phone number and forget my name.

ONE TEAM - ONE FIGHT!!!

Mike

Hi, @hausdok. Your claims example is an interesting one. Here at InspectorPro, we only charge the deductible when the claim amount--including payment and legal fees--meets or exceeds the deductible. So, in your particular case, you likely would have just paid the $350 to the client and nothing to us.

As for your 18 years since, it's great that you haven't had any claims since you dropped your insurance coverage, and it's likely that your inspection practices have a lot to do with it. Unfortunately, you may be the exception to the rule. Just looking at the inspectors we've insured over the past 10 years, about 60 percent of them have at least one claim in their career. And of those claims that we receive, 80 percent of the claims are meritless, meaning the technical inspection was accurate and the home inspector still received a claim.

Ultimately, in states where insurance isn't required, whether you buy insurance is up to your risk tolerance: how much you want to protect yourself versus how much you're willing to leave up to chance. As insurance providers, we'd say that inspectors like you who choose not to carry insurance have a high risk tolerance. In contrast, an inspector who chooses to carry all the insurance coverage they can has a low risk tolerance. It's a personal choice.

[Jim Katen]

4 hours ago, InspectorPro Insurance said:

Hi, @Jim Katen. I agree that, in many instances, what protects the client and the inspector are the same thing.

As for the SoP being a minimum rather than a maximum, that's just not how we've seen the SoP interpreted by attorneys, arbitrators, and judges. That's why we recommend staying within the SoP rather than exceeding it. Whether meeting rather than exceeding the SoP was what the people who framed the SoP intended, I can't say. But, I can say that's not how the SoP is regularly being used in both claims filings and defense.

This isn't an interpretation. It's a fact.

The first sentence of the ASHI SOP under "purpose" reads: 

• The purpose of the Standards of Practice is to establish a minimum and uniform standard for home inspectors who subscribe to these Standards of Practice.

The opening paragraph of the Oregon State Standards reads:

• OAR 812-008-0202 through 812-008-0214 of this rule set forth the minimum standards of practice required by Oregon certified home inspector.

Nothing in either of these standards even comes close to suggesting that the standard is not to be exceeded. (I can't speak to the standards of other organizations or other states - especially stupid states like Texas.) 

By parroting myth that exceeding the standards increases your liability, InspectorPro is  contributing to the problem, not helping it. 

 

[Jim Katen]

10 hours ago, Les said:

"An inspection report that doesn't exceed the standard of practice is a piss-poor report. "

 

Dear James Katen, 

Please tell us how you feel about home inspector standards of practice and what purpose they serve.

Thank You

Leslie Van Alstine

Home inspector standards of practice are the bare minimum performance standard; the floor that you stand on when you do a home inspection. They define a dollar-store home inspection product. 

[Les]

13 hours ago, Jim Katen said:

Home inspector standards of practice are the bare minimum performance standard; the floor that you stand on when you do a home inspection. They define a dollar-store home inspection product. 

Mostly for other readers - I have always known what Jim thinks about SOPs.  I have always had that understanding of any sop.  My comment was sarcasm. 

I agree with Katen. 

I do like the Dollar Store comparison.  Hopefully mine is more of a Nieman-Marcus piece of goods!

 

[InspectorPro Insurance]

16 hours ago, Jim Katen said:

This isn't an interpretation. It's a fact.

The first sentence of the ASHI SOP under "purpose" reads: 

• The purpose of the Standards of Practice is to establish a minimum and uniform standard for home inspectors who subscribe to these Standards of Practice.

The opening paragraph of the Oregon State Standards reads:

• OAR 812-008-0202 through 812-008-0214 of this rule set forth the minimum standards of practice required by Oregon certified home inspector.

Nothing in either of these standards even comes close to suggesting that the standard is not to be exceeded. (I can't speak to the standards of other organizations or other states - especially stupid states like Texas.) 

By parroting myth that exceeding the standards increases your liability, InspectorPro is  contributing to the problem, not helping it. 

 

Thanks for sharing that. That section from the ASHI SOP does shed some much needed light on the SOP's intended use.

However, I do think you misunderstand our purpose as insurance providers. The risk management tips we provide are meant to do just that: manage risk. We aim to help home inspectors limit their liability and prevent potential claims by sharing the information we've gathered from a decade of insuring and defending inspectors from allegations. While you may disagree with the counsel to stay within the SOP rather than exceed it, that counsel isn't based on personal opinion. Rather, it's based on actual cases we've faced. To not recognize that inspecting beyond the SOP can make claims more difficult to defend would be a disservice to our clients and other inspectors who read our articles in hopes of being able to apply various techniques to shield their businesses from claims. So, while there are some inspectors who disagree with the principle, we continue to share that counsel so that inspectors can then make an educated decision about how they run their inspection businesses.

