The Importance of Errors and Omissions Coverage for Inspectors

December 30, 2015


One more from the land of insurance craziness.
One of our brokers insures a plumber. The plumber was asked by a homeowner to come to their house and check for a leak. The homeowner believed they had a water leak. The plumber looked around and couldn’t find any leak. Homeowner paid the plumber $75 for the work. The plumber didn’t install any of the plumbing nor did they do any repair or service work. Well now the homeowner has filed a lawsuit against the insured saying there was a leak and they didn’t find it and the now have damage to the property. The plumber tendered the claim to their General Liability carrier who declined to defend. The carrier states the insureds work didn’t result in any BI or PD nor was the work an “occurrence” under the policy definitions. Basically this plumber performed an inspection similar to that of a property inspector. The GL policy also contains a professional liability exclusion. And the policy excludes breach of contract.
To me what the plumber did was an inspection and since they didn’t do any service or repair work they really created an E&O exposure for this inspection and advice. So, I believe that the denial of coverage is correct.
It’s a really bad situation for the insured and agent.
Just one more potential E&O issue we all need to manage and advise our insureds of the need for E&O insurance if they perform inspections.
Fun times.