Even seasoned home inspectors can be unaware of the nearly infinite number of hidden dangers in a home that can wreak both financial and physical damage to homeowners and occupants. Regardless of how thorough their inspection, it is the home inspector that will be held accountable for the fallout from not identifying and reporting the problem. With so much on the line, every home inspector must understand the differences between Liability and Errors and Omissions Insurance to protect their business and reputation as well as the safety of the inhabitants.
While every home inspector understands that the hazards in a home can be varied and hidden, they must also understand their unique vulnerability to those hazards are also quite varied. This is where the full protection of both General Liability and Errors & Omissions coverage come into play. Although both policies will include coverage for Bodily Injury and Property Damage exposures, they have inherent and important differences that make both of them a necessity for a home inspector.
Errors and Omissions Insurance, or as it is called in the industry E & O Insurance, is the coverage that protects home inspectors should they accidentally miss signs of damage.
Full E & O insurance coverage is the best way the inspector can help guard against a lawsuit should home damage result in an oversight during inspection. The E & O policy is designed to cover the liability associated with the economic loss from a third party’s use of the inspection company’s services.
General liability insurance is meant to protect the business owner from bodily injury and property damage claims resulting from their operations as a home inspector (for example, a ladder used to access the roof is blown by the wind and falls, injuring the homeowner and damaging her vehicle). Coverage should also apply to personal and advertising injury claims (libel, slander, invasion of privacy) and contingent bodily injury and property damage arising from a home inspection (for example, an awning collapses and injures a third party 6 months after an inspection. It is determined that the inspection failed to discover termite damage which caused the collapse).
While these two types of insurance coverage seem to overlap in some respects, it is the exclusions found in both that highlight the need to purchase both coverages from the same insurance company. Typical exclusions found in General Liability policies include Intangible Property (Computer data), Impaired Property (Loss of use) & Professional Services. E&O policies often have exclusions for Bodily Injury, Property Damage, Personal & Advertising Injury. In the case of two different insurers and a claim that encompasses some or all of the above exposures, the situation quite often becomes a finger pointing exercise with both insurers looking for the other to respond to the claim. It would not be out of the question for both carriers to send claim denials for the areas that are excluded under their policy forms.
|Coverage Feature||General Liability||Errors & Omissions|
|Bodily Injury Claims||✅||❌|
|Property Damage Claims||✅||❌|
|Personal and Advertising Injury Claims||✅||❌|
|Wrongful Act from Professional Services||❌||✅|
Consequently, home inspectors that do not have adequate insurance are taking a big financial risk as litigation is time consuming as well as expensive. It is the responsibility of the home inspector to fully understand how General Liability Insurance as well as Errors & Omissions Insurance works in conjunction with every aspect of their professional inspection process. Only then can they work collaboratively with their insurance provider to craft a policy that offers the right amount and types of protection.