WHO OWNS THE HOME INSPECTION REPORT? WHAT IS ARBITRATION? ALL THIS AND MORE ON OUR INTERVIEW WITH JOE FERRY HIMSELF – “THE HOME INSPECTOR LAWYER”!
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Ian R: Welcome back to Inspector Toolbelt. I am super excited about our show today, as my guest here today. Just put it Let’s light this candle. We have Joe Ferry the home inspector lawyer himself. Joe, thank you for being on today.
Joe Ferry: I’m happy to be here, Ian.
Ian R: Yeah, thanks. We were just chatting before we hopped onto this podcast and just talking about a few things. If you don’t know who Joe Ferry is, first of all, what rock have you been under? You should really know who Joe Ferry is. He is the home inspector lawyer, you can go to Joeferry.com and find out a lot about him. He also sits on the board of directors for InterNACHI. I have known about and known Joe, my entire inspection career, all three of my companies have used him and still use him to one extent or another. So I’m just excited to have you here, Joe.
Joe Ferry: I’m, as excited as you are, Ian, because I think this is a tremendous format. And it’s my whole existence. These days, my whole professional existence is about, you know, educating home inspectors and helping them out.
Ian R: Yeah, and that’s what I really appreciate about you, for instance, claims Academy, one of the services that you offer, on Joeferry.com is free. Home inspectors can just go in there and learn about these legal matters to help them out with their business, which is important because we’re inspectors, we’re not attorneys, we don’t always know this stuff. And you offer that information free, which is incredible.
Joe Ferry: Yeah, and I’ve got you know, I’ve been doing this for almost 20 years now and got a lot of I’ve probably responded to 3500 to 4000 different home inspection claims, and in less than 1% of them have any validity. It’s really quite remarkable.
Ian R: It really is. And you would know those statistics better than anyone. And matter of fact, I’ll throw ourselves in there. We have used claims intercept for many, many years. And you also have a service for inspection agreement audit. We actually had you audit an agreement many years ago, before you had that service. And it was fantastic. But you actually squash two claims for us. One was a seller who decided that they did not like our inspection. So they wanted to sue us. You, you kick that one right out the door. We love that one. Another one is a seller and an engineer reported us to New York State. And you helped us craft the letter back to New York State. And interestingly, that engineer got in trouble for him interfering with our inspection from the letter that you helped us craft. We didn’t want him to get in trouble. But New York State said do not interfere with another profession like this, you are out of line.
Joe Ferry: Well, that’s awesome!
Ian R: Yeah. We got an official letter back and the agent shared with us what happened afterwards too, you know, you did a fantastic job with that.
Joe Ferry: That’s great to hear.
Ian R: Yeah, a lot of respect over here.
Joe Ferry: Love hearing that. Yes. Well, New York State is actually very good for home inspectors from a legal standpoint. There’s actually a lower court ruling that, there’s no cause of action against home inspectors because it was preempted by the New York State home inspectors Act. Now, that’s only a lower court ruling. And I use it all the time. So seems to get a lot of respect from the other attorneys. So New York is great. And I’m sure we’re talking to people in other states. There’s other states, Texas is wonderful for home inspectors. And any state that enforces limitation, liability agreements. limitation, liability clauses is great for inspectors, because you know it takes the wind out of the sails of plaintiffs’ attorneys, if they understand that there’s nothing to be gained from pursuing a claim. Not that these claims have anything worth pursuing to begin with. But that really does seem to take the wind out of their sails.
Ian R: Yeah, and I remember you mentioned that before about New York. I didn’t know about Texas. But remember, you also liked New York, too, because it’s one of the places and we’ll talk about this later, but arbitration clauses where you can have an arbitration clause and limitation of liability as well. I remember you saying that.
Joe Ferry: That’s correct. Yeah. that’s correct.
