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Navigating Dangerous Waters: Lessons from 100 Inspection Claims

by Kendra Budd, Editor

Home inspectors are often misunderstood by the home-buying public, with little understanding of what a home inspection is—or what it isn’t. Homebuyers often assume inspectors are responsible for uncovering every hidden flaw, predicting future breakdowns, or even guaranteeing the performance of a home’s systems for years to come. Consumers expect home inspectors to have X-ray vision, a crystal ball (that predicts the future), or to function like warranty providers.

Home inspections are limited, visual, and non-invasive snapshots of a property. Unrealistic expectations put home inspectors on the receiving end of more legal demands, claims, and lawsuits than any other professional in the home services sector.

Inspectors need risk management plans to handle potentially litigious clients who make demands when problems arise after closing.

Specializing in home inspector insurance for over 20 years, OREP Insurance, which administers a national Risk Purchasing Group, has developed a unique attorney-led pre-claims service for its Members.

Unlike other programs that involve adjusters unfamiliar with the profession or that try to “coach” inspectors to respond on their own, OREP Members benefit from direct attorney support and decisive response letters from Geoff Binney, managing partner at Woodlands, Texas-based Gauntt, Koen, Binney & Kidd LLP.

As an experienced trial attorney, Binney has built his practice around construction-defect litigation, first-party insurance defense, and home inspector claim defense. With 15 years’ experience in home inspector defense, he is one of the most experienced lawyers in that field, having worked with many of the largest home inspector insurance carriers in the United States.

OREP and Binney have worked together to help home inspectors respond to over 100 claims. Many never escalated to formal litigation thanks to early, strategic intervention.

Working RE Home Inspector sat down with Binney, as well as Isaac Peck, owner of OREP Insurance, to discuss some of the lessons that have come out of this, including the types of claims inspectors face, what works, what doesn’t, and how inspectors can protect themselves when a client turns hostile.

Here’s what we’ve learned.

Working RE Home Inspector: What are some of the weirdest claims you’ve seen against home inspectors?

Binney: Mold and termite claims. These are often so clearly outside the scope of a home inspection that it’s obvious from the beginning the claimants don’t understand what a home inspector’s duties actually are. In many cases, I’m able to explain that quickly and get the claim dismissed—because mold and termites are excluded under almost every standard of practice I’m familiar with.

That said, not all of them go away easily. I’ve been defending one wood-destroying insect case for over four years now, and we’ve racked up more than $60,000 in defense costs. I’ve tried to explain to their attorney: “If you pursue this, not only are you going to lose, but there’s a real possibility your clients are going to have to pay my attorneys’ fees.” In another case, we won and collected $40,000 in attorneys’ fees from the plaintiffs, which the inspection agreement clearly said we were entitled to. They seemed like decent people, but they ended up on a payment plan to reimburse the insurance carrier.

Peck: One of my favorites is a Florida case where the home inspector filled out a wind form stating that a particular type of roof has an average 25-year lifespan. At the time of the inspection, the roof was 20 years old. Nearly three years after closing, the roof started leaking and an ambulance-chasing Florida attorney sent a demand letter for $60,000 for a new roof, basically arguing that the home inspector had represented the roof would last 25 years and now should have to buy a brand new, nicer roof for the claimant because, in year 23, the roof now required some repairs. The Florida attorney promptly filed suit when the carrier refused to make a settlement offer. When we talk about shakedown litigation that is completely frivolous, unethical, and insane, this is what we’re talking about.

A close second would be the cases where a buyer is doing a gut-to-studs remodel, pulls back the drywall, and discovers some hidden defect like termites or wood-rot behind the drywall. The buyer will then try to blame the home inspector for not having X-ray vision.

Working RE Home Inspector: Are most demand letters and claims against home inspectors legitimate mistakes by the inspector or more on the frivolous side?

Binney: Most complaints I see come from clients who misunderstand home inspectors’ duties and the scope of the inspection. Often it involves something that clearly falls outside the scope of a standard home inspection—even if the issue existed at the time of the inspection. More commonly, though, it’s something that happened after the fact.

In most of these claims, the client truly believes the inspector should have caught the issue or warned them about it. But legally, it’s outside the scope. I don’t think most people are dishonest; they just don’t know any better. And that goes for both unrepresented claimants and those who are working with an attorney.

