The Home inspection profession can be somewhat of a risky business, customer's expectations are often very high. Sometimes too high, elevated by television shows where homes are a literally torn apart during the inspection process, where infrared camera technology is presented to make one think they can almost see through walls.
However, it is also a very rewarding profession, a Home Inspector must communicate well and take constant ongoing education. However, if there is something they do not know, then admit it and then go find the answer.
Home Inspectors who guess can pay the price in the way of financial loss. However, we do have E&O insurance to cover legitimate claims of errors or omissions.
However, why in Canada is this insurance so costly? It is so costly in fact that a huge percentage of Home Inspectors are forced to operate without having any insurance at all. I can guarantee the lower priced Home Inspectors have neither workers compensation coverage, or e&o insurance.
Normally the Home Inspectors General Liability and Errors & Omissions insurance are provided on the same policy to reduce gaps between the two coverages. Coverage can be extended to Real Estate Brokers and Agents where required for their referrals to the Home Inspector.
Home Inspector E&O Insurance in Canada used to be reasonably priced. There appears to be no hard evidence ever provided, despite the Professional Associations requesting it, to justify the high premiums. American E&O coverage remains reasonable. Are Canadian Home Inspectors that much worse? I don't think so.
Going back in history, there was one case in British Columbia where a Home Inspector made a serious error, costing the insurance company a large sum of money.
In summary, in September 2006 Manuel Salgado and Nora Calcaneo hired Imre Toth to inspect their property at the recommendation of their Real Estate Agent. Toth provided both a written and verbal report to Salgado and Calcaneo. Toth noted a number of structural deficiencies and told his clients that repair costs would be in the neighbourhood of $15,000 to $20,000. On that assurance, the buyers closed the deal. However, after closing, the new owners discovered serious problems with the wooden structural beams of the house due to rot and moisture. As well, it turned out that the south part of the house was sitting on fill that had not been properly compacted and the structure itself was settling and unstable.
The buyers sued Toth, the sellers and the real estate agents. The case against the former owners was settled before trial and the claim against the agents was discontinued. The only defendants remaining at trial were Toth and his company. After a five-day trial, Justice Grant Burnyeat awarded the buyers $192,920, representing the restoration costs of $212,920, minus Toth's original $20,000 estimate.
The judge ruled that Toth was negligent in not inspecting all of the structural beams and in failing to draw to the buyers' attention that the rot was much more widespread than he indicated to them.
As I mentioned earlier, this is not a business to guess at…if you do it may cost you dearly.
However, these huge cases are unheard of in the Canadian industry and one before or after has not been seen. In fact it is widely believed there are few cases of actual litigation or even insurance claims in Canada that do exist, and there has been no evidence to suggest otherwise.
Despite this apparent fact, insurance rates rose dramatically after this case and new Home Inspectors are now forced to pay in the area of $4000 or even $5000 per year for their E&O insurance policy. As a new inspector, with often fewer inspections to perform, this often becomes prohibitive.
Even experienced Home Inspectors will pay in the area of $2000 to $3000 per year.
Now, granted there are risks involved, and insurance companies hate risk. However, given the apparent low claim rate, what justifies the premiums? In fact, it was due to this that the provincial government has dropped the mandatory insurance requirements for Home Inspectors in the licensing proceedings that are ongoing. Personally, I would have preferred if they put a cap on the maximum amount of damages that can be claimed, and forced insurance companies to provide reasonable rates to Home Insepectors.
I carry E&O, but did not used to when I began. With our professional association, it is required.
Hopefull one day this will correct itself and be more favorable, as any Home Inspector who has coverage simply passes along to the consumer. Nick Gromeko from InterNACHI has been working to have an American company provide e&o coveage to Canadian Inspectors starting in 2017 for a cost of around somewhere around $1000 per year if I understand correctly, however so far I do not believe it is yet available nor have I seen the actual coverage.
Until that time, we will keep moving on.