Lessons from the Deep End

The following is a real home inspection claim from InspectorPro  Insurance’s archives. To protect the insured’s identity, all identifiable characteristics from this mold damage claim—including names and associations—have been altered or removed.

At the tail end of summer in North Carolina, an inspector completed a home and pool inspection for a combined fee of $825. His client purchased the house and moved in almost three months later. 

By then it was late October, and evening temperatures were dropping fast. Two days after moving in, the new homeowner turned on the pool heater.

Six days after moving in, the pool heater began leaking, and the pool’s water levels dropped, flooding the backyard in the process. 

The homeowner called an emergency pool service, who removed the heater panel and found the system “rusted on the inside and out.” Multiple pipes had deteriorated and fallen away from their fittings, and the heater was deemed inoperable. The inspector’s employer visited the property shortly after.

What Would Cause the Pool to Leak?

A pool heater isn’t a standalone piece of equipment. It’s integrated into the pool’s circulation system. As Apex Electric and Mechanical illustrates in their comprehensive guide to pool heaters at apexelectricmechanical.ca, this system works by pulling significant amounts of water through the main drain and skimmer, moving it through a pump, filter, and heat exchanger, and returning it to the pool. 

If the heater is compromised, like due to corrosion or loose fittings, that circulated water can leak out from the pool heater, Lou Tobia of Tobia Pool Care wrote in their blog article titled “Is Your Pool Really Leaking—Or Is It Just Your Heater?” 

In this case, the corroded heater must have leaked and allowed pool water to escape into the yard. 

A Closer Look at the Pool Inspection Report

According to the pool inspection report, it had been 90 degrees on the day of the inspection, which barred the inspector from operating the pool heater. He’d reported the limitation and advised the client to have the pool heater serviced by a qualified contractor, as the unit was getting old. But he hadn’t opened the panel or visually inspected the interior.

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t the tail end of summer in North Carolina, an inspector completed a home and pool inspection for a combined fee of $825. His client purchased the house and moved in almost three months later. 

By then it was late October, and evening temperatures were dropping fast. Two days after moving in, the new homeowner turned on the pool heater.

Six days after moving in, the pool heater began leaking, and the pool’s water levels dropped, flooding the backyard in the process. 

The homeowner called an emergency pool service, who removed the heater panel and found the system “rusted on the inside and out.” Multiple pipes had deteriorated and fallen away from their fittings, and the heater was deemed inoperable. The inspector’s employer visited the property shortly after.

What Would Cause the Pool to Leak?

A pool heater isn’t a standalone piece of equipment. It’s integrated into the pool’s circulation system. As Apex Electric and Mechanical illustrates in their comprehensive guide to pool heaters at apexelectricmechanical.ca, this system works by pulling significant amounts of water through the main drain and skimmer, moving it through a pump, filter, and heat exchanger, and returning it to the pool. 

If the heater is compromised, like due to corrosion or loose fittings, that circulated water can leak out from the pool heater, Lou Tobia of Tobia Pool Care wrote in their blog article titled “Is Your Pool Really Leaking—Or Is It Just Your Heater?” 

In this case, the corroded heater must have leaked and allowed pool water to escape into the yard. 

A Closer Look at the Pool Inspection Report

According to the pool inspection report, it had been 90 degrees on the day of the inspection, which barred the inspector from operating the pool heater. He’d reported the limitation and advised the client to have the pool heater serviced by a qualified contractor, as the unit was getting old. But he hadn’t opened the panel or visually inspected the interior.

The client demanded $7,300 to install a bypass and a new pool heater.

The Inspector’s Terms

The employer, our insured, believed his employee made an obvious error. Though our claims team wanted to make our insured and his client happy, they also wanted the solution to be fair and accurate to the inspector’s standards and his agreement. 

Following their investigation, our claims team determined the inspector was not liable and issued a denial of liability letter with our insured (the employer’s) approval.

This denial of liability letter addressed facts such as:

1. The inspector noted he was unable to inspect the pool heater, meaning he could not comment on its condition or functionality.

2. In his report, he documented that the pool heater was old and in need of service from a qualified professional. The client didn’t heed this advice.

3. Inspectors are generalists, and their services are limited, visual, and non-invasive. They cannot diagnose the extent of a defect, nor are they required to comment on a component or system’s life expectancy, adequacy, or efficiency. 

4. By signing the inspector’s pre-inspection agreement, the client consented to the terms of a dispute resolution clause. This clause specified that any disputes must be submitted in binding arbitration, in front of an arbitrator with at least three years of home inspection knowledge, and in the county where the inspection took place.

5. The client also agreed to a limitation of liability provision. It stipulated that, if the inspector was found negligent, the maximum recoverable would be twice the inspection fee. In this case, that would be $1,650.

The homeowner refused our offer of $1,650. That’s when she threw our inspector into the deep end.

The Doubled-Down Demand

As negotiations were ramping up, our team received a new demand letter from the homeowner’s attorney. She’d found our offers “grossly inadequate” and “insulting.” 

To rub more salt in the wound, the letter outlined not one, not two, but three new allegations. We responded to them in an updated letter as follows:

HVAC needed immediate replacement because it was too small for the house. Cost: Nearly $14,300.

We responded that home inspectors are not required to calculate the adequacy of any systems or components, or predict future conditions. Also, the inspector had reported multiple HVAC defects and advised further evaluation from an HVAC contractor.

