In a world where litigation is the preferred method of resolving even the most minor conflicts, it should come as no surprise to real estate agents that they are increasingly finding themselves named as defendants in lawsuits wherein purchasers of residential real estate are claiming damages as the result of the alleged fraud and/or negligence of one or more of the participants in the transaction.
Aggrieved purchasers of residential real estate are operating in a target-rich environment and have a remarkable array of potentially responsible parties from which to seek financial redress for their claimed grievances. In lawsuit after lawsuit, one finds multiple defendants: the sellers, the sellers’ agent, the sellers’ agent’s broker, the buyers’ agent, the buyers’ agent’s broker, the home inspector, the pest inspector, and so on. The alleged grievances can include multiple counts, as well: fraud, negligence, breach of contract, etc.
Once a lawsuit has been filed and you have been named as a defendant, you can kiss your E&O deductible goodbye, even if you are blameless, which, in the overwhelming majority of instances, you are, because the overwhelming majority of these types of lawsuits is completely devoid of merit. The size of these complaints and the sheer number of their allegations guarantee it. No competent lawyer could possibly read and respond to the vastly overblown pleadings that normally characterize these types of lawsuits for anything close to the typical real estate agent’s E&O deductible.
Therefore, the best strategy is to avoid being named in the suit in the first place. Fortunately, there are a number of effective policies that, if followed, can sharply reduce and even eliminate your exposure to being named in a meritless lawsuit.
Lawsuits resulting from a residential real estate transaction almost always result from a feeling on the buyers’ part that they got less than they bargained for. After they moved into the property, they discovered that it was not all that it was cracked up to be. Sometimes, the alleged defects were present at the time of the home inspection but, for one reason or another, were not discovered during the home inspection. The fact that the alleged defects were not discovered by the home inspector does not automatically mean that the home inspector was negligent or that you were negligent for recommending the inspector -- in fact, far from it.
There could be a number of reasons why the alleged defect was not discovered at the inspection that fall well short of actionable negligence. The defect could be something that is not discovered because its inspection is simply not contemplated by the home inspection, such as a determination of the adequacy of any structural system or component, for example. Such a determination is outside the scope of a home inspection. Or it could be something that is not reported because it was concealed by furniture on the day of the inspection, or was located in an area that was inaccessible. Not infrequently, known defects are deliberately concealed by the sellers. And far more frequently than anyone would imagine, the alleged defect that is the subject of the buyers’ complaint was actually discovered by the home inspector and noted in the inspection report, but not acted upon by the buyers because they did not bother to read the inspection report.
Therefore, when selecting a home inspector for your client, you should bear uppermost in your mind that the home inspector is your first line of defense against a meritless negligence claim.
Top Ten Ways You Can Sharply Reduce Your Professional Liability Exposure:
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