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Editor's Note: The following questions are
from OREP insureds and inspectors nationwide. The answers, provided by David
Brauner, Senior Broker at OREP, may be helpful when shopping for your E&O
insurance. If you have specific questions about your coverage, ask your agent.
Inspectors Errors and
Omissions Insurance Q&A
By David Brauner
Question: Do I have Coverage for “After the Fact” Claims?
I was advised by another agent to ask about Contingent
BI/PD (bodily injury property damage). 1. Specifically, if we
are sued after the fact for a leak in the roof which causes extensive
collateral damage to walls, floors, furniture etc., would we have coverage for
the collateral damage? 2. If we inspect a deck, find no fault with it, and six
months later it collapses and injures someone, does our policy provide bodily
injury coverage at this point?
Brauner: 1. Yes you have coverage. You purchased Contingent Bodily
Injury and Property Damage (BIPD) with your (OREP) E&O policy, which covers
collateral damage such as what you describe here. 2. Yes you have coverage. You
purchased BIPD with your policy, which covers bodily injury, such as someone
injured by a faulty deck after the fact.
Question: Premises Coverage, BIPD, General Liability: What’s
the Difference?
I have E&O insurance through OREP and my general liability from another agent.
Am I covered for premises liability- if, for instance, I leave the water running
in the bathtub during an inspection and ruin the floors or run over someone
backing out of the driveway?
Brauner: You will have to ask the agent who
sold you your general liability policy whether you have coverage for bodily
injury and/or property damage while you’re at the job (premises coverage). Most
GL policies, including the one(s) sold by OREP, provide premises liability
coverage. OREP now offers a comprehensive GL policy including premises coverage
for home-based businesses with minimum premiums of $150. Call OREP for details.
Question: What is Incidental Coverage?
I was advised by another agent to ask about incidental coverage. We
specifically disclaim any responsibility for wood destroying insects, organic
growths, and asbestos. If we were sued after the fact for remediation and/or
property damage and/or bodily injury as a result of WDI, OG, or
asbestos, allegedly present during the inspection, would we have defense and
awards coverage up to our (OREP) declarations page policy limit?
Brauner: There are no exclusions for WDI/WDO under your OREP policy and
none for additional inspectors, independent contractors, radon, commercial
inspections, pool, septic, new construction/code compliance. There are
exclusions for mold and asbestos. Remediation of the property is
typically covered under the E&O portion of the policy. The bodily injury and/or
property damage injury is typically covered under the BIPD that you purchased
along with the E&O.
Question: Does Big Price Equal Big Coverage?
I recently read a story in an industry journal that basically warns me to
beware of "low-cost" E&O insurance because, like anything else, you get what you
pay for. What about that and why is your program so much less expensive than the
one I have?
Brauner: The OREP program is less expensive than many programs and
competitive with others. Regarding coverage, I agree that there can be coverage
differences between policies- we believe that the coverage provided by the OREP
policy is as broad or broader than most but this is easy for you to verify on
your own with a few clicks. I also agree that it is important to know who you
are dealing with: OREP is in its eighth year and I have been serving the E&O
needs of inspectors for 16 years. The OREP carrier is Lloyds, which is the
largest in the world. With that said, let me share with you what I’ve learned
about premiums in my 16 years in this business.
I've observed that E&O premiums rise and fall for two reasons- insurance market
conditions and loss history (claims). In “hard” markets, like following 9/11,
fewer carriers are willing to write professional liability insurance (E&O) and
fewer still will write “high-risk” professions, such as home inspection. You
might remember you had far fewer choices back then and you paid much more for
your E&O. What else has gone down in price in the last seven years?
In today’s soft market, there are more carriers willing to write
inspectors, so prices are more competitive. This is good for you. The second
reason why a program’s premiums rise is loss history and/or the total
expense of handling claims. If the claims ratio (expenses vs. premium sold)
exceeds a carrier’s benchmark, they typically do one of two things: they either
raise premiums or stop writing the business. So in short, a higher premium is
not necessarily an indicator of broader coverage: with insurance, big
premiums do not necessarily mean big coverage. And the opposite is true
also: low premiums are not necessarily an indication of narrow coverage. Again,
these days it’s not hard to compare coverage and price for yourself with a few
clicks.
Question: Do I Have Coverage for Infrared Inspections?
My franchisor now tells me I need to be covered for infrared
inspections. Does my (OREP) policy cover that?
Brauner: There is no specific exclusion for infrared inspections.
Question: Coverage for Temporary Use of a
Home?
Another agent advised me to ask if I’m covered for
Temporary Use of a Home
under my OREP policy.
If we are sued six months after an inspection because of structural problems
that force the plaintiff to temporarily live away from their home, and the judge
makes an award to cover this expense, are we covered?
Brauner: While underwriters typically do not give specific answers to
hypothetical questions, the adjuster indicates that should a judgment be
awarded, there is no particular exclusion in the policy for the expense you
describe here.
Disclaimer: This article is meant to be
used for informational purposes only. It is not the intent of this article to
provide legal advice or advice for any specific fact, situation or circumstance.
Contact legal counsel or your insurance agent for specific advice.
About the Author
David Brauner is Senior Broker at OREP, a leading provider of E&O insurance for
appraisers, inspectors and other real estate professionals in 49 states (OREP.org).
He has been serving the E&O needs of inspectors and appraisers for 16 years. He
can be contacted at
info@orep.org or (888) 347-5273. Calif. Insurance Lic. #0C89873.