Inspect the Home Inspector(‘s Attorney): Joe Ferry

It wouldn’t truly be our “protection” edition of the newsletter if we didn’t shed light on the legal aspect of home inspecting.  Joe Ferry is an attorney in Philadelphia who specializes in home inspection cases. He currently serves as General Counsel for InterNACHI home inspection association and has more than 10 years of experience representing home inspectors under his belt. The good news, according to Ferry, is that home inspectors are rarely the ones who make lawsuit-worthy mistakes. Out of the approximately 300 cases Ferry has taken, he says that he’s only seen three where the home inspector was legally to blame. The down side is that despite the positive odds, you’ve still got to protect yourself. Here’s how:

Tap Inspect: How can home inspectors prevent a law suit before one starts?

Joe Ferry: First, they need to manage their clients expectations. A lot of people that hire a home inspector have no idea what the home inspection entails…They think that the inspector is going to take the house apart and put it back together again. Inspectors need to tell clients that it’s going to be a limited, non-invasive, visual inspection and explain what the standards of practice (SOP) are that they’ll be following. The second thing that they need to do is follow the SOP…One thing you can’t fail to notice if you read SOPs is that there are a lot of things home inspectors are not required to do. Inspectors should know what those are. The third thing they need to do is strengthen their pre-inspection agreement. A lot of [agreements] are really inadequate to protect the inspector and a lot of them are internally inconsistent. Something in the front of the agreement contradicts something in the back of the agreement which means that the agreement can get invalidated in court.

Tap Inspect: How can home inspectors beef up their pre-inspection agreements?

Joe Ferry: An arbitration clause and an attorney’s fees clause are the two main elements. You want an arbitration clause because most cases involving a residential real estate transaction are multiple defendant cases. You have the seller, the real estate agent, the buyer’s agent, the seller’s agent, the home inspector and sometimes others. If the client has agreed to resolve any disputes in arbitration, then the inspector’s attorney could prevail upon the client’s attorney to voluntarily dismiss the inspector. The client’s attorney will generally do this voluntarily because otherwise the inspector could file a motion to dismiss based upon the arbitration clause and then seek recovery of his attorneys fees because the refusal to voluntarily dismiss the inspector would be unreasonable in that circumstance.

An attorney’s fees clause says that the prevailing party in litigation would be entitled to recover his [or her] attorneys fees. The inspector is almost always going to be the prevailing party…Another clause that inspectors should have in their agreement is a clause that waives the statute of limitations. In most jurisdictions, the statute of limitations for tort claims is two years and the statute for contract claims is four years. Inspectors are in the house for two hours. If a client doesn’t discover the problem in a year, how are you supposed to have discovered it in two hours? If inspectors put a clause in their agreements that limit the time that a claim can be brought to one year, they would eliminate 40 percent of all potential claims.

Tap Inspect: What else do home inspectors need to do to stay out of court?

Joe Ferry: They need to do a professional inspection and disclaim appropriately. The final thing that they need to do is establish what I call The Killer Defense. The Killer Defense is the contributory negligence…If an inspector finds an issue that he’s concerned about, say, with the roof. Maybe it’s at the end of its life or the inspector had accessibility issues. The inspector has to say in his report “Listen, this roof is very close to the end of its useful life and I was really unable to inspect it properly because  the attic was inaccessible.” If that’s in the report and there’s a subsequent issue with that roof and the claimant did not engage in the services of a professional roofer, the client would lose because contributory negligence of any degree is a complete defense to cases involving mere economic loss.

Tap Inspect: What should an inspector do if they do get hit with a lawsuit?

Joe Ferry: If they’re insured, they need to notify their insurance company. If they’re not insured, usually they notify [an attorney]. Most cases don’t start with a lawsuit. Most cases start with a phone call from an unhappy client or a letter from an attorney. It may be counterintuitive, but the people represented by attorneys go away faster than they ones who are not because once I explain to attorneys all the reasons that they can’t win, they lose interest in the case.

Joe Ferry is an avid blogger and public speaker on home inspection related cases. His writing is available at Joeferry.com.

If you’ve got a question on the home inspection business you’d like answered or you’ve got a tip you’d be willing to share with our fans, send us an e-mail at chris@tapinspect.com with “Inspect the Inspector” in the subject line.