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Stories From the Trenches: Interview With Attorney Geoff Binney

 by Isaac Peck, Publisher 

I spend a good part of my workdays at OREP speaking with home inspectors, pouring over claim documents and sharing risk management advice and information with our inspector insureds.

There are only a handful of attorneys who truly specialize in home inspector litigation and defense, so it was especially rewarding to sit down recently with someone who’s been in the trenches defending home inspectors day in and day out for 15 years.

Geoff Binney, managing partner at Woodlands, Texas-based Gauntt, Koen, Binney & Kidd LLP is an experienced trial attorney who’s built his practice around construction-defect litigation, first-party insurance defense work and home inspector claim defense cases.

His career path is an interesting one. After graduating from the U.S. Military Academy and serving in the Army, Binney became an FBI special agent in Houston, attending law school at night. Though he originally had no intention to practice law, once Binney began to litigate cases, he was drawn to those in which he could help people, similar to the work he did for the FBI. “I was investigating folks who had been injured or damaged in some way and trying to help,” Binney says.

As a practicing attorney, Binney got his first home inspector case around 2010. “I remember feeling like I really helped someone who needed help. They were good folks just trying to do the right thing and trying to make a business go,” he says. “I was able to help them continue doing that by defending them. It was a positive outcome, and I felt really good about myself working on that case.”

Since then, his home inspector case docket has increased substantially. “Today, I work for a number of different insurance companies who write coverage for home inspectors, and I also work directly for some home inspectors who need somebody who they can call,” notes Binney. “I’ve also gotten very involved in helping home inspectors in a pre-claims capacity, helping shut down claims before they turn into lawsuits.”

All told, Binney has been involved with more than 250 home inspection cases including pre-claims and litigation. In the following Q&A, he shares some valuable advice about inspector claims and risk management.

Question: Have you noticed an increase in claims against home inspectors now that the market has slowed down?

Geoff Binney: I feel like there has been an increase in claims against home inspectors, at least proportionally. Fewer transactions are occurring, but the level of claims has remained about the same. If you take into account that the market has slowed down and there are less transactions occurring, the percentage of claims occurring from those transactions has increased. If there are less transactions, then the net percentage is increasing.

Question: What are the most common home inspection claims you see?

Geoff Binney: By far, the most common claim I see is water-intrusion related, which includes roof leaks, stucco or window leaks or water penetration, as well as plumbing leaks. Oftentimes, a homebuyer moves in and, whether it’s immediately or sometimes years later, they notice something like a damp spot in a ceiling, some sort of rot or other indication that there’s a water issue going on. They often get a contractor or a roofer to come out and look at it, and that individual will often take the position that “of course” the home inspector should’ve reported the problem.

I’d say foundation issues take second place. After that, I see a smattering of claims related to HVAC, flooring, electrical, plumbing, drainage, pests and so on.

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

Geoff Binney: The vast majority of claims or lawsuits involving a home inspection are frivolous—with a caveat. I think the majority of these claims are more of a misunderstanding between the client/homeowner and the home inspector regarding what the home inspector’s duties are. While the claims seem frivolous to you, me, and the home inspector because we know what the duties and rules are of the inspection profession, they aren’t frivolous to the homeowner. Most of them believe that something is wrong with their house and that the home inspector should’ve found it.

I spend a great deal of time in litigation educating the claimant and/or the plaintiff lawyer about what an inspector’s duties are. The vast majority of claims that I see do not involve a mistake made by a home inspector. It’s usually more along the lines of there’s something wrong with the house, but the issue wasn’t within the scope of the duties to inspect for or wasn’t present or visible on the date of the inspection.

The buyer/homeowner and to some extent the attorneys who represent them often don’t understand at the outset what the home inspector’s role really was. At many depositions, I’ve asked what they thought the home inspector’s job was, and the most common answer I get is: “I thought they were going to tell me everything that was wrong with the house.” That’s an impossible and unrealistic expectation of an engineer or a specialist, let alone a home inspector generalist.

My job then becomes to educate that person. Whereas I am a home inspector defense lawyer and deal with these types of cases all the time, the vast majority of plaintiff attorneys aren’t very familiar with these types of cases. Typically, they don’t sue home inspectors as part of their career, so I need to educate them on what the industry standards are.

The challenge is that even after I explain to them that what they’re complaining about falls outside the scope of the home inspection or that the issue wasn’t visible at the time of the inspection, it’s often really difficult to get the inspector out of litigation once they’re in it. That’s why the pre-claims process is so important because we can shut down the claims before they make it to litigation.