[Les]

20 minutes ago, InspectorPro Insurance said:

However, I do think you misunderstand our purpose as insurance providers. The risk management tips we provide are meant to do just that: manage risk. We aim to help home inspectors limit their liability and prevent potential claims by sharing the information we've gathered from a decade of insuring and defending inspectors from allegations. While you may disagree with the counsel to stay within the SOP rather than exceed it, that counsel isn't based on personal opinion. Rather, it's based on actual cases we've faced. To not recognize that inspecting beyond the SOP can make claims more difficult to defend would be a disservice to our clients and other inspectors who read our articles in hopes of being able to apply various techniques to shield their businesses from claims. So, while there are some inspectors who disagree with the principle, we continue to share that counsel so that inspectors can then make an educated decision about how they run their inspection businesses.

carefully reading her response will guide you to enlightenment why we are in this mess.  Do what you want.  I will exceed standards. 

[Bill Kibbel]

2 hours ago, InspectorPro Insurance said:

Thanks for sharing that. That section from the ASHI SOP does shed some much needed light on the SOP's intended use.

However, I do think you misunderstand our purpose as insurance providers. The risk management tips we provide are meant to do just that: manage risk. We aim to help home inspectors limit their liability and prevent potential claims by sharing the information we've gathered from a decade of insuring and defending inspectors from allegations. While you may disagree with the counsel to stay within the SOP rather than exceed it, that counsel isn't based on personal opinion. Rather, it's based on actual cases we've faced. To not recognize that inspecting beyond the SOP can make claims more difficult to defend would be a disservice to our clients and other inspectors who read our articles in hopes of being able to apply various techniques to shield their businesses from claims. So, while there are some inspectors who disagree with the principle, we continue to share that counsel so that inspectors can then make an educated decision about how they run their inspection businesses.

As an insurer, I suspect your experiences and advice are focused more toward the "bottom end" of this profession.  I've been fortunate to have been able to interact with the "top end" folks for over 3 decades. Deflecting, defending, or even worrying about claims is not part of any discussion in that group. 

Training, educating and inspecting to a level well above the minimum standard would probably reduce the claims significantly. This whole profession should be constantly improving their knowledge and service to their clients, not hiding behind minimum sop.

[Marc]

It seems that if an inspector wants to serves his client as best he can, he's gonna have to tolerate more liability on the job.  Fine with me.  Is Inspector Pro going to deny me if I apply for coverage next year?  No claims in 16 years.

[InspectorPro Insurance]

5 hours ago, Bill Kibbel said:

As an insurer, I suspect your experiences and advice are focused more toward the "bottom end" of this profession.  I've been fortunate to have been able to interact with the "top end" folks for over 3 decades. Deflecting, defending, or even worrying about claims is not part of any discussion in that group. 

Training, educating and inspecting to a level well above the minimum standard would probably reduce the claims significantly. This whole profession should be constantly improving their knowledge and service to their clients, not hiding behind minimum sop.

I'd like to think our audience is broader than the "bottom end" you've described! However, most of the questions we get asked have to do with managing risk, so I must acknowledge that we're speaking with different groups of inspectors.

While I have to stand beside my earlier comments about the SOP, I do agree with the idea of better training, educating, and inspecting likely reducing claims. We've definitely seen a relationship between a lack of experience and training and claims.

2 hours ago, Marc said:

It seems that if an inspector wants to serves his client as best he can, he's gonna have to tolerate more liability on the job.  Fine with me.  Is Inspector Pro going to deny me if I apply for coverage next year?  No claims in 16 years.

Ha! While we recommend staying within the SOP, we don't penalize people for exceeding it. Frankly, we don't ask. As for a denial, the only way to know for sure is apply! However, unless you have any other experiences I'm unaware of, like an inspection-related felony, I can't see there being a problem. 

[Jim Katen]

On 9/20/2019 at 7:46 AM, InspectorPro Insurance said:

Thanks for sharing that. That section from the ASHI SOP does shed some much needed light on the SOP's intended use.

However, I do think you misunderstand our purpose as insurance providers. The risk management tips we provide are meant to do just that: manage risk. We aim to help home inspectors limit their liability and prevent potential claims by sharing the information we've gathered from a decade of insuring and defending inspectors from allegations. While you may disagree with the counsel to stay within the SOP rather than exceed it, that counsel isn't based on personal opinion. Rather, it's based on actual cases we've faced. To not recognize that inspecting beyond the SOP can make claims more difficult to defend would be a disservice to our clients and other inspectors who read our articles in hopes of being able to apply various techniques to shield their businesses from claims. So, while there are some inspectors who disagree with the principle, we continue to share that counsel so that inspectors can then make an educated decision about how they run their inspection businesses.

I fully understand your purpose as an insurance provider. But I think that your advice is short-sighted and, ultimately, self-defeating. Inspectors don't get sued for finding problems, they get sued for missing them. The very slight increase in liability caused by exceeding the standards is far outweighed by the very great decrease in liability gained by finding otherwise hidden problems. 

I'm old enough to remember when inspectors first started to use moisture meters. My insurer a the time advised me not to use one and, if I were to use one, never to mention it in the report or to let the customer see me using it. Their reasoning was that using a moisture meter would instantly make my inspection "technically exhaustive" and open me up to all kinds of disastrous claims. That was dumb reasoning at the time and every inspector I know uses a moisture meter today. What really happens is that the moisture meters help to find problems and reduce the inspectors' liability. They are, of course, beyond the standards.  (The same argument is now playing out with IR cameras.)

