Refunds from negligent home inspectors
Q: After we bought our home, electrical violations and building settlement problems were discovered. None of this was reported by our home inspector. When we called to complain, he said his liability is limited to a refund of his inspection fee. Is this the way home inspectors typically do business?
A: Home inspector liability is a recurrent issue that has frustrated many homebuyers. Complaints about undisclosed defects often arise, and some of these involve the refund policy in many home inspection contracts. Some of these contracts limit home inspector liability to a simply refund of the inspection fee. This policy is a sensitive subject because it appears at first glance to be a naked avoidance of honest responsibility by home inspectors. In some cases, that would be a fair indictment, but this is not a simple subject with a one-size-fits-all answer. So, here are the basics of the issue.
Lack of disclosure has many causes. Sometimes the home inspector is at fault; sometimes not. If unreported defects are visible, accessible, and within the scope of home inspection standards, professional negligence is often the problem.
When a home inspector is negligent, and when this negligence is financially damaging to homebuyers, one would expect some financial liability on the part of the inspector. But most home inspection contracts set strict limits on liability, regardless of the circumstances and regardless of the damages caused by the inspector's failure to report defects. In some states, the courts have rejected the contractual clause that limits inspector liability to a simply refund. In other states, the refund clause has been upheld.
Refund clauses in home inspection contracts have good and bad applications. The good application is to oppose frivolous claims against home inspectors. For example, a defect that is discovered inside a wall when a home is being remodeled could not have been discovered during a home inspection. If someone files a claim against a home inspector for that kind of defect, the claim would be frivolous, and a refund of the inspection fee would be a fair defense for the inspector. A bad application of the liability limit would be merely to refund the inspection fee in cases of actual negligence.
An inspector who is honest and ethical will consider the merits of each claim, rather than issuing a blanket refund in every case. If the costs to repair unreported defects are affordable, the inspector can accept responsibility for a professional error and pay for them directly. If the costs are not affordable, the inspector can file an errors and omissions insurance claim. Hopefully, the inspector carries that kind of professional liability coverage. (Note: Some home inspectors do not carry E&O insurance for fear that “deep pockets” may attract frivolous claims. But that’s a subject for another article.)
No home inspector is perfect. Even the best inspectors miss some defects in the course of a career. When mistakes occur, it is the ethical obligation of a true professional to take responsibility for those errors. At times, the cost of that responsibility can be severe, but that discomfort, as painful as it may be, is part of the cost of doing business in any profession.
• Distributed by Action Coast Publishing. Questions to Barry Stone can be e-mailed to barry@housedetective.com.