Does Your Home Inspector Carry Insurance? Most people think, or hope, that their inspector has insurance in case the inspector misses something. But there are other things, such as what if someone gets injured during an inspection?
The California Residential Purchase Contract has a provision that puts the onus on the buyer. Most buyers, and even most real estate agents, have little idea this provision exists. Not being aware of this provision can be costly in the event of a mishap.
What the California Residential Purchase Contract says about Insurance
Section 12 E of the RPA states “Buyer shall carry, or Buyer shall require anyone acting on Buyer’s behalf to carry, policies of liability, workers’ compensation and other applicable insurance…”
Yes, that’s right, by contract, the buyer is responsible for insurance for any inspector the buyer hires that does not have their own workers’ compensation policy.
That language matters more than many buyers realize.
When buyers hire a home inspector, sewer inspector, mold company, roofer, chimney contractor, or any other vendor during the inspection contingency period, those companies are effectively acting on the buyer’s behalf under the contract.
If someone gets hurt on the property during that process, things can become complicated very quickly. Basic E&O Insurance is NOT workers’ compensation insurance.
An Example: Inspector Falls off a Ladder
Let’s say it’s a beautiful day for an inspection. Imagine a home inspector sets up a ladder to inspect the roof. Unknown to him, the soil near the side yard has become soft from overwatering. The ladder shifts, the inspector falls, and he injures his shoulder.
At first, everyone feels terrible and assumes it was simply an accident.
But later, the inspector receives medical bills, misses work, and eventually speaks with an attorney. The attorney begins looking for possible sources of recovery. If the inspector carried proper Workers’ Compensation insurance, that policy would generally be designed to handle workplace injuries like this.
But if the inspector was uninsured, only had E&O insurance, or improperly classified as a 1099 contractor, the situation can become much more complicated. The attorney may begin looking at the seller as a possible source of recovery. The seller may then point toward Section 12E of the RPA. If a real estate agent recommended that inspector, the recommendation itself may also come under scrutiny. A simple accident can quickly turn into a chain of finger-pointing.
And it may not be ladder-related. An inspector gets injured because of faulty wiring that shocks the inspector. Algae build up around a pool making the pool deck slippery. The sellers’ dog bites the inspector. A lot of situations could potentially result in the need of insurance. And the California RPA makes it clear that the buyer had the responsibility to make sure insurance was in place.
Why Do So Many Inspectors Not Carry Insurance?
Home inspectors are not heavily regulated in California. That said, most inspectors have at least a minimal Errors and Omissions policy. But that does not mean they have a workers’ compensation policy. A big aspect is price: Insurance is expensive. Many inspectors feel they need to compete on price and be cheaper than the other guy. The best way to be cheaper is to not pay for an expensive insurance policy. If the inspector you are talking to is cheaper than average, that’s a clue that they may not have proper insurance. The other important aspect of a one-person company, state labor laws do not require single owner/operators to carry workers’ comp insurance. And this can get muddy if an inspector is a 1099 contractor of an inspection company. Most agents or buyers just ask, “Do you have insurance?” but rarely ask what types of insurance the inspector has.
Why Does IM Home Inspections Carry Insurance?
At IM Home Inspections, while we are a family-run business, we are also a real corporation. We carry E&O Insurance, General Liability Insurance, and yes, Workers’ Compensation insurance. We also offer health insurance to employees. Our inspectors are covered. Which means buyers who hire us are satisfy the requirements of Section 12 E. We carry insurance not because we fear missing something, but to protect our clients, and because it’s the right thing to do.
Book your legally compliant home inspection by calling 818-298-3405 or book online here.