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 Question: As the lead attorney managing pre-claims defense for OREP members, you’ve responded to more than 50 demand letters in the last two years. Is there anything that sticks out to you or that you’ve learned from that work so far?

Geoff Binney: The thing that sticks out the most is the success rate that we’ve had. I don’t think I anticipated that somewhere in the 95 to 97 percent range of claimants, including those in which the claimants were already represented by an attorney, would just go away after we respond to them.

Other than that, I’d say the experience has just reinforced what we just discussed. So many people have a misperception of what a home inspector does and what they’re responsible for. And because of that misunderstanding, having pre-claims support is really important. If a home inspector isn’t with an insurance carrier that has a pre-claims process, the carrier will sometimes move right into settlement discussions, or the inspector might try to handle the problem on their own.

The problem with an inspector trying to resolve the situation on their own is that it’s personal to them. If there’s a phone call between a client and a home inspector and the client is accusing the inspector of doing a poor job, that is going to make the inspector defensive, raise their voice and get emotional. Once that happens, the conversation is not productive.

So, it’s important to have somebody step in that is not involved in the transaction that can objectively review the report, the evidence, the claim that’s being made, the alleged damages, and so on.

I would recommend to any home inspector who doesn’t have a pre-claims process ready to go right now to contact their carrier and find out what happens if a claim is made. If no plan is in place, they need an attorney they can call when a situation arises. Without a pre-claims process, that claim is going to turn into litigation very quickly. That happens most of the time. It’s critical for a home inspector to have a pre-claims process already laid out for them that they can take advantage of.

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

Geoff Binney: Yes, especially as it relates to a real estate transaction. If a homeowner perceives something is wrong with the house, the first person they’re going to look at is the home inspector. They’re thinking: “That’s why I hired you. You were supposed to tell me everything that is wrong with the house.”

The next most likely target would be the sellers. If something is wrong with the house, surely they knew about it. They might’ve concealed it in some way or painted over it. Lower on the list are Realtors and appraisers. Anybody who stepped foot in the house becomes a potential target.

Another consideration is that the buyers/new homeowners likely had a positive relationship with their Realtor. They know that person, spent a lot of time with them and looked at a lot of houses together. The Realtor might’ve sat with them at closing. So, buyers have a real reluctance to sue their own Realtor, whereas they might not even know the home inspector. If they met them, it was for a very brief period. Thus, there’s more inclination to sue that person than someone they were friends with.

Question: What are the two or three top ways a home inspector can avoid claims and defend themselves?

Geoff Binney: The No. 1 way to protect yourself as a home inspector is to know your trade, be diligent and have good customer service. Be communicative with the client, listen to their concerns, do a good job and be open-minded.

In cases where the home inspector does potentially have liability, typically they are in a hurry. They almost always do a good job, but they didn’t in this case. I’ve also seen cases where they did a great job, but they’re just not great at customer service with the homeowner. In some cases, the home inspector doesn’t handle it right, is rude to the client when they raise an issue, and chooses to ignore the complaint.

Secondly, in terms of avoiding litigation, it’s absolutely essential to have a good, written and signed inspection agreement for every single inspection that you do. Your inspection agreement needs to have the proper clauses, be defensible, written and signed. A strong, signed pre-inspection agreement is almost as good as a get-out-of-jail-free card. Even in the unlikely event the home inspector does make an error, it can be very helpful in removing the inspector from the litigation process.

No matter how good of a job you did, if you don’t have a signed pre-inspection agreement, it’s very difficult to get you out of the litigation process. Most inspectors today get signed agreements, but I occasionally encounter an inspector who tells me: “I’ve been doing this for 30 years. I’ve never had a written contract, and I’m not about to start now.” I have cases on my docket now in which there is no signed agreement.

The reason this matters is to get the home inspector out of the lawsuit as quickly as possible. If the agreement is a good one, there are clauses that will give me an opportunity to ask the judge to enforce them, which would lead to an automatic dismissal for the client. If you don’t have them, the judge is not going to let you out.

Most litigation can drag on for two years or more. It might need to go to a jury, there will be discovery and depositions, and it costs a lot of time and money and frustration. If there is no written inspection agreement, there are very few mechanisms I can employ to get the home inspector dismissed—unless the case against them is obviously frivolous.