Peck: Most of the demand letters and actual litigation filed against home inspectors have no merit. Of course, not all claims are frivolous.

With that said, defending home inspectors against claims—whether frivolous or not—is costly. Litigation is set up to be expensive and drawn out. That’s why many plaintiff attorneys are quick to file suit and try to force an inspector and/or their insurance carrier to make a payment. There are some cases, in some states, where we can file for a preliminary judgement based on strong contractual language in a pre-inspection agreement, and that’s ideal. The cost to defend a frivolous claim and actually get vindication and a judgement in an inspector’s favor can exceed $30,000 once litigation starts.

This is one reason why having a strong pre-claims process that includes an experienced attorney is so valuable, because (1) it ensures that the insurance adjusters are not erroneously negotiating and paying frivolous claims for demands that are well outside of a home inspector’s standards of practice, and (2) it shuts down so many claims that might have ultimately resulted in litigation by explaining upfront, in detail, and with strong clarity why the claim is unreasonable and is unlikely to succeed if the claimant chooses to pursue it further.

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Working RE Home Inspector: Have you noticed an increase in claims against home inspectors now that the market has slowed down?

Binney: Actually, I’m seeing fewer claims come across my desk. My docket is lighter than it’s been in a while. These things tend to come in waves, so I suspect it’ll turn around at some point. But right now, I’m seeing a decrease. I can’t say for sure why that is, but from a pure numbers standpoint, there’s definitely been a drop.

Peck: I’d say things have calmed down a little, but proportionally, if we compare the volume that home inspectors were doing back in 2021 versus what they did in 2024 and what they’re doing today, there’s still been an uptick.

Working RE Home Inspector: What are the most common home inspection claims you see?

Binney: It depends a bit on whether we’re talking about pre-claims or actual litigation. In the pre-claims process, the issues can vary. But by far, the most common claim I see—both nationally and here in Texas—is related to water intrusion. That includes roof leaks, stucco or window leaks, plumbing leaks, and general water penetration issues.

Oftentimes, a homebuyer moves in and either right away—or sometimes even years later—they notice a damp spot in the ceiling, some rotting wood, or another sign of a water issue. They’ll call out a contractor or roofer, and that person will almost always say something like, “Well of course the home inspector should have caught this.” That happens all the time.

Here in Texas, especially in the Gulf Coast region, we have clay soil that’s known to shift and move. So, foundation issues are also very common, probably second only to water intrusion.

Beyond that, I see a variety of claims involving HVAC, electrical, plumbing, drainage, pests, and flooring. But leaks and foundation movement are by far the top two.

Peck: Frivolous ones, mostly. Just kidding. I agree with Binney’s assessment.

Working RE Home Inspector: Are home inspectors more likely to face claims than other real estate professionals or folks in the trades?

Binney: Yes, I do think home inspectors face claims more frequently. Claims against them are generally easier to pursue. It’s harder to prove that a real estate agent breached a duty, or that they knew about a defect and failed to disclose it. With a home inspector, it’s often a more straightforward case. Plaintiffs tend to see the inspector as the first line of defense—and often the first target.

That said, it’s very common to see what I call the “shotgun approach,” where buyers sue everyone involved: the sellers, the real estate agents, and the home inspector.

Peck: Yes. OREP has the benefit of serving home inspectors for over 23 years, but we also have deep expertise and regularly work with real estate appraisers, real estate brokerages, and other professionals in the home services sector. The homebuying public often misunderstands what home inspectors do and what they’re capable of. Combined with the fact that inspectors are strategically set up to be the real estate community’s liability bag-holder means that when buyers move into a home and start finding problems, or they have buyer’s remorse, they will frequently zero in on the home inspector as the one to blame.

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Working RE Home Inspector: How can home inspectors avoid and defend against claims?

Binney: First, be diligent. Know your duties and stick to them. Provide plenty of information in your report and take lots of photographs—more than you think you need. When there are legitimate claims—and there certainly are—they usually come from a situation where the inspector just had a bad day and missed something. But even when inspectors do everything right, they can still get hit with a claim.

