Tuesday, May 5, 2020

My Home Inspector Missed Major Problems. Can I Sue My Home Inspector? What Can I Do?

Is the home inspector responsible for problems in my house that weren't reported? Can I sue my home inspector? What recourse does a buyer have against a bad home inspector? What should I do if I've had a bad home inspection? 

The answers to these questions are somewhat complex because there are so many variables, but the short answer is that in many cases an inspector will refund part of the cost of the inspection if the problems should've been discovered and reported. Otherwise it is usually futile to sue a home inspector unless there is clear evidence of negligence or willful misrepresentations of fact, and here's why: 
1.  The terms of contract or agreement limit the inspector's liability. Most home inspectors have an agreement with the customer that waives liability if the inspector doesn't discover problems, especially those that are hidden, and if it is determined the inspector missed problems that should've been discovered contracts usually limit the maximum liability of the inspector to the cost of the inspection.  Typical contracts also stipulate a method for resolution if there is a disagreement between parties, often prescribing mediation or arbitration in lieu of a lawsuit.
2. Contrary to popular belief, an inspector's Errors and Omissions Insurance doesn't protect a home buyer or pay for an inspector's mistakes. Most home inspectors carry errors and omissions insurance, but it doesn't protect a home buyer, it protects the inspector from a lawsuit by a client / buyer. Typically the errors and omissions insurance companies have the resources to hire better legal representation with more experience defending such claims than what the average consumer can afford to spend to win, and usually the damages aren't enough to get a high quality lawyer to work for a consumer without charging fees or keeping a significant portion of any possible settlement award. The chances of winning an E & O claim against a home inspector are small. The exception is if it can be proven the inspector was negligent. I've provided testimony and affidavits relative to the standard of practice for the inspection industry in lawsuits against other inspectors that involved E & O claims, and despite it being my opinion the inspector(s) in question acted negligently and didn't follow the standards of practice of our industry, the plaintiffs were unsuccessful. I'm not familiar with any case locally in which a plaintiff has been successful suing a home inspector - it's just too difficult to prove actual negligence. 
3.  A lawsuit might be futile if the problems were hidden or if the inspector didn't have a chance to rectify the situation before repairs began. For example, some homeowners discover problems with their house after they buy the home but fail to notify the inspector until after repairs are complete, thus the inspector had no way to either help resolve the situation or determine what burden of responsibility he or she might have to bear, thus the inspector has no mechanism for minimizing harm or determining cause and origin of the problem, which creates a potentially legally complex situation because most problems overlooked by inspectors are concealed by contractors or homeowners, thus there might be contributory negligence or fraud by other parties. In some cases an inspector might actually be able to help determine who's at fault and be a potential witness for the customer rather than being a defendant of the customer. A good home inspector should always be an advocate for objectivity and truth. 
4. Home inspectors aren't responsible for latent or hidden defects. Sometimes the problems in homes are discovered or uncovered through the course of remodeling, or after living in the house for a period of time.  When this occurs it lessens the likelihood of a successful claim because a home inspector doesn't have the benefit of living in the home or removing finishes to examine and discover hidden problems and typically the courts recognize these limitations.   
5. Actual damages and their effect on a home's value might be marginal. Let's say you discover $50,000 worth of termite damage overlooked by the home inspector. It's possible that after spending $50,000 to repair damage the resultant value of the house might actually increase relative to what it was purchased for, plus in most liability situations the negligent party isn't responsible for upgrades or paying full price to repair depreciated components, thus if a home had obvious defects that were reported and unrelated to the termite damage at the time of purchase, and those problems got repaired in conjunction with the other repairs, the defendant isn't responsible for the full cost of the improvements because one party can't capitalize on the negligence of another for gain - only for indemnification. In other words the monetary value of claim could be reduced significantly from the cost of repairs if there was a net improvement in the value of the home above and beyond the cost of repairs, and even if there isn't a net gain in value a homeowner can't recover damages unless one could actually prove the inspector was truly negligent. 
6. Home inspections are not warranties. A home inspection is an evaluation of a home that's limited by time and accessibility of components. Not all problems at a home can be discovered through the course of an inspection and no home inspector is an expert at everything. Some inspectors do offer warranties to their clients for problems that occur subsequent to the inspection, but only if those problems weren't discovered at the time of the inspection. Also, home inspection warranties might have either a deductible for each problem, or a limit on the coverage that amounts to little more than the cost of the inspection. Plus, many warranties only cover repairs to correct the problem in question, not the resultant damage. For example, if there is a leak at the bathtub that wasn't discovered during the inspection, the warranty will pay for the cost of repairing the leak, but there might be a monetary limit on the cost of repairs, or a deductible that the homeowner must pay up front, and none of the subsequent water damage is covered - only the repair to the leak that caused the damage would be covered.
So, what should a homeowner do if they find a problem missed by their home inspector? The first thing to do is contact the inspector and/or inspection company to let them know about the problem, and if the inspector wants to see the problem allow them to investigate it, assuming the inspector is trustworthy and responsible. The inspector might be able to offer solutions, provide names of reliable contractors, and give some advice relative to how to prevent similar problems from recurring - and depending on whether the inspector feels responsible for not discovering or reporting the problem, they might contribute to the cost of repairs. Also, the inspector might be able to determine if there is evidence of prior repairs or if pre-existing damage was intentionally concealed by a third party, which might help a homeowner recover from a fraudulent seller who failed to disclose defects at the time of sale. Second, it's important to document everything - take photos, keep a journal, and save all correspondence / communications. Third, do everything possible to minimize or mitigate damage - ignoring or neglecting a problem is never the proper solution. Fourth, if there's significant damage consider contacting the insurer to determine if it's covered by the homeowner policy.
If a homeowner isn't satisfied with the inspector's response to the discovery of problems consider notifying the agent(s) involved in the transaction. Sometimes agents have a bit of leverage with inspectors to help get a satisfactory outcome. An inspection client can post bad reviews online, however this shouldn't be used as a tool of vengeance or retaliation, and posting negative reviews will hurt any chances of winning a lawsuit or settlement because if there is so much as one word in the review deemed misleading, the inspector now has ammunition for his or her own complaint or counterclaim for defamation. 
The principle of 'caveat emptor' or 'buyer beware' is important to consider because it is something taken into account by the courts. A home buyer must assume some risk, and it's generally understood that sellers of homes do try to make cosmetic repairs to hide existing damage, and it's also understood home inspectors can't and won't find every problem.  Hiring a home inspector to evaluate the condition of a property is essential, but there are no guarantees. In most cases inspectors aren't responsible for the problems they miss, and if you assume otherwise you're going to be disappointed. 
The best way to prevent yourself from getting stuck with a defective house is to hire a home inspector that's knowledgeable, thorough, and experienced.  Most agents don't refer their clients to the most thorough inspectors out of fear inspector will find too many problems and be more likely to derail the sale. The biggest home inspection nightmares I'm aware of have been the result of home buyers hiring inspectors as per agent referrals without doing their own research into the inspector's background and client reviews. The most common complaint I hear from my non-clients is, "I shouldn't have hired the inspector my agent recommended."
There are a handful of cases in which homeowners have succeeded in claims against inspectors, but they are rare. Lawsuits will take years off your life and usually the stress isn't worth the money.  When people call me with home inspection horror stories I try to maintain objectivity, look at what could've been done differently by the various parties, and determine what can be done going forward. I recommend using the entire experience as a learning tool - putting money into a home is the cost of tuition for a Homeownership Degree, and though mistakes made by home inspectors are discouraging and often cost homeowners money, those homeowners will be that much better prepared for the next problem, or the next home purchase.