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Insurance IQ: Defining Professional Services

by Isaac Peck, Editor

Have you ever wondered what your home inspector E&O policy actually covers?

OREP E&O insurance agents are frequently asked: “Am I covered for infrared thermography?” Or “Am I covered for radon testing?” Or “Am I covered if I perform an inspection for pests/termites?” If you’re covered through OREP and you’re a professional home inspector performing “professional services” as a home inspector, the answer to the above coverage questions is most likely yes.

OREP policies are tailored specifically for home inspectors, providing coverage for “Professional Services” that you might provide as a home inspector. Defining coverage in this way is commonplace for most (if not all) professional liability policies, also known as errors and omissions insurance (E&O).

It follows then that “professionals” should purchase professional liability (E&O) insurance specific to the services they provide. The good news for OREP home inspectors is that you have broad coverage for a variety of services and assignments that you might pursue. Most policies in the marketplace are broad, but always ask your agent if you have any questions—whether you are with OREP or not.

Here is an example of how “Professional Services” is defined in OREP’s primary home inspection policy:
“Professional home inspection services” means only the non-invasive visual examination of the ‘readily accessible’ installed systems and components of a building, as identified and agreed to in writing by the client and “insured” prior to the inspection process, performed for others for a fee, and for which a written home inspection report is generated.”

You can generally begin with the premise that most services you provide in your capacity as a home inspector of real estate are covered, unless it is specifically excluded in the policy. If you’re thinking, well then what’s excluded is pretty important: you’re right! When you get your policy, you should review the Exclusions section first—right after you make sure your name is spelled correctly!

For example, with the OREP flagship or primary program, there is no specific exclusion for termite/WDI, pool or spa inspections, carbon monoxide testing, lead paint inspections, radon testing, drone inspections, EIFS/stucco inspections, and more.

Mold NOT Excluded
One important difference in OREP’s policy is that the primary program does not exclude mold! You read that right, there is no mold exclusion in OREP’s policy; this can make a big difference if you are currently insured in a program that excludes mold. Mold and water damage claims are quite common with home inspectors. Please note that this is distinct from mold testing, which requires additional premium and training. An example might be missing a water leak, which causes mold damage and something the policy should respond to. This is different from testing for mold and making a mistake.

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In OREP’s policy, sub-limits apply to some coverage items, which means the maximum the insurance company will pay towards a specific type of claim may be capped at $100,000 or $250,000, even if your policy limits are $500,000, for example. (Ask your OREP agent for details.)

So what are some common exclusions? OREP’s policy (and most policies, for that matter) excludes asbestos claims, any operations that you perform under a different professional license (general contractor, appraiser, agent/broker, etc.), and any transactions where you also conduct repairs or construction on the same property that you inspect. And so on.

To summarize, your inspector E&O policy (even if you’re not with OREP) will likely start with a broad definition of “Professional Services” and then go on to list very specific exclusions to those professional services. You want a policy that affords broad coverage for a variety of services you might perform in your capacity as a professional home inspector, and that does not specifically exclude what you want covered.

Takeaways
1. Look for an E&O policy with a broad definition of Professional Services.
2. Read your policy—pay attention to what is excluded.
3. Ask your agent about coverage and exclusions if you have questions.

Check out OREP for broad coverage, competitive pricing and efficient, professional service. OREP has been serving home inspectors with their insurance and risk management needs for over 19 years. We specialize in home inspector coverage issues and provide free pre-claims assistance for our inspector insureds. Got questions about your policy’s coverage or how best to avoid claims? Give us a call at (888) 347-5273 or visit OREP.org to learn more.

About the Author

Isaac Peck is the Editor of Working RE magazine and the President of OREP, a leading provider of E&O insurance for appraisers, inspectors, and other real estate professionals in 50 states. He received his master’s degree in accounting at San Diego State University. Reach Isaac at isaac@orep.org or call (888) 347-5273. CA License #4116465.

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