The third thing is having a pre-claims process—access to some mechanism to help an inspector resolve issues when they pop up. Upset clients and demands are going to pop up for home inspectors. It’s inevitable.

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

Geoff Binney: My question to that person: Wouldn’t you agree with me that today’s society is more litigious than it was five, 10 or 20 years ago? Because everything is becoming more litigious and people have access to lawyers more than they ever have, it’s truly just a matter of time before a home inspector faces a claim.

Just because you do a great job as a home inspector doesn’t mean you’re never going to face a claim. You don’t have to screw up to get sued. You could do a perfect inspection and write a perfect report, but if you get the wrong claimant, it’s going to be expensive just to defend that litigation—especially if you don’t have a signed agreement. There are a lot of litigious people out there.

Question: Do you have specific clauses you recommend home inspectors use?

Geoff Binney: The most important clause to have in your agreement is the Limitation of Liability clause. There are a few states where it’s not allowed, and it has to be conspicuous—meaning in bold, underlined or stand out in some way—for it to be enforceable. However, the Limitation of Liability clause allows me to turn to the plaintiff or the plaintiff’s attorney and say, “We’re not liable here. We’ll fight this all day long, but even if we’re wrong, the most you can ever get is $500 to $1,000, or whatever the amount the inspection fee is.” It takes a lot of the wind out of the sails for the claimant and their attorney.

The second clause is the attorney’s fees provision. In litigation, most defendants do not have a mechanism to recover their attorney’s fees, even if they win. That means the plaintiff has no skin in the game. If they have a lawyer working on a contingency basis, or a family friend, or maybe they are an attorney themselves, it helps tremendously to have an attorney’s fees provision in the contract. This clause should just say that the prevailing party in any dispute can recover their attorney’s fees.

So, instead of losing and getting zero dollars being the worst case scenario, the worst case is having to pay $25,000 in attorney fees to the home inspector. In most states, if not all, if a plaintiff sues for breach of contract or negligence, attorney’s fees are recoverable for the plaintiff. Really, the only person who needs protection is the home inspector, so that’s why we make it a dual attorney’s fees clause. It’s more enforceable that way.

Another important clause is the indemnification provision. What that means is you would think the person who signed the contract is the person who ends up suing the home inspector. For example, a wife or spouse may set up the inspection and sign the agreement, but when litigation comes, the husband might be the plaintiff. When I point out there is a contract with an attorney’s fees provision, sometimes the plaintiff’s attorney will try to get around that by saying, “Well, the husband didn’t sign that.” An indemnification clause allows me to go after the wife for all the attorney’s fees that could’ve occurred.

Lastly, I like to see a notice provision. This basically mandates a timeline that a claimant would have to follow if there’s an issue that arises in the house. If the homeowner finds something wrong, they have to let us know about it within a reasonable amount of time. This alleviates two problems. One, if something happens 18 months after the inspection, this gives you the opportunity to inspect. Two, often there’s no communication between the plaintiff and inspector. The homeowner fixes the issue, and the defect is gone. There’s no opportunity for us to say that was there or wasn’t there at the time of inspection. It makes it difficult to defend. We’ve used this a lot in our pre-claim response letters as well as in litigation to try to put some pressure on them that they failed to meet those timelines.

Conclusion
While state law differs with respect to what is and is not enforceable in a home inspector’s pre-inspection agreement (see Sharpening Your Pre-Inspection Agreement on WorkingRE.com), many of the tips that Binney shares above can be used in some form by home inspectors nationwide.

When faced with a claim or potential claim, inspectors are advised to seek legal counsel with experience defending home inspectors. If you currently carry insurance, ensure your carrier selects counsel familiar with home inspectors. That will be the case if you’re using a program written exclusively for inspectors, like OREP’s. The difference between the defense you receive can be substantial. With his extensive inspector claim experience, Binney is on the roster of experienced lawyers representing those insured with OREP’s primary carrier in Texas. OREP has served inspectors with comprehensive E&O insurance, risk management and pre-claims assistance for over 22 years.

About the Author
Isaac Peck is the Publisher of Working RE magazine and the Senior Broker and President of OREP.org, a leading provider of E&O insurance for savvy professionals in 49 states and DC. Over 13,000 professionals trust OREP for their E&O. Isaac received his master’s degree in accounting at San Diego State University. Reach Isaac at isaac@orep.org or (888) 347-5273. CA License #4116465.

OREP Insurance Services, LLC. Calif. License #0K99465