Stakeholders at the up and coming meeting with the Ministry of Consumer Services regarding Licensing of the Profession in Ontario include representatives from Insurers.
The ones so far notified re the Insurance Bureau of Canada and the Brokers Hub International. There is no doubt that these two stakeholders either individually or on behalf of the insurers have a lot to gain by making Commercial Insurance mandatory for Home Inspectors as part of the Licensing process.
In some Provinces across Canada, professional liability insurance is mandatory for certain types of professionals. These are generally professions that are recognised as having significant public service commitments, or are in areas where the risks of inflicting injury or damage on property or people is high. examples are Lawyers, Doctors and Dentists, Construction contractors, etc.
The Sales pitch
While this is sold as providing the public with a guarantee that the professional is competent, and is beneficial to the public in general, in most studies it has shown that the opposite is found to be true.
For example, studies in Europe show that lack of access to affordable professional indemnity insurance for the 2009/2010 and 2010/2011 insurance years forced dozens of law firms in England,
Ireland and Wales to shut their doors. The remaining firms, by law of supply and demand pushed their charges up, which meant the cost to the public increased tremendously.
This is only one argument that is used against mandatory insurance. Another is that if a professional is insured, it raises the likelihood that a lawsuit will be raised for frivolous or nuisance reasons, that results in yet higher premiums, forcing otherwise professional worker out of business. Indeed, there are statistics that show, in litigious areas, or in a hard market this is the case.
Much is said about Errors & Omissions Insurance, and indeed this is the most emotive area of insurance, as it is sold as protecting the insured against negligence on their part. Very often Brokers and their underwriters claim that Nuisance Claims are dealt with as such. If this was the case then every E&O insurance would have clauses that offered defence outside the limit of liability and protect the Insured professionals deductible from legal expenses. This is sadly not the case in many policies.
For example; and Insured inspector with a Policy that has the deductible subject to legal expenses might find that although a Claim was found to be frivolous, and easily defended by a few letters from a Lawyer on the pay of the Insurer, he/she is still stuck with a bill for the legal fees that can sometimes build up to all of the deductible.
Other insurers have clauses in their policies that exclude specific duties that pose no threat to the Inspector or his insurance cover, just because it is a way to add to the premium by offering extra insurance. Such a case is in Asbestos testing.
Again an example: An inspector takes, with a documented approval from the home owner, a sample of Asbestos, and sends this sample off to a lab. In their report they announce exactly that. The report comes back and the inspector augments the report with the findings of the Lab. If the Inspector then has a claim against them over the Asbestos part of the Inspection, some insurers will wash their hands of the claim, leaving the Inspector to fend for themselves. In this instance, the Inspector has followed all the rules, farmed out the expert part of the inspection to a Lab, and yet could still be left uninsured and faced with huge defence costs.
General Insurance is another item that is often overlooked. This covers the inspector for things that might get damaged during the process of inspection. This is not covered by E&O insurance. If for instance an Inspector went on a roof and fell through, the Inspector would be claimed against for the damage to the property. E&O insurance would not cover them in this circumstance, General Insurance would.
As part of the benefits programs OntarioACHI is working on for our members, we have developed a Request for Proposals(RFP) for Insurers to provide an Inspection related Insurance Policy that balanced the real risks of liability with the cost of the premiums. This has been sent out to a number of constants working in the Insurance field, and a worrying, but consistent thread is coming back. Insurers are uneasy to ask the underwriters for quotations as, and I quote from one broker “Once an insurer has quoted on an area of business to a broker, they will refuse to quote on the same area of business to another broker”. It is unconfirmed if this is a sales tactic used on behalf of the Brokers, but the fact that it has been heard from more than one does indicate that maybe it is likely the Insurers are attempting to create a monopoly in the market.
This again would affect the prices paid for insurance, again likely drive up the price of inspections directly or indirectly as a result of inspectors leaving the market.
Another issues we’ve found is that Insurers favour multi-inspector policies. This is here a base price is paid for the initial policy, and this may be anything up to 15% greater than a single cover policy, but then adds only a small increase per Inspector. (For example $400-$500 per inspector per year) another one of the Stakeholders at the Ministry of Consumer Services meeting will be such a company so we will be asking our representative to confirm or deny this. We can the ask Ministry of Consumer Services, who are not just responsible for Home Owners as consumers of Home Inspection services, but also Home Inspectors as Consumers of Insurance Services how the insurers can claim a disparity between risk and cost in these instances.
OntarioACHI has decided to release the Request for Proposals(RFP) to the Insurers anyway. In this we are asking what the options would be for Individual Insurance, for E&O and General Liability, but also for Benefits Insurance (you are not able to work if you are ill) as well as a Corporately sponsored insurance that covers each of our Certified Members.
Once we have the results of the RFP in, we will make a decision on a preferred Insurer for OntarioACHI and it’s members. This will not make it compulsory for our members to have insurance, but if it is made so by Law, then it will at least offer our Certified Members the best possible benefits, with the most inclusive policies, the least amount of risk to their deductibles for the best possible premiums.
We have even built into the RFP a request for acknowledgement of any inspectors that decide to self insure and instead, or additionally opt for the Legal Intercept Program.
Reminder about WSIB
The WSIB are legislated by the Ontario government and are responsible for administering the Workplace Safety and Insurance Act (WSIA). They are funded by the employers of Ontario, where employers pay premiums for no-fault collective liability workplace insurance.
Under this system, workers give up the right to sue as a result of their work-related injuries, in return for guaranteed compensation and benefits for accepted claims. In turn, employers are protected from lawsuits.
The Ontario government changed the law to expand coverage in the construction sector. The new rules began on January 1, 2013. WSIB coverage is mandatory for the following people who carry on a business in construction:
- independent operators,
- sole proprietors,
- partners in partnerships and
- executive officers in corporations
You may ask, “I’m a Home Inspector what does that have to do with me?”
Currently, home inspectors are classified in the WSIB Employer Classification Manual under Rate Group 704-02 CU 4499-001: Testing, Inspection, and Related Services.
To be exempt from the mandatory requirement and therefore coverage, a home inspector must exclusively do home inspections on an existing private residence where they are paid by, and work directly for, the occupant or potential occupant (or member of their family).
However, home inspection work is not exempt when it is for potential purchasers or a member of their family, who do not intend to occupy the residence themselves.
What this means
If you are performing Commercial Inspections, construction process inspections, or inspecting pre-existing property for people who intend to rent the property rather than live in it, you are required BY LAW to register with the WSIB and pay your premiums to support that program. If as part of Licensing, the Government of Ontario asks us to provide even more insurance, then the question should be asked, is the government working in the best interests of the public, or the best interests of the Insurers?