Errors and Omissions Insurance Coverage

   

When Home Inspectors do not carry Errors & Omissions insurance coverage….

Federal Court in Florida Holds “Professional Services” Exclusion in GL Policy Precludes Coverage for Home Inspection Claims

In Auto-Owners Ins. Co. v. E.N.D. Services, Inc., 2013 U.S. App. LEXIS 2529, Plaintiff insurance carrier sought a judgment by the United States Court of Appeals for the Eleventh Circuit that it did not owe coverage, i.e. a defense and indemnity, to its insured home inspector under a General Liability insurance policy. The GL policy contained a “Professional “Services” exclusion that provided that there was no coverage under the policy for claims related to bodily injury, property damage, personal injury or advertising injury due to rendering or failing to render professional services in the performance of any inspection. The court held that this exclusion applied to a claim that the insured home inspector failed to detect and report on structural defects and termite damage during a routine home inspection. Accordingly, the home inspector was liable for the damages of $245,940.00 and had no insurance coverage for the loss. Most GL insurance policies have a “professional services” exclusion. If you’re carrying only GL coverage, and not Errors & Omissions (E&O) coverage, you may be at risk of having no defense and no way to satisfy a judgment entered against you or your company. You should always know your coverage, particularly in regulated states that require a certain type and amount of coverage for home inspectors. It only takes one uninformed judicial or jury decision to ruin years of work building a business. This article was written by J. Denneler, Esq.:  e-mail at jdenneler@srstlaw.com. I routinely advise realtors and homebuyers to make sure the home inspector they are referring, or hiring, has Errors & Omissions insurance and commercial auto insurance.  I understand this is not something many folks think about.  The amazing thing which always shocks me, is the Broker doesn’t think about it – and they should really know better.  After all, it is the Broker who typically manages the real estate business and who understands the need for proper coverage for the brokerage and its agents! Why is this coverage important to the Broker/Agent?  In the absence of proper coverage, the attorney for the claimant will most likely seek compensation from the referring realtor – after all, they probably have insurance. Why is this coverage important to the homebuyer?  Because, without it, the buyer may have no recourse for recovery for a major claim.  Let’s face it – most home inspectors don’t have a quarter million dollars in recoverable assets. Why do they need commercial auto coverage?  What if the inspector accidently backs over a child in the driveway?  His personal auto coverage will not cover the claim. Far too many home inspectors are doing business naked – no E&O insurance and no commercial auto coverage.  Why?  It is expensive and they have decided to put you at risk in order to sell cheap home inspections.  Quite frankly, some home inspectors may not be able to obtain these policies due to past claims, lack of experience, weak credit ratings or poor driving records. The $100 or less that you may be saving on the home inspection fee will quickly pale in the event of a claim with the inspector who does not carry proper insurance.

 William Chandler

The Building Inspector

Certified Building Consultant