Approximately sixty (60) percent of all claims against home inspectors are brought within one year of the date of the inspection. Ninety (90) percent are brought within two years. Claims brought after two years are generally completely ridiculous. An Extended Reporting Period, popularly known as Tail Coverage, extends the time in which you can report a claim. It does not extend coverage, but only the time in which you can report a claim for work done prior to the expiration date of your coverage and, if you have been continuously insured, subsequent to your Retroactive [Prior Acts] Date of your coverage. If you retire or stop practicing, it is wise to purchase an Extended Reporting Period [Tail Coverage]. See coverage form for details and specifics.
What is E&O insurance?
In this specific instance, Home Inspection E&O insurance, or Errors and Omissions insurance, is a coverage that handles claims by a home inspector’s client in relation to the report provided. Similar to other professional liability insurance, these are services that a home inspector either provided, or neglected that then resulted in a loss client monetarily. This insurance covers you for both errors and omissions allegedly made or missed while conducting an inspection of a property.
What does E&O insurance cover?
Home Inspection E&O policies cover judgments, settlements and defense costs that may be brought against the inspector. Even if the allegations are meritless, the cost of defending your professionalism can be daunting. As an example, the Congressional Budget Office has determined that in 2002, the average unmeritorious medical malpractice claim—a claim that did not result in a payment to the claimant—cost $22,000 to defend. In short, E&O coverage provides protection for you, your company and your employees in the event that a client of yours alleges that an error or omission on your part has caused a financial loss for the client regardless of whether or not the allegation has merit.
Do I need E&O insurance?
If you actively perform professional home inspection services for a fee, it is strongly recommended that you invest in errors and omissions insurance. Although most professional liability claims are without merit, and professionals win over 90% of cases that come to a verdict, the trials and tribulations can be easily avoided. Most jurisdictions have made it a requirement for all home inspectors to have Errors and Omissions Insurance in addition to their inspector’s license. In fact, the following states have made it part of having a license: Washington, Massachusetts, Arizona, Texas, Mississippi, Tennessee. Nevada, Pennsylvania, North Dakota, and New Jersey. Additionally, many businesses have made it a requirement of their franchisees to have E&O insurance coverage as well. It is also a smart option when looking for referrals, as real estate brokers, reputable relocation businesses and real estate attorneys prefer to refer clients to inspectors who are fully insured.
Does professional liability insurance cover errors and omissions?
Insurance forms and advertisements are often filled with words that have the same or similar meaning. This question is a case in point. Professional Liability coverage and Errors and Omissions (E&O) coverage are synonymous. This type of insurance indemnifies the policyholder for allegations of negligent acts that result in financial loss. A negligent act could certainly include an error or omission in performing a home inspection service so you could very well state that professional liability insurance cover errors and omissions and that Errors and Omissions insurance covers professional liability claims. In either case, the wise Home Inspector professional will want to make sure they have adequate E&O insurance to protect their assets and business from financial loss.
What is a referring party endorsement?
This endorsement provides coverage to a referring party—any referring party, not just a real estate agent—for any claim that alleges that the referring party negligently referred business to the insured home inspector for home inspection services.
Must I specifically request the referring party endorsement?
No. The endorsement is automatically included at no additional charge to all home inspector E&O liability policies with EliteMGA.
I am a newly licensed inspector; can I get E&O insurance?
Yes. You can obtain coverage regardless of your tenure in the profession. EliteMGA requires our new inspectors provide previous proof of education, training or certification prior to issuing a policy.
What limit should I purchase?
There are various limit options available: $1,000,000; $500,000; $300,000, $250,000 and $100,000. Many states have minimum limits of $500,000, as do many franchisors and many referring parties, such as, real estate agents, relocation companies and real estate attorneys. Some builders may require limits of $1,000,000 in order to enter onto their premises.
Can I increase my limits mid-term?
Yes, changes to limits of liability can be changed mid-term with undwriter approval. Term and conditions may apply.
Suppose I hire an additional inspector mid-term, will he be covered?
Yes. There is no premium adjustment for adding an inspector mid-term. Neither is there one for dropping an inspector mid-term. Premiums are based on the number of inspectors at the beginning of the policy term. The only requirement is that you provide proof of training, education, certification or licensing prior to them inspecting for your firm.
How soon can I get a binder of insurance?
At Elite MGA, typically policies are issued within 1 business day of the receipt of your completed application and other subjectivities. No payment is due up front and installments are available without outside financing. Many of our competitors force payment in full, or financing with additional fees up to 12.5%.
What happens if I switch insurance companies and I then have a claim for an inspection that I performed before the switch?
You will be covered for any claim covered under this policy that is presented after you switch insurance companies, if you have had continuous E & O Insurance in your name from the date of the inspection that gave rise to the claim. This is known as Prior Acts Coverage. For example if you have had continuous E & O Insurance in your name since 1/1/2002, that would be your prior acts date or, retroactive date, as it is sometimes called. Your current Insurance carrier will respond to a claim for work you performed from 1/1/2002 forward, assuming you have had continuous E & O Insurance with no lapses in coverage.
How do I obtain prior acts coverage?
Prior Acts Coverage is only available to Home Inspectors who have maintained continuous Errors & Omissions Insurance in their name. Elite MGA will need a copy of the Declarations Page of your prior policies together with the completed application to determine if you are eligible for prior acts coverage.
Can I get prior acts coverage if I have never been insured before?
No. Prior Acts Coverage is only available to insureds who have had E & O Insurance continuously in force.