Water heater was 13 years old, missing parts,
and unable to serve two showers at once.
Cost: $7,300.

The inspector was not required to determine the adequacy or capacity of the hot water systems. It was also unreasonable to expect the inspector to run multiple showers at the same time. Plus, the report clearly showed the water heater expansion tank covered by a thermal blanket at the time of the inspection, making it inaccessible.

Refrigerator was leaking antifreeze,
causing stored items to melt. Cost: $3,100.

We explained that home inspectors are not required to inspect refrigeration units. This limitation was specified in the inspector’s standards of practice (SOP) and reiterated in his report.

Total new demand: $26,500 for the added allegations, plus $7,300 for the original pool inspection demand. 

The client admitted to our claims team that she only brought up the additional issues because the pool inspection claim wasn’t paid out the way she wanted. She said she could “forget” the new allegations if they paid for the pool repairs in full. 

As time passed, she continued posting negative reviews about the inspector’s business, where she mentioned not just the pool and spa inspection issues but also the additional allegations. At this point, our claims team raised their settlement offer to three times the inspection fee. After the homeowner refused to negotiate, the claim went to arbitration.

A year-and-a-half from the day of the inspection, the arbitrator found the inspection business negligent for failing to adequately inspect the pool heater pipes. Fortunately, they enforced our inspector’s limitation of liability clause in his InspectorPro model agreement, capping his liability to $1,650.

Our insured inspector’s deductible was $2,500. After receiving a $1,000 discount (which has since increased to a $1,500 discount) for using our model pre-inspection agreement and a 10% discount for one year without a claim, his deductible dropped to $1,250.

Lessons From This Inspection Claim

1. When you can’t test it, document and inspect what you can.

If you can’t test or operate pool equipment or components due to circumstances like inclement weather, visually inspect, use your pool inspection report to document whatever is accessible to you, and report your limitations. 

In this claim, the client ignored her inspector’s advice to get the aging heater evaluated by a specialist. But if the inspector had removed the heater’s cover and taken photos of the inside, the inspector might’ve described the pool heater’s condition more accurately, given it more urgency in his report, or better informed the buyer about potential repairs. 

2. Photos are your friends.

The most risk-adverse home inspectors have at least one thing in common: They take way more photos than they “need.”

Photos aren’t just good for documenting defects. In our experience, many inspectors aren’t taking enough photos to adequately manage their risk. They tend to miss three essential opportunities:

Representative photos, like wide shots or 360 pictures of entire rooms.

Areas that don’t have any defects. You can use these to capture the home’s exact condition as you saw it. If future buyers accuse you of missing a defect, like a water stain that appeared months later, non-defect shots can prove the defect wasn’t visible during your inspection.

Concealed or inaccessible spaces, like unreachable pool heaters or flooded crawl spaces.

As this swimming pool insurance claim progressed, the client introduced new allegations in an attempt to get more compensation from the inspector’s insurance. One of these additional claims was about the water heater, which was 13 years old and missing parts. 

The home and pool inspection report clearly stated that the water heater expansion tank was covered by a thermal insulation blanket, making it inaccessible. But he also included a photo of the tightly wrapped tank. This made it easy for our team to prove that the tank was outside his scope and that the claim was meritless.

It’s always better to have too many photos than not enough. To protect yourself, take photos of everything. If only 25% of them make it in the report, save the ones in the report and the extras in a digital cloud.

3. If pools are common, carry a pool and spa inspection endorsement and use a contract addendum.

Inspectors can get claims for ancillary services they don’t offer. 

For example, if the house you’re inspecting has a pool, and the pool heater malfunctions and floods the backyard, your client could still blame you, even if they didn’t pay for or request a pool and spa inspection. Consequently, if you don’t have adequate coverage, you could be left vulnerable to a pool inspection claim.

If pools are common in your inspection region, consider getting a pool and spa inspection endorsement for your insurance policy. It’s the simplest move you can make to protect your hard-earned business from pool inspection claims, meritless or otherwise.

Additionally, if you are performing pool and spa inspections, don’t forget to use an addendum for your pre-inspection agreement to make your expanded scope of services clear.

Coverage for Pool and Spa Inspections Made Easy

Insured with InspectorPro Insurance? Ask a team member about our endorsement package. It bundles our most popular inspection insurance endorsements–including mold, radon, pest, septic, pool, code, lead, and carbon monoxide–for one lower price.

Not insured with InspectorPro, but want to learn more? Visit inspectorproinsurance.com to apply for a free quote. 

Alyssa Guerra is the Marketing Content Editor for InspectorPro Insurance, which offers ASHI members exclusive benefits through its program: InspectorPro with the ASHI Advantage. Through risk management articles in the ASHI Reporter and on the InspectorPro website, InspectorPro helps inspectors protect their livelihood and avoid unnecessary risk. Get peace of mind and better protection with InspectorPro’s pre-claims assistance and straightforward coverage. Learn more at inspectorproinsurance.com/ashi-advantage.

Note: The Managing Risk column with InspectorPro Insurance provides home inspectors with tips to protect their businesses against insurance claims

Opinions or statements of authors are solely their own and do not necessarily represent the opinions or positions of ASHI, its agents, or editors. Always check with your local governmental agency and independently verify for accuracy, completeness, and reliability.