Ian R: See, I listened Joe I checked the Claims Academy. So we actually have some questions that guys have been asking about. And it’s interesting, I see these guys, these inspectors asking these questions, and then everybody just throwing out information online of what they think. But, you know, it doesn’t mean it’s real, legal information. So a couple of the questions we’re gonna ask who owns the report? That’s a big one that comes up all the time. Should I have an arbitration clause or should I take things to court? Can I put a lien on a property after someone doesn’t pay for the inspection? What can I do about fraudulent reviews from sellers or other inspectors? And ultimately, what should I do when I get a demand letter from an attorney? So I’d love to hear a couple of your thoughts on this, especially the first one.
Joe Ferry: Who owns a report?
Ian R: Yeah, who owns the report?
Joe Ferry: Well, there are a number of inspectors have copyrighted their reports and it’s pretty easy to copyright something you just put copyright 2022 and whoever the inspector’s name is, I don’t run into very many instances where, or any at all actually where that is of any importance. Home inspectors, by enlarge, are very good at what they do, I mean, even the new guys. I remember when I was a new attorney, you know, I would take forever on a case because I was worried. And I think a lot of these new inspectors, they do the same thing. You know, they’re worried about making a mistake. So they’re super careful. In the 3500 plus claims that I’ve responded to, it’s never been an instance, where ownership of the report was material or even came up. I don’t think that’s very important, actually.
Ian R: Yeah, I guess the question comes up a lot, because the scenario that I see the most of, is an inspector says, hey, the buyer’s agent gave my report to the seller’s agent. Now I have a new buyer of a property that I inspected that my client walked away from, and they’re calling me about the report. And it’s kind of almost a “How dare they take my report? I own it.”
Joe Ferry: Yeah, well, that that subsequent buyer has no claim against the original home inspector, because the original home inspector does not owe a duty to that subsequent buyer, and that subsequent buyer has no basis for relying on a home inspection that was conducted by someone else. So generally speaking, as you know, from a negligence standpoint, in negligence, you have to prove four things, you have to prove that there was a duty owed to the plaintiff. Secondly, you have to prove that that duty was breached somehow. And thirdly, you got to prove that the breach of the duty was the cause of damages. So you need duty, breach causation and damages. And you almost never have causation. In these cases, like if someone, you do an inspection for someone, and six months later, they discovered there’s a leak in the roof, you didn’t put the leak there. And so your inspection did not cause that leak, what it might have caused is, if you actually missed that leak, it might cause the person to pay more for that house than he should have paid. And that’s basically it. So the only thing they will be entitled to in that instance, would be to have the roof leak repaired, you know, a couple 100 bucks. A lot of people think that if there’s a leak in the roof, you get a new roof. That’s not the case at all. All you’re entitled to was to have the roof leak repaired, you know, something that costs a couple of $100. These lawyers on the other end and these claimants, they think these claims are worth more, a lot more than they actually are.
Ian R: Yeah, and it’s interesting that you bring that up. I’ve always viewed somebody distributing my home inspection report as free advertising. You know, if I wrote a great report, I want everybody, I mean everybody in the universe to have my report: agent’s buyers, 30 buyers, agents used to give them away at a pre-listing. And when I do a pre-listing inspection at an open house, they’d have them sitting there on a table.
Joe Ferry: That’s a good point. I actually had a home inspector’s client, call me up, and he didn’t have any complaint with his home inspector, other than he didn’t think the report was as good as the report, as the prior inspector had done. On his house for the previous buyer. He was selling his house. His buyer had a report done by a home inspector and the seller loved that report, but hired a different home inspector to inspect the house he was buying. And he thought that report wasn’t up to the standards of the previous report. So it was very interesting. So I think you’re right, Ian, that there’s nothing to lose from having someone look at your work product.
Ian R: Right, exactly. And so going back to that question, I agree with you, I think it’s a great advertising piece. And there’s really no liability in them having it.
Joe Ferry: There isn’t.
Ian R: But now if we’re a home inspector, though, and we say, well, we want to own our report. So now Joe said, I can copyright it. So how do we go about copywriting a report if we’re really just worried about that, and we just want to make sure we own it? Is it just a matter of saying that we copyright it in the agreement?
