An Errors And Omission Insurance Policy Can Prevent A Home Inspector From Losing His Business

By Author: Larry Chandler
Total Articles: 739
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The current mortgage and housing climate has created quite a bit of change in the marketplace. Most lenders have more stringent policies for approving a home loan. Home Inspectors have been asked to do a more thorough job of inspecting the home. The home inspectors are looked upon as the final gatekeeper of any problems or issues with the property. That is one reason why it is so important that inspectors keep their errors and omissions insurance policy up to date.


Need for Pre-Inspection Contract

Although the word OMISSION is pretty prominent in the term errors and omissions insurance, it is always a safe idea to get a signed pre-inspection contract. Although each state and each jurisdiction within the states have slightly different interpretations of the laws regarding contacts and property inspections, it helps to have an agreement that clearly spells out the liability on the part of the inspector. By outlining what is covered and what is excluded by the inspection it is possible that the errors and omission insurance policy will not even be needed for frivolous broad claims ...
... of negligence.


Unrealistic Expectations from Property Buyers

There are some buyers who feel like an inspector should be a fortune teller that can foresee every problem facing a home in the future including insects, structure and construction issues. But expecting any single person to be able to observe a home or building at one fixed time and have the capacity to detect EVERY possible problem including non-visual and future is just unrealistic.


For example, an inspector may not detect the presence of some debilitating insect damage because it is the wrong time of the year for the insects to be active. Any damage cause by the bugs would likely occur after the inspection is completed.


Real Life Examples

One inspector reported completing an inspection on a home in a northern climate. The power leading to the furnace was shut off by the inspector, giving him a chance to review the filter for the furnace. After finishing his work the inspector failed to turn the power back on to the furnace. The pipes froze and burst, causing damage into the range of tens of thousands of dollars. Thanks to his errors and omission policy the inspector paid $2,500 to help with the damages while the policy paid the rest.


In a totally different case a lawsuit was brought against an inspector due to issues with the air conditioner, electrical problems and the presence of mold that was not indicated on the report. The homeowners asked for $20 million in damages in their suit. The inspector his insurance carrier and they assigned him with an attorney and activated his errors and omission insurance policy which help pay for the legal counsel. In the end, the judge decided that the signed pre-inspection agreement limited the inspector’s liability to only the amount paid for the inspection. The inspector had to refund the $450 fee and pay his deductible on the insurance policy for the legal defense.


Every judge and jury may not side with the home inspector. But having a quality errors and omission insurance policy in place will help give the inspector the best chance of keeping their business alive and their reputation intact.

Larry Chandler is a freelance writer for Elite InspectInsure, a company that provides error and omission insurance to home inspectors as well as training and other services. To find out more about their e & o insurance offerings as well as their services, visit the site Eiipro.com.