The Pitfalls of Building Inspectors not Having Insurance 5

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Monday, May 18th, 2015
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Australian property owners expect a property Inspector to be adequately insured for professional indemnity and public liability to protect their investment whether it’s for a pre-purchase inspection or new construction.

What purchasers may not realise is that it is not mandatory for inspectors to be insured, and this can leave both the consumer and the inspector open to the risk of severe financial loss and stress.

The Australian Standards removed compulsory professional indemnity insurance for building inspectors. This allows those who skip having this insurance an opportunity to deceive if the purchaser does not ask “do you have professional indemnity insurance?”

Many home buyers don’t understand that if they hire an uninsured inspector, they have no recourse of any claim if the inspector has no assets. If the inspector fails to see a fault in the building that results in financial loss for the purchaser, there is a very good risk that a long battle in court will result in no compensation. This is the reason why it is essential that every property buyer insist that the building inspector supplies a copy of his/her Certificate of Currency and if they can’t supply this, then find another inspector.

On the other hand, building inspectors also risk financial ruin for not having professional indemnity insurance because mistakes can happen, and if a client decides to take legal action, defending a claim can be very costly both financially, and in lost time. Professional indemnity insurance for inspectors covers more than claims for errors, it also covers claims for property damage and bodily injury, for example, if an inspector’s ladder falls and causes damage to property or a person resulting in permanent injury.

The inspection industry is not highly regulated and almost anyone can set up a business as a pre-purchase inspector, even without the necessary training. With many states having no standards or regulations about who can set up a building inspection business, it opens the doors for anyone setting themselves up as a property inspector with minimal training or knowledge in the area.

We live in a buyer-beware property market, and once a property is bought there is no recourse back to the agent or vendor, so if the inspector is not insured, then that leaves the purchaser to foot the bill.

Consumers need to do their homework on finding a building inspector that is suitably qualified and have their best interest at heart.

Questions to ask are:

  • Do you have insurance?
  • Has anyone taken legal action against you professionally?
  • Do you come from a building background or engineering trade?
  • How many inspections have you done in the last 12 months?
  • Do you have any references from clients?

I would also recommend purchasers not rely on a property inspection report that has been offered by the vendor or agent. It is best to spend the money and engage a fully qualified and insured inspector because in the long run, it could save thousands of dollars.

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Discussions
5
  1. John Bolton

    Realistically, anyone setting themselves up with the right type of insurance is foolheardly and downright silly. One mistake and they could be financially bankrupt.

    On the consumer side, any inspection provided by the property owner or agent is pretty much useless and untrustworthy. Its well worth the money to pay for your own inspection.

    • Howard Ryan

      John,
      You are correct. There have been many inspectors over the last 30 years that have been sued and lost everything due to incompetent reporting.

  2. Mark Whitby

    Howard,

    There is a distinction between 'Building Inspector' and a person who inspects buildings (pre-purchase); and an important one.

    A Building Inspector does a course so that he/she may inspect a home/shop etc. on behalf of a Building Surveyor. These Inspectors are Registered Building Practitioners and carry the insurance that you say 'building inspectors' are not required to have.

    Opinion report writers are quite a different animal altogether, and I assume you are referring in your article to this type of operator. These people are Building Consultants… and yes, there is a sad lack of regulation regarding these individuals, many of whom also call themselves experts.

    Many Building Inspectors (as distinct from the misleading term 'building inspectors' which appears as a heading in the Yellow Pages and similar publications), actually carry out pre-purchase inspections, 137B reports and so on, as do some Building Surveyors, Architects and Builders.

    • Howard Ryan

      Mark,
      It is different in each state. A Building Surveyor, a Building Inspector and a PCA or Private Certifier must carry PI and PL Insurance. A Pre Purchase Inspector is not required which in my expert opinion is ludicrous.

    • Phil Morey

      I was going to set myself up as a report writer and consultant . With 25 years experience in brickmaking and site visits to determine brick quality and construction problems, I was given a quote for PI insurance of $28,000 because I was not an architect, engineer, licenced builder or surveyor because my experience would not stand up in court.