Joe Ferry: Now, it’s just a matter of writing. Copyright 2022. And then the inspector’s name. You can put that copyright symbol in there.
Ian R: Right in the report?
Joe Ferry: Yeah. But I don’t think there’s any real upside to copywriting your report, I think you’re better off, as you pointed out in to let the world see it. You know, if you’re proud of your work product. Let everybody see it.
Ian R: Yeah, exactly. And that’s it. That’s what we produce as home inspectors. It’s our report.
Joe Ferry: That’s your product. Right!
Ian R: Yeah. So if we didn’t copyright the report, who technically owns it then? would it be the purchaser of the home who hired us to inspect?
Joe Ferry: Well, I think so. I think, yeah, ownership. You know, I’m reading a book now on William F. Buckley, Jr. and who owns that book? You know, I own the book, you know, I bought the book. So I own that book. I can’t start using, pulling paragraphs out of there and putting them in my letters, Yeah. Who owns it? The person that purchased it owns it. I would say
Ian R: Am I using the correct legal term, when I say it works for hire, like if you hired an employee, and they produce something for your company. And now that belongs to your company, it doesn’t belong to the person who physically wrote it. Is it kind of the same thing?
Joe Ferry: That’s kind of the same thing? Yeah.
Ian R: It’s “works for hire” unless you’re going to copyright it.
Joe Ferry: That’s right.
Ian R: All right, I tell you what, that was the most clear answer to that question I’ve ever heard. There was a guy who posted a video, and it was very long and wasn’t as concise. So thank you. Thank you very much. That was a nice, easy way to go about that.
Joe Ferry: But I think the takeaway there, is what you said. Yeah. Let people see what you do.
Ian R: Yeah. 100% agree. I’ve gotten so much work over the years from people who saw a past report. It was awesome. Alright, so this one is a little bit of a question that I think there’s some back and forth with a lot of people in the industry arbitration clauses. First of all, what is an arbitration clause? And in your opinion, do you think we should have it in our agreements or leave it out?
Joe Ferry: Of course, there’s two schools of thought on this, and neither one of them is completely right, or completely wrong. The reason I favor arbitration clauses is because quite a number of cases are as small claims court level and small claims court level, you can defend yourself, even if you’re a corporation in most jurisdictions. So we have a tutorial that we give out the people who have to go to small claims court. And you should always clear it with your insurance company, that they’ll allow you to go defend yourself. And my experience is that most of them well, and the thing about an arbitration clause in small claims court is that small claims courts, and courts in general, are limited in their jurisdiction over the subject matter. They’re unlimited in their jurisdiction over the person. So if you inspected a property in Tarrytown, New York, you would be liable to be brought into court in Tarrytown so they would have jurisdiction over your person. But if you have an arbitration clause that says that any dispute has to be resolved in arbitration, they don’t have what is known as subject matter jurisdiction. They don’t have jurisdiction over the subject matter of that claim. So in our small claims tutorial, our clients are batting 1000 in small claims court based on this if they have a arbitration clause. When you get into court, you say to the judge, Your Honor, I think I can make a motion that will shorten this proceeding. And they’ll generally say, Okay, what’s your motion? And all you say is, Your Honor The plaintiff and I, this dispute is governed by a contract that requires any disputes to be brought in arbitration. And what the judge will do is ask you for a copy of the contract, and of course, you’ll have one, and you’ll have one for the plaintiff as well. And you’ll have that clause highlighted. And you give it to the judge. And he’ll say to the plaintiff, “Sir is this your signature on this contract.” And they will agree that it is their signature. And the judge will say, “Well, you have to go to arbitration, we don’t have jurisdiction over this matter, because you agree to arbitration.” And our clients are batting 1000 following that procedure. Now, every now and then the judge will go well, okay, let’s proceed anyway, and in that case, you just go in and say, well, this defect was concealed as defects outside of the scope of the inspection. Or if you look on page 30 of our report, you’ll see that we found that defect and told him, told the plaintiff to have that reviewed before, further evaluated before closing, or here’s a photograph of that, you know, fountain working during the inspection, and so forth. So that’s really the reason I favor arbitration clauses. Another reason is, these home inspection claims that reach court are always have multiple defendants in it. It’s always the seller, the real estate agent, and the home inspector. And if the home inspectors a corporation, the home inspectors Corporation, none of these other defendants is going to have an arbitration clause with the plaintiff. Generally, lawyers don’t want to fight in two different venues. So you know, they’re more susceptible to letting you out because you don’t have a liability to begin with. In most instances. I’ve often called up plaintiff’s attorneys and told them that they don’t really want the home inspector in the case, what they want is the home inspector, testifying for your mutual client. If this is something that was concealed, you had a home inspector can testify on your client’s behalf for your mutual clients behalf, that the defect was concealed. And sometimes these lawyers are happy to have that cooperation settled. That’s the reason I favor. You can go either way, if you want to. I’m not married to the arbitration clause, but I do favor.