Second, assuming you’ve done your job well, you need to communicate. When a client becomes a potential claimant, maintain a professional tone. Often, people just want to feel heard, so don’t get defensive or dismissive.

Third, have a pre-claims plan. Whether you’re working with a risk management program like OREP’s or not, you need a strategy before a claim ever arises. That could mean engaging with the claimant directly, working with your insurance carrier, or involving an attorney early on. What you don’t want to do is try to figure it out on the fly while emotions are high. Have a clear plan in place that you can activate immediately.

Finally, have a good written and signed inspection agreement for every single inspection. The agreement needs the proper clauses, it needs to be defensible, written and signed. Without a signed pre-inspection agreement, it’s difficult to get out of the litigation process.

Peck: A strong pre-inspection agreement is the home inspector’s first line of defense. We also always advise inspectors to avoid predicting system lifespans unless absolutely required. Buyers often twist such estimates into guarantees.

Also, if you can’t access a particular area of the home, like a crawlspace or attic, you should disclaim that in your report.

We have disclaimers that we recommend for crawlspaces and attics even when you do have access because it’s often not possible or practical for a home inspector to stick their head in every corner of an attic/crawlspace and look every which way.

Working RE Home Inspector: What would you say to home inspectors who don’t believe getting a signed pre-inspection agreement is necessary?

Binney: As nicely as I can say it—that’s naïve in today’s world. Maybe most of your clients are reasonable. But you only need one litigious person. And you don’t have to do anything wrong to be sued.

In that situation, without a signed agreement, you’re in for a long, expensive haul. The difference between defending a claim with a solid, signed agreement versus without one is night and day. I’ve seen it many times.

Peck: There aren’t a lot of insurance programs that cover home inspectors, but most of them require a signed pre-inspection agreement for the policy to respond to a claim. That speaks to how important having a signed agreement is to defend a home inspector in litigation or even pre-litigation.

Working RE Home Inspector: What are the must-have clause(s) for inspection agreements?

Binney: The two most important clauses are Limitation of Liability and Attorney’s Fees clauses. I’m not aware of any jurisdictions that are unfriendly to an Attorney’s Fees clause, and they can make a big difference in how a case plays out.

An indemnification clause is also valuable, especially in cases where someone who didn’t sign the agreement tries to bring a claim. I’ve seen situations where, for example, the husband signs the agreement, but the wife is the one bringing the lawsuit. Indemnification language can help shut that down.

Peck: After Limitation of Liability, my second favorite is an Attorney’s Fees clause that says if the client and the home inspector end up in litigation, the loser pays the fees. In many jurisdictions across the country, the plaintiff can get attorney’s fees if they win their lawsuit and it includes claims under “consumer protection” laws. The courts are one-sided in that regard: a two-sided Attorney’s Fees clause in your agreement basically says the loser has to pay. That’s a gut-check on irrational claimants or aggressive attorneys looking to “shake-down” home inspectors and squeeze a settlement out of the insurance carrier.

Working RE Home Inspector: Geoff, as lead attorney managing pre-claims defense for OREP Members, you’ve responded to over 100 demand letters in the last three years. Is there anything that sticks out or that you’ve learned from that work so far?

Binney: I was surprised at the success rate we’ve had with these pre-claims. I didn’t anticipate that somewhere between 90 to 95 percent of these cases—including many where the claimant is already represented by an attorney—would just go away after we send a response. That tells me the majority of these folks have a fundamental misperception of what a home inspector does and what they’re responsible for. This experience has only reinforced that.

My advice for home inspectors is to have somebody like me—and somebody like OREP—on speed dial. You need an attorney who’s easy to reach, who can answer your questions quickly and help you develop a strategy. Have an insurance company and a pre-claims process in place that you can call on immediately.

When you’re running your business, things don’t always go your way. Even if those situations are rare, you need a plan for when they happen. I’ve seen too many inspectors try to handle claims on their own, only to lose coverage, or lose important legal defenses, because they didn’t report an issue on time or didn’t take the right steps early on. Don’t let that be you.

About the Author
Kendra Budd is the Editor of Working RE Magazine and Marketing Coordinator for OREP Insurance. She graduated with a BA in Theatre and English from Western Washington University, and with an MFA in Creative Writing from Full Sail University. She is currently based in Seattle, WA.

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