Don't get bit by not inspecting for pests
by Isaac Peck
Even if your inspection specifically excludes wood destroying inspects/organisms (WDI/WDO), that does not stop an irate homeowner from suing you if a problem arises. That’s why it is good to have a clear scope of work, a signed inspection agreement, and a broad errors and omissions insurance policy- just in case.
“We see new homeowners move in and begin a remodel only to find termite damage that was hidden behind a wall- so it was unseen and unreported by the inspector,” said David Brauner, Senior Broker at insurance provider OREP.org. “Their first instinct is to try to recover some of the expenses from the home inspector. The inspector responds with their scope of work and agreement, signed by both parties, which specifically excludes WDI/WDO or pest inspections, and is limited to what is visible. That’s great but if that does not stop the homeowner there, the inspector may have to be prepared to prove his/her case in court, and it may be without the help of their insurance carrier if he did not purchase that specific coverage.”
According to Brauner most inspectors who don’t inspect for WDI/WDO, probably don’t think they need to purchase the coverage. So if a problem arises, they may be left on their own. Brauner says that OREP’s E&O policy provides what is known as “incidental” coverage for pests and other services- for when a problem like this arises. “That’s why a broad policy form is so important,” said Brauner. Brauner recommends asking your agent when you’re shopping insurance about what is and isn’t covered in the base policy- whether you specifically inspect for it or not- just in case.
“Obviously, if you perform pest inspections, and it’s not included in your base coverage, like with the OREP policy, it is necessary to purchase that coverage. But if you don’t inspect for it, you should be aware whether ‘incidental’ coverage is in place in case the unexpected happens,” says Brauner. “The unexpected is not so unusual in this business, unfortunately. Insurance, more than anything, is about peace of mind and having coverage when you need it.
Some inspectors believe that having insurance and/or expanded coverages just puts a bigger target on their back. Brauner says that this is one of those questions that can’t be answered definitively either way. “As an agent, I never try to sell anyone on whether to invest in insurance, just how to choose wisely if they do want it-which means getting the most coverage for best rate,” Brauner said. “Inspectors without insurance get sued. The fact that an inspector does not have insurance does not stop people from suing. I also know it can be devastating emotionally and financially for those who go through it without insurance. With insurance you minimize the loss- that’s your deductible, and in most cases even if the worst happens, you can recover- it’s not catastrophic. You are still in business. Insurance seems like a waste of money until you need it, I agree. But if you decide insurance is worth the cost, you should get the most coverage you can for the best price. Insurance for home inspectors is very competitive now– there are a lot of choices. Choose wisely. Shop. Pick a company with a long track record of service to the industry and with broad coverage and affordable rates.”
Isaac Peck is the Associate Editor at Working RE Magazine / OREP.
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