The Differences Between General Liability and Errors and Omissions Insurance for Home Inspectors
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 on 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.
Home Inspector’s Need for Insurance
While every home inspector understands that the hazards in a home can be varied and hidden, they must also understand that their unique vulnerability to those hazards is also quite varied. This is where the full protection of both General Liability and Errors & Omissions coverage comes 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.
As someone who provides a service, a home inspector must consider their own needs as well as the needs of their client. Experienced home inspectors can be guilty of accidental oversight, and it’s important for them to be protected from the possible legal ramifications that may occur as a result of an error or omission on the job.
E&O Insurance for Home Inspectors
Errors and Omissions Insurance for home inspectors, or E&O Insurance as it is called in the industry, is a type of professional liability insurance that can help to protect professionals from the legal consequences of oversight on the job. E&O insurance for home inspectors is the coverage that protects home inspectors should they accidentally miss signs of damage. Errors and omissions can and do occur, and an insurance plan will help to cover any court or settlement costs that may arise as a result of any inaccuracies.
In any home inspection, there are so many different facets of the inspection that are open to error or oversight. Electrical wiring, air conditioning and heating systems, plumbing, insulation, and the walls and foundation of a home are just a few of the complicated areas that home inspectors are expected to fully understand and examine. A good home inspector will be familiar with the ins and outs of the inspection, but even an experienced one can be open to omission and oversight. If a homebuyer feels that the inspector missed something important during the inspection, they can sue the home inspector for neglect, damage, or breach of contract. This could be potentially devastating to any professional, so seasoned home inspectors will refuse to work without E&O insurance.
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 an 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.
Quick Facts About E&O Insurance:
- The majority of E&O policies are claims-made, as opposed to occurrence policies
- E&O insurance is a type of professional liability insurance that protects companies and employees in the case of errors or oversight on the job
- There are a number of different industries that can be covered by E&O, and typically anyone who provides a service to a client can benefit from this type of insurance
- A large portion of errors and omissions claims revolve around allegations of negligence
- Roughly 1 in 7 professionals will be affected by an errors and omissions lawsuit at some point
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, a third party is injured on a property 6 months after an inspection, and it is determined that the inspection failed to discover damage that led to the injury).
Why should home inspectors invest in general liability, especially if they already carry errors and omissions insurance? Isn’t that excessive? Actually, responsible inspectors know that liability insurance is an essential part of their business. Inspectors will carry both types of insurance because they understand that there are advantages to each one, and although the policies may overlap in some areas, they also cover important aspects of home inspections that will help protect businesses and employees from legal issues.
Imagine a scenario in which an inspector fails to properly identify a threat to the home, such as termite damage. While this does not prevent the sale of the home, if someone is later injured on that property as a direct result of this oversight, the home buyer can hold the home inspector responsible for any damage or injury. This is where liability insurance for home inspectors comes into play. By protecting the inspector against liability and errors claims, a comprehensive insurance policy can allow an inspector to work unhindered by the threat of a lawsuit.
The Difference Between E&O and General Liability for Home Inspectors
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 to 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.
How can Home Inspectors Purchase General Liability and E&O Insurance?
When searching for insurance, you want a reputable and experienced company that will answer your questions and guide you in the right direction. At EliteMGA we offer home inspector liability insurance to cover you on the job as well as errors and omissions insurance for home inspectors to protect against legal claims.
Our agents can address your concerns and help you find the right coverage for your business. You can also save money if you choose to bundle plans and cover yourself for both liability and errors and omissions at once.
If you’re ready to get a quote for home inspectors insurance, click here.
This article has been updated for 2020 and all information is current.