Ian R: Yeah, and I remember a while back, I think in one of your presentations, you also talked about meritless claims are easy to file for in small claims court, these places 50 60 bucks, and now you file a claim.
Joe Ferry: What’s the other thing?
Ian R: Whereas arbitration, you actually have to be sure that you’re right, that this home inspector missed something because arbitration is not cheap. It’s like 1000 to $2,000 a day, isn’t it?
Joe Ferry: It’s very expensive, because the arbitrators are generally attorneys, and these attorney fees are getting way, way out of control. I am just generally shocked by what attorneys charge for hourly rates in major cities. So yeah, you’re going to learn that phase pretty quickly in arbitration. And the thing about arbitration is if your agreement calls for arbitration and should also call for the plaintiff to pay the arbitration cost, the initial cost anyway, they’re about $600, just to get started. So someone’s got to have a pretty good claim before they’re going to spend $600.
Ian R: Yeah, that makes a lot of sense. And thank you for putting some context on that, too. So the third question we have, and this one is kind of an interesting one. I kind of wonder about this myself, I’ve never had to go through this. But can I put a lien on a property after someone doesn’t pay for the inspection?
Joe Ferry: No, you can’t. Because first of all, your client doesn’t own that property. It’s held by somebody else, by the seller, so you really be getting into trouble if you did do that. Because that’s a cloud on the title and they’re going to get tremendous pushback.
Ian R: Yeah, I can’t imagine that would be a pretty situation to be in.
Joe Ferry: No it would not.
Ian R: So what kind of avenue can an inspector go to if somebody doesn’t pay for the inspection?
Joe Ferry: Well, yeah. First of all, you should never not get paid twice. You have to, after the first time you get stiffed, he should really make a practice of being paid before the inspection. This I notice a lot of places that there’s a tradition of paying at closing. But of course, not every inspection results in a closing. So I think it’s a good idea to have a business practice where you absolutely will not go out, you won’t leave the house until, you know, you’ve been paid. And, you know, today with, you know, so many, so many products out there. So many software products, where people can pay online, can sign the inspection online inspection agreement online. I know he said, there’s no excuse for having to go to small claims court to be paid. And that’s really your only avenue. Your other avenue could possibly be filing a private criminal complaint for theft of services. But you’re better off, I tell you what. If you’re charging $500 or $400, for an inspection, how much time do you want to waste collecting $500? So you’re better off getting paid ahead of time. And I actually don’t get very many, I don’t get very many calls from inspectors about that. I really don’t.
Ian R: Yeah, I see this question a lot. There’s been very few times actually, technically only once where somebody didn’t finally pay up. But this is probably a good plug, spot for software, just what Joe said there. You can get your agreement signed online, get paid online, all that before you show up with Inspector Toolbelt great features to have even on our free version, you can have that. But like Joe said, sometimes it’s just cutting your losses and moving on. And I think your expression there, Joe of “You don’t want to get not paid twice” So if you haven’t been paid, fix that situation. And now it’s just an expensive lesson. Yeah,
Joe Ferry: That’s right. And while we’re on that subject, I want to talk a little bit about home inspectors being too prone to give money back when they haven’t done anything wrong. You know, I get a lot of, I’ve seen a lot of inspectors that are very, very quick to refund an inspection fee, whenever really, you know, thing was outside the scope of the inspection, or it was not visible, you know, or it was disclaimed. You disclaimed it and you told him to have it further evaluated. You did nothing wrong. There’s no reason not to get paid. There’s no reason to return that fee.
