Lessons in Risk Management: The Multiple Return Trips to "Help"

By Michael Casey of Casey O'Malley Associates and Robert Pearson, Allen Insurance Group.

Although some insurance claims are due to negligence on the part of the inspector, most are not. Most are the result of comments made, or not made, at the inspection and in the report and, sometimes, after the inspection.

For example, an inspector inspected an older home with a partial basement and partial crawlspace. Everything was normally accessible, with the usual personal storage items.

In her report, under "Basement," the inspector wrote, "acceptable condition" along with the description of some conditions in need of minor maintenance. The buyer moved in, and one month after the inspection called the inspector saying "I am completely disappointed in your report and inspection, call me". The inspector promptly called the client and arranged to visit the property to discuss any concerns in person.

Upon meeting with the client the inspector was shown cracked glass in a window and several receptacles missing cover plates. The inspector explained these items were minor and normal home maintenance items all homeowners need to budget for and that the receptacles were probably hidden by personal storage. Nevertheless, the inspector, in good faith, offered to pay $50 for the minor repairs and the client accepted. The inspector wrote a check and left the property.

Two more times the inspector received similar calls with similar results after visiting the property each time and leaving after writing checks for under $75. Upon the fourth call for "help" the inspector listened to the complaint on the phone and refused to visit once again at no charge or pay for any repairs.

Three months later the inspector was served a summons and the complaint outlined numerous issues because of which the house is not habitable and the client has had to move out and is unable to live in the home or work. The matter was settled for a "nuisance" fee by the insurance carrier which was kind enough to extend coverage even though the carrier was not noticed of a potential claim upon the first phone call from the inspector's client.

The moral of this story: the inspector performed an inspection and report meeting or exceeding national standards of practice. Upon the first complaint the inspector should have noticed the insurance carrier and upon visiting the site admitted no guilt, taken photographs, and obtained a full release in exchange for writing a check. Additionally, the client must be educated as to the scope and expectations of a home inspection as well as the contract (you MUST get a signed contract) provisions, sometimes again a few months later if they call regarding an item and question the accuracy of the inspection report.

Simply paying for a repair does not absolve you of responsibility in the client's mind. In fact, you have now set a precedent to pay for repairs. Refund of the entire inspection fee is best, with a complete release signed by the client as then there is no longer compensation and you have a full release. Contact your attorney or insurance carrier for a proper release form.

Furthermore, if there is any opportunity to document conditions if you return to a property take photographs. These may help later for parties involved to visualize actual conditions instead of relying upon memory and verbal testimony.

Bob Pearson is the Executive Director/Vice President of the Allen Insurance Group. He began his career in home inspections in 1985 and has had three inspection businesses. He has performed thousands of inspections, with an emphasis on commercial properties. In 1992, he was employed by the Allen Insurance Group to create its home inspectors program. He is a member of many inspector associations and is widely recognized as an expert on home inspector insurance. Bob can be contacted at bob@allenins.com

Michael Casey is a partner with Casey, O'Malley Associates; a national A.M. Best recommended consulting and inspector training firm based in San Diego. Mike is a past president of the California Real Estate Inspection Association (1994/1995) and of the American Society of Home Inspectors (ASHI) (2002). He is multi-code certified by the ICC and IAPMO. He is also a licensed general, plumbing and mechanical contractor in several states and a Virginia Certified Home Inspector. Besides co-authoring several books in the Code Check series, Casey has authored many other books, has taught home and building inspection and has an expert witness practice throughout North America since 1987.

Michael can be contacted at mike@caseyomalleyassociates.com