Cracked foundations happen.

The Mistake. 

A home inspector failed to identify massive cracks within the foundation of a new home. Due to the severity of the problem, the house was uninhabitable, and the value of the home dropped substantially. The owner who purchased the home from the builder sued both the builder and the home inspector for the cost of his alternative housing, the lost value of the home and the cost to return the home to a habitable state. Unfortunately, the builder declared bankruptcy and was dropped from the suit, leaving the home inspector solely responsible for the claim.

The Consequences

Defense costs: $16,000
Indemnity: $87,000
Total cost to carrier: $103,000 (after insured’s deductible)

The Avoidance

  • Work with reputable and financially secure builders
  • Have a signed/dated pre-inspection agreement limiting liability to the value of the inspection (if allowed by law).