Ian R: Yeah, it’s not a good overall business practice to give back money when the services were already rendered.
Joe Ferry: Yeah, I think it’s a bad habit to develop, because not only are you losing money on a fairly regular basis, if that’s your MO, but in a lot of instances, it’s an entry-level drug for these claimants. It’s like, Wow, maybe this guy did more than maybe he really, remembered other things he missed, you know, so, and then the cardinal sin is giving money back without getting a release. Don’t ever do that.
Ian R: Yeah, that’s scary. That’s a scary thought right there.
Joe Ferry: Well, the other thing is, sometimes when you go give a guy the money back and ask a release, they get their backup, you know, so you’re really better off just sticking to your guns and saying, I just had a case out in California. It’s kind of interesting. Los Angeles, never rains in Southern California. Remember that? Remember that song? Well, about a month ago, they had 100 year store. It was isolated in basically in LA County was isolated. 10 inches of rain fell in 24 hours, 10 inches of rain. So the inspector had done the inspection back in September. And the guy was complaining because water was pooling in his yard. Imagine that. So I told the inspector I said look. First of all, we don’t do hydrological inspections. That’s number one. But number two, come on, 10 inches of rain. I mean, be reasonable, tell the guy. I never heard back from the inspector. So I assumed that that went away. I mean, but that’s how crazy people are. You know, they think you’re going to be responsible for the rest of their lives for anything that goes wrong in the house. It’s really quite remarkable to me.
Ian R: It is to me too, I mean just as a home inspector, I’ve had people call back. One guy was six months after he closed. “My dishwasher doesn’t work.” And my question was, I said it nicely. “Did you not wash dishes for six months?” He goes, “No, it worked fine. Right up until now.” Welcome to homeownership. He wanted money back. I’m like, yeah, no, I’m good.
Joe Ferry: Well, personal record is 12 years for a roof leak.
Ian R: Oh, my goodness.
Joe Ferry: Yeah. It did not rain for 12 years? Yeah.
Ian R: It’s a weird mentality that people go
Joe Ferry: It really is. Well, it’s not even confined to the houses either, you know, a friend of mine was just in a minor auto accident about two years ago. And the striking vehicle, the guy in the striking vehicle, the guy that hit him sued. And his insurance company gave the guy $47,000. He, of course, was outraged. You know. I don’t know how that’s possible. These insurance companies say they’re so risk-averse. I guess they didn’t want to try a case anymore. That is very odd.
Ian R: But that’s unfortunately, how the world runs nowadays.
Joe Ferry: Yeah. And that’s why premiums go up because we got morons running these insurance companies.
Ian R: Yeah. And that’s, that’s, uh, maybe we could have you on the show another time. We would love to talk about insurance companies paying out and premiums and stuff like that, because you’ve had some interesting thoughts on that in the past too, that I’d love to talk to you about. But the fourth question that we wanted to ask you about a lot of home inspectors asked what can they do about fraudulent reviews from sellers or other inspectors? And I gotta tell you, I have seen this so much. I have seen other inspectors get all their friends to, unfortunately. It’s a sad thing. We’re a good, honorable industry. But once in a while that’s going to happen. Somebody is a little cutthroat doesn’t like you, I had one guy he had like 7, 8, 9, every day, more reviews added on from a competitor. Sellers. I’ve had that happen. sellers have left me bad reviews, “that hole on my roof was meant to be there. That’s how I filled up my bucket in my head”, that kind of thing. What can we do about that?
