Who pays when the home inspector damages property or is injured while at the property?
If a home inspector injuries his or herself on a property, or damages something, who is responsible?
In transactions that do not involve real estate licensees, and in commercial transactions negotiated by lawyers, it is not unheard of for the seller to demand that the buyer indemnify seller for damages caused and injuries sustained by the home inspector. To provide indemnity is to provide protection against financial loss, usually attributed to one’s negligence or mishap.
When a buyer agrees to indemnify a seller for losses or damages caused by the home inspector (who is, after all, in the property at the request of, and for the benefit of the buyer), the buyer is on the hook for any damages caused by the inspector; and that may also include attorneys’ fees incurred in the cost of recovering the losses.
The obligation to indemnify the seller for damages caused by an inspector might seem like little risk. Home inspectors typically conduct noninvasive inspections of readily-accessible and visible areas. They generally won’t move things, and are rarely engaged in the type of activities that cause harm. Not only that, they carry general liability insurance for these types of losses.
These types of indemnity agreements, however, can cover much more than just the damages that might be caused by a home inspector. They also may cover the liability for injuries to the inspector. What if the inspector is injured because a rotted basement step gives way, or because he slips on a child’s toy left in a dark area where the inspector did not anticipate it?
Sellers, by way of these agreements, may pass off their own legal responsibility to a willing (but perhaps under-informed) buyer. I have seen sellers attempting to do just that in several recent transactions. In such instances, the seller is essentially saying “if you want a home inspection then you, buyer, bear full responsibility for anything that happens to my property, my home or my personal belongings; and you will also be responsible if the home inspector injures himself on my property even if caused by my negligence.”
At this point you may be questioning whether you should incorporate an indemnity clause for the protection of your seller, or worrying about if a seller demands such protection of your buyer. If any more questions about indemnity clauses arise, refer your client to an attorney.
Indemnity provisions covering inspections in the residential transaction are rare and for a reason. In addition to carrying errors and omission (E&O) insurance for the mistakes made in the inspection process, home inspectors carry general liability insurance that covers mishaps such as when an inspector knocks a valuable vase from a table.
Fortunately, Pennsylvania’s Home Inspection Law requires home inspectors to maintain E&O insurance and general liability insurance with coverages of not less than $100,000 per occurrence. This means the home inspector is supposed to have the coverage in place, but should you have any questions, do not hesitate to ask for proof.
An indemnity agreement can also direct that a buyer will protect the seller against an inspector’s personal injury claims should the injury occur on or at the property. This might result in buyers covering the inspector’s medical bills, even if the inspector has medical insurance.
An insurer who pays medical bills and/or lost income to an inspector by virtue of a seller’s negligence would have what is called a “subrogation claim” against the seller and because of the indemnity provision with the buyer, ultimately the buyer may pay. Though this risk is and has been attendant to home inspections for many, many years, sellers are rarely concerned and that is because sellers have their own liability insurance to protect them in these situations.
On the other hand, a buyer who agrees to indemnify a seller against a home inspector’s claims of personal injury probably does not have a policy that will cover those losses. After all, the injury occurs on the seller’s property and not the buyer’s, so the buyer’s homeowners policy will not likely cover that event.
Confusing? Yes, but you at least now know the basics and enough to have your clients consult their legal counsel if and when the issue of indemnity is broached.