Likewise, I remember when we first started to use digital cameras. Again, my insurer advised against taking any pictures during the inspection because one of the pictures might capture a defect that I didn't include in my report and that picture could be used against me in court. They were also concerned about a seller suing if I took pictures of personal property. None of that turned out to be much of an issue. (And if an inspector does take a picture of a defect and not report on it, then he or she probably should be responsible for the oversight.) In the long term, pictures reduce liability and InspectorPro (and probably every other insurer out there) knows that perfectly well (you having just written an article about how every inspector should take hundreds of thousands of pictures every minute). They, of course, go beyond the standards. 

You stand at one small corner of the home inspection profession and your view is distorted by your perspective from that corner. I suggest that by taking a step or two back, you'll see that advising people not to exceed the standards is actually increasing rather than decreasing the overall risk of your customer pool. 

Bottom line: exceeding the standards might make it a little bit more difficult for an attorney to defend an inspector, but it makes it much less likely that the inspector will need that attorney in the first place. 

[Jim Katen]

Here's an idea: 

Instead of advising your inspectors to *never* exceed the standards, I suggest introducing the concept of "tactical exceedance."

Begin by including a statement like this in the inspection agreement, "The inspector may occasionally exceed the standard of practice as a courtesy to the customer, who agrees that, in doing so, the inspector will not exceed the standard in every regard or in every instance." Or something like that. I'm sure that your lawyers can get the gist across. 

Then, inspectors can feel a bit more free to perform risk assessments to decide when it's more beneficial to go the extra mile or so to find problems. 

As an insurer, providing guidance about how to perform that risk assessment and when it's actually beneficial to exceed the standard would be a lot more useful - and do more to reduce claims - than simply issuing blanket advice to never exceed. 

By the way, if you implement this concept, I want full credit. It should be called, "The Katen Method" and spoken of reverently, in hushed and respectful tones. 

 

[InspectorPro Insurance]

On 9/21/2019 at 10:24 AM, Jim Katen said:

I fully understand your purpose as an insurance provider. But I think that your advice is short-sighted and, ultimately, self-defeating. Inspectors don't get sued for finding problems, they get sued for missing them. The very slight increase in liability caused by exceeding the standards is far outweighed by the very great decrease in liability gained by finding otherwise hidden problems. 

I'm old enough to remember when inspectors first started to use moisture meters. My insurer a the time advised me not to use one and, if I were to use one, never to mention it in the report or to let the customer see me using it. Their reasoning was that using a moisture meter would instantly make my inspection "technically exhaustive" and open me up to all kinds of disastrous claims. That was dumb reasoning at the time and every inspector I know uses a moisture meter today. What really happens is that the moisture meters help to find problems and reduce the inspectors' liability. They are, of course, beyond the standards.  (The same argument is now playing out with IR cameras.)

Likewise, I remember when we first started to use digital cameras. Again, my insurer advised against taking any pictures during the inspection because one of the pictures might capture a defect that I didn't include in my report and that picture could be used against me in court. They were also concerned about a seller suing if I took pictures of personal property. None of that turned out to be much of an issue. (And if an inspector does take a picture of a defect and not report on it, then he or she probably should be responsible for the oversight.) In the long term, pictures reduce liability and InspectorPro (and probably every other insurer out there) knows that perfectly well (you having just written an article about how every inspector should take hundreds of thousands of pictures every minute). They, of course, go beyond the standards. 

You stand at one small corner of the home inspection profession and your view is distorted by your perspective from that corner. I suggest that by taking a step or two back, you'll see that advising people not to exceed the standards is actually increasing rather than decreasing the overall risk of your customer pool. 

Bottom line: exceeding the standards might make it a little bit more difficult for an attorney to defend an inspector, but it makes it much less likely that the inspector will need that attorney in the first place. 

 

On 9/21/2019 at 11:04 AM, Jim Katen said:

Here's an idea: 

Instead of advising your inspectors to *never* exceed the standards, I suggest introducing the concept of "tactical exceedance."

Begin by including a statement like this in the inspection agreement, "The inspector may occasionally exceed the standard of practice as a courtesy to the customer, who agrees that, in doing so, the inspector will not exceed the standard in every regard or in every instance." Or something like that. I'm sure that your lawyers can get the gist across. 

Then, inspectors can feel a bit more free to perform risk assessments to decide when it's more beneficial to go the extra mile or so to find problems. 

As an insurer, providing guidance about how to perform that risk assessment and when it's actually beneficial to exceed the standard would be a lot more useful - and do more to reduce claims - than simply issuing blanket advice to never exceed. 

By the way, if you implement this concept, I want full credit. It should be called, "The Katen Method" and spoken of reverently, in hushed and respectful tones. 

 

Hi @Jim Katen. Thank you for your thoughts on this. I find your examples with the moisture meter and digital camera particularly interesting since they do show a definitive change in risk management recommendations. While I don't see us changing our recommendation to "tactical exceedance" just yet, I do think "The Katen Method" concept presents an interesting compromise. I'll pass the idea on to our claims team, who determines our recommendations, as an item of interest.