Joe Ferry: Well, I think, unfortunately, a lot of the times these bad reviews don’t have any name attached to that, you know, you suspect it’s, you know, we suspect it’s a seller. Or you suspected it’s a competitor. But there’s no one to go after. Now, I’ve had probably over the years, I probably have had about 15 or 20 people who actually went and put up bad reviews on people. I remember one a couple of years ago, let’s say it was in Philadelphia, and the guy put up this terrible review. And the thing of it was that the inspector had pointed everything that he was complaining about pointed out to him, you know, So I wrote that guy a really firm letter, to the extent that if that review was not removed, there would be real serious consequences. And the guy removed it almost immediately. And the thing is you really do have a hammer, Because that’s defamation. If you’re a home inspector and someone goes online, and says all these terrible things about your workmanship, you know, about your abilities, and they’re not true. Well, you have a defamation claim against that person, if the person is identifiable. And I said, I’ve done this about 15 times, maybe possibly 20 times in the last 20 years. So I don’t have a lot of experience at it. Man, that’s also indicative about how seldom it really comes up, at least in my experience. But I’m batting 1000 at getting people to take those things down. You know, but it’s too small a sample as far as I’m concerned, you know, to make any, you know, extrapolate any theories about it, but it’s a really powerful thing, the threat of a defamation lawsuit. And here’s the reason why in defamation per se, which defamation per se is things against your personal morality, you know if they say this person’s a rapist and you’re not, or this doctor is a quack, things like that. That’s called defamation per se. And thinking about defamation per se, that makes it the best of all ports. According to the late attorney in Philadelphia, after whom my law school is named after he gave that $25 million. He said that’s the best port that there is, because you don’t have to prove damages. In other words, you don’t have to say, Hey, I lost 15 inspections, because you put that up there. And some of these and juries throughout the nation, throughout the length and breadth of this nation, have absolutely no problem coming back with multimillion-dollar verdicts against defendants in those cases. And that’s something I always point out. When I’m writing a letter like that. I point out to them, Look, you’re in Pennsylvania, this jury returned $8 million verdict against somebody in a defamation case, and those verdicts are out there. You can you can search Google and put defamation per se damages, New York State, and you’ll get returns showing spectacular damage awards. I mean, really huge. There was one up in New Hampshire, this is really egregious. This was a guy who defamed people on billboards. I probably was vertical is about $40 million.
Ian R: Oh, my goodness, yeah. Somebody goes that far, then. Yeah, they’re digging their own hole.
Joe Ferry: Well, the thing of it is you get a $40 million verdict against me. You know, okay. I’m never going to be able to borrow money again. But you’re not getting 40 million, you know, I’ll have 40 million, but this defended did have it. So that was pretty sweet for the plaintiffs in that case.
Ian R: And I think I’m going to go out on a limb here too, because I remember a discussion that you had, and I want to say it’s Barbra Streisand that you use as an example, but is it the Barbra Streisand effect, I think you called it?
Joe Ferry: The Barbra Streisand effect. Yeah.
Ian R: Yeah. Tell us about, like we may think, Okay, well, I know this seller, I can identify her. But what bearing does the Barbara Streisand effect maybe have on it?
Joe Ferry: Well, the Barbara Streisand effect, Barbra Streisand has this spectacular home on the Pacific Ocean. And many years ago, the NOAA National Oceanic and aeronautical Association, I think, a government operation contracted engaged a photographer to fly up the California coastline, and take photographs of the coastline in order to have a starting place for subsequent erosion. They could walk, five years later than photograph the same things and see what the differences were. Well, Barbra Streisand took exception to this fellow putting these photographs on his on his website. And she asked him to take them down, and he wouldn’t take them down because that was part of his obligation to the NOAA was to keep them up there. And the deal was that prior to her filing, the lawsuit, the photograph of her home had been downloaded. I’m going to say maybe 70 times in the six weeks after she filed the lawsuit, because when you file a lawsuit, you know, TMZ goes in and sees if there’s any celebrities that are filing lawsuits. So, you know, they went in, of course, they publicize that she was filing this lawsuit for this reason, and in six weeks subsequent to her filing a lawsuit. It was down to something like 180,000 times. So the point of the Streisand effect is that sometimes when you call attention to stuff, in other words, if you, I always counsel inspectors not to respond online to these defamations. Because sometimes a guy will double down. And then they call attention, they call attention to that particular bad review. And of course, these sites, Yelp, and Google, and Angie’s List and Better Business Bureau, that is their stock in trade. That’s what they deal it. So they pump those things up to the top. So you’re better off. You know, if you don’t want to go after the guy in court, you’re better off oftentimes, just ignoring it. Because people will have seven or 18 or 19 good reviews that will dwarf that. That bad review.
Ian R: Yeah. And that’s, and that’s a good point. Like when I went to a restaurant recently, it had 4.8 stars. Here, they had two reviews that said they wouldn’t let their dog eat there. Basically, I didn’t listen to them, because there’s always going to be that one or two guys that you really can’t make happy. And they just buried it in good reviews, great place to eat, and everybody moved on. So that’s great advice. We don’t want to draw too much attention to it.
Joe Ferry: Yeah. You don’t want to draw too much attention to it. And you really want to get along with your life too. That’s not to say that these things don’t eat you up for a week or so. You know, it’s human nature. You know, you’re going to be upset by something like that. But you’re often better off just not doing anything. You’re a good inspector, you know, you’ve been in business for X number of years done 1000s of inspections. You’re not going to please everybody, every time.
Ian R: Yeah, a matter of fact, as inspectors, we walk away from most transactions with at least one person not liking us. So I don’t want to keep it too long, Joe, because you’ve been more than generous with your time. And, and I’m loving this discussion. But I wanted to get your answer to that last question. What should we do if we get a demand letter from an attorney? Because I think that’s the most common thing that we worry about. A friend of mine, actually, who used to work for one of my inspection companies and went off and started his own. He recently got a demand letter. I looked at it, and I didn’t give legal advice, and I go, so. Yeah, no. So what do we do?
Joe Ferry: Well, if you get a demand letter, generally these lawyers, they think these cases are worth a lot more than they actually are. And my clients, what they do when they get a demand letter, is they send it to me. And I look, I will respond to an attorney or just a layperson, a lay claimant, I’ll respond to that with chapter and verse on why their claim is invalid. You know, it’s because it’s outside the scope of the inspection. Because it was concealed at the time of the inspection. Because it was disclaimed. At the time of the inspection, or the crawlspace was, you couldn’t get into it, it was on a 10-inch opening. So you disclaimed the anything having to do with the crawlspace. Or it was something you found, you’d be surprised how oftentimes, people are complaining about things that they were told about. Or finally, it’s something that was working at the time of the inspection. You’d be surprised by that, too. You know, you get a claim for something with the water flow. And then you look in your report, and there’s a photograph, or sometimes even a video of the faucet running, you know, the shower running, things of that nature. So you know, we weren’t negligent, that’s the first line of defense. And then oftentimes, yeah, these people don’t read these reports. Hey, we told you about that roof. Did you have it evaluated like we asked you to? “Well, no, I didn’t.” Okay, well, not only were we not negligent, you were negligent. You know, you were contributorily negligent. And that’s a complete defense in most states, and in every state, it’s a complete defense. Or even if we weren’t negligent, which we weren’t and even if you weren’t negligent, but you were you don’t have any damages. All right, your roof’s leaking. You don’t get a new roof; you get the leak fixed. And by the way, also, you know, you can’t bring a negligence claim because of the economic loss doctor. Economic loss doctrine basically says that, you know, unless there’s property damage caused by the tortfeasor, unless that was caused, which I said earlier in this podcast, that you don’t cause these leaks, you know, the inspection doesn’t cause the leak, unless it was caused by the inspection, or at least was bodily injury caused by the Inspector. That’s economic loss. And in a lot of states, pure economic loss, is not recoverable in tort. So you know, you’re, you’re out of luck there. Oh, and by the way, even if you weren’t negligent, which you are, and even if you had damages, which you don’t have, and even if the economic loss doctrine didn’t apply, which it does, we have an agreement that says, any loss is limited to the amount of the inspection fee. Well, an attorney gets that letter. Now he’s really like, holy smokes, I didn’t know any of this, which they don’t, they think that reclaims auto accident. You know, it’s not, it’s, you know, the home inspection is completely different from an auto accident. So they generally go away, and lawyers go away faster to laypeople, because they don’t want to waste our time on a case that doesn’t have any value to it. And then what happens then after I write the letter, then you notify your insurance carrier and the insurance carriers are generally delighted at that I have responded because what they do then is they put a 45-day pending on that claim. And then if I haven’t heard from the claimant, or if the inspector hasn’t heard from the claimant, 45 days, they close the file, so there’s no claim – nothing.
Ian R: Nice, you know, you’re talking about this subject really makes me feel good, because I think a lot of us as home inspectors, especially new guys, if we’ve never had a claim, if we’ve never had an issue with a client, one of the things that we worry about the most as a new guy is, oh, my goodness, everybody’s talking about getting sued. Everybody’s talking about this or that. There are a lot of layers between the client and us, and especially if we work with someone like you, who knows these laws inside and out. So it sounds like we’re well protected to be able to do a good job for people and to be able to sleep at night.
Joe Ferry: Yeah, well, as I said earlier, I think home inspectors are generally not negligent. Professionals in general, are generally not negligent. Why? Because they’re professionals. You know, they do this thing, they do these hundreds of 1000s of times, now hundreds of times 1000s of times a day. Now, I bet Ian the next house, you would inspect, you will inspect it exactly the same way you did the last house you inspected, you know, you have a routine, you know what you’re doing, you know where the pitfalls are. Professionals in general, are generally not negligent. And when I was working up for the seminars that I used to do, you know, I was still in research. And I discovered that 95% of the professional liability claims that go to trial result in a defense verdict, that defendant was not negligent? Hey, why is that? Yeah, well, here’s a good example. You know, a person has a surgery, and you go into the surgical theater, the theater is sterile, all the instruments are sterile. The surgeon is gowned, masked, gloved. All the supporting people are gloved and masked and gowned. And the surgical patient. He’s completely draped, totally draped. And the only thing that’s exposed is the two square inches. That where they’re going to make the incision. And those two square inches are bombarded with germicides. So, yeah, there’s less than a 1% chance that anything is going to go wrong. I think it’s something like one in 500 surgeries results in a claimant. And there’s no negligence because they did everything they could possibly do to prevent that they didn’t do anything wrong. That’s why they get a defense verdict. So, you know, over 3500 claims I’ve responded to only a handful, less than seven have been, where there was actually merit to the claim. And I didn’t have to tell the inspector that inspector told me, he said, you know, I think I actually did miss this. Well in that case, there’s nothing I can do. I can’t block a meritoriously. You know, meritless claim, that’s actually a piece of cake for me. Do I block them all? No, because there are knuckleheads in the world. You know, some people are completely impervious to force 10 levels of logic. They just don’t get it. You know, they continue the march.
Ian R: I tell you, the information you’ve given us on this podcast has been some of the most informative that we’ve had yet, anecdotally, and your information has been spot on. As always, we’d love to have you on the show again, sometime in the future, because we could talk for hours and hours on this stuff, because there are so many questions rolling around in my head, I have to control myself.
Joe Ferry: Yeah. Well, without a doubt, I’m happy to come back.
Ian R: Well, thank you very much, Joe, for being on the show for sharing your wisdom and your insight. I know the inspection industry appreciates everything that you do. And it’s interesting, even before the podcast shows like I want this to 100% benefit the home inspection industry. And that’s what Joe’s always been about. Visit his website, Joeferry.com. If anything at the very least check out the Claims Academy. I always enjoy those. They’re very informative. And keep a lookout for Joe in the future on Inspector Toolbelt talk. Thanks again, Joe.
Joe Ferry: All right, Ian. Thanks so much for having me.
Ian R: Thank you
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