Dispute Resolution Sample Incident/Claim Response The following suggestions and recommendations are provided for your consideration when responding to a client s complaint or claim. In general, all pertinent content in the applicable Order Agreement, Limited Inspection Guarantee, applicable Standards of Practice, as well as the Inspection Report should serve as a basis for formulating a detailed formal response. A reinspection can often provide valuable information regarding either the frivolous nature or validity of a claim and is a prudent step in most claim-handling situations. All responses should be customized for the specific situation; specific version of the Order Agreement and Guarantee used; as well as the Report version and inspection details. Keep to the bare facts in your response; make it clear and concise. Any complaint or claim-handling matters are also subject to your insurance provider s guidelines and local attorney review or approval. Prior to responding, also be sure to obtain approval from your insurance provider when appropriate. Some insurance companies do not want you to respond in even a potential claim situation without their knowledge; proceeding without approval may jeopardize coverage or the application of deductible limits In addition to providing an overview of the type issues, materials and documents to consider when responding to a claim, the following scenario clearly provides insight on: 1) the benefits of: and need for, getting the order agreement signed prior to the start of the inspection; 2) the reason to follow the IDEA reporting approach (specifically the reporting of the significance of an observed defect, and providing recommendations regarding remedial action or needs), 3) the value of performing a reinspection to determine if allegations are frivolous or otherwise without merit, and, 4) how following best inspection and reporting practices can take the stress out of having to right a response letter, and having to worry about any subsequent followup. Sample Claim Scenario Eighteen year old house with 10 year old electric water heater and 18 year old gas furnace was inspected in September 2007. Client occupied the house in October
2007. Three months after the inspection the water heater leaked one night and was replaced the next morning by a plumber. In April, approximately six months after the inspection, and just prior to the start of the cooling season, a HVAC serviceperson was called to check and service the furnace and air conditioner. He noted rust on the furnace and told the homeowner the furnace was old, and, because of its age and the rust present, it likely had a cracked heat exchanger and the entire furnace would have to be replaced. He did not perform any servicing or testing of the unit, nor did he dismantle it to check the exchanger. He provided a $3000 quote to replace the unit. A week later the homeowner called another heating contractor and asked for a quote to replace the heating system. A salesperson came out, looked at the unit and gave a quote for $2900, but no inspection of the unit was performed. That same day the client called the local franchise demanding reimbursement for the new water heater and new furnace under the terms of the HouseMaster Guarantee. He reported that the inspection had not found any problems with the house but a short time later his water heater had leaked. He also claimed an Heating serviceman had told him his furnace had a crack and was unsafe to use and the crack was likely there for years. Of course he also added, had he known the water heater and furnace were not in good condition, he would not have bought the house, or would have negotiated a better price. A day later, the franchise s senior inspector revisited the house to document current conditions. He observed that a new water heater had been recently installed. He also confirmed the gas furnace was still operating with the same external conditions as originally reported, but with no evidence of recent servicing or dismantling. He did not provide any comments on his finding to the homeowner, but informed the homeowner that he would get a written response form his office within three days. Sample Response Letter Date Homeowner 1000 Deepwater Lake Drive High Desert, NV Re: Inspection No. (XXX); Inspection Date: (XXX) Dear (Mr. Homeowner): We want you to know that we value you as a client and take pride in the service we provide. This letter is in response to your call (letter) to our office regarding a reported water heater failure and crack in the heat exchanger of your furnace and your
request for repair reimbursement under the terms of the Limited Inspection Guarantee. As a follow-up to your call, we performed a complimentary reinspection on May 15, 2008 to document current conditions and address your concerns. At the time of this reinspection, we found that a new water heater had recently been installed. We also observed that the original house furnace was operating; however, the reported crack could not be observed due to normal design constraints. With respect to any potential obligations or responsibility on our part with regard to this matter, please note the following (emphasis added to pertinent areas) : 1. You signed a Home Inspection Order Agreement on Sept 14, 2007 indicating you agreed to the Terms and Conditions of the Home Inspection and Report, and the HouseMaster Limited Inspection Guarantee. 2. Section A. of this Agreement indicates: - Our company would perform a limited time/scope inspection of readily accessible components. - The Inspection would be performed to industry standards (add specific reference) - We would identify visual material defects - The Inspection is not technically exhaustive - (add other applicable terms) 3. Home Inspection Standards state (Use applicable standards and clauses): - The inspection is intended to provide information on the condition of components as inspected at the time of the home inspection - The inspection is of readily accessible elements - The inspection does not include latent or concealed defects - (add and other pertinent language or exclusions, general or otherwise 3. Section B. of the Agreement indicates that a complimentary Limited Inspection Guarantee is provided. This Guarantee provides for reimbursement of certain eligible repairs for elements rated in Satisfactory condition and reported to us within 90 days of closing, or 120 days of the inspection. 4. Section C. of this Agreement indicates that the. Company s liability is limited to direct loss/damages to a maximum value of (the fee paid). 5. Under Additional Terms and Conditions of the Order Agreement, Section 1, it is stated: - The Inspection will not be invasive or technically exhaustive - The Inspection cannot detect latent conditions or concealed defects - It is not possible to determine conditions that might be affected by lack of maintenance
6. Under Additional Terms and Condition, Section 3, it indicates agreed to Client Obligations, including: - Subsection a. Client agrees to use due diligence to follow up with specialists on any reported conditions or defects, or recommendations in the report - Subsection b. Client agrees to notify the Company in writing within ten days of discovery (regarding a concern or dispute of the condition of an inspected element) and prior to the commencement of any repair work 7. In the Water Heater section of the Inspection Report (Section xx, page xx) it was noted that the water heater was 12 years old and in Poor condition with evidence of significant wear (heavy rusting in the combustion chamber). Furthermore it was noted that the design life of this type heater is 8 to 10 years and it was recommended that the unit be replaced, as it was at the end of its service life and had a high probability of leaking in the near future. 8. In the Heating section of the Report (Section xx, page xx), the furnace was estimated to be 16 years old with a design life of 15-20 years. The unit was reported to be operational, but rated in Fair condition due to evidence of external rusting and deferred maintenance, including a clogged filter and irregular burner operation. It was reported that this presented an operational as well as potential safety concern. It was also noted that the heat exchanger was not fully visible for inspection and an inspection and servicing of the unit by a qualified service person had been recommended prior to closing. In addition, reference was made to the following supplemental comment HEAT EXCHANGER - Limited assessment of the exchanger indicated signs of, or suspicion of, failure or other detrimental conditions. Potential health/safety concerns may exist. A thorough check of the unit and vent system by a qualified heating contractor is recommended. While heat exchanger replacement may be possible in rare cases, replacement of the furnace usually will be required if failure exists. 9. In the Inspection Report, Introduction Page (Page XX of the report), the ratings and associated terms are clearly defined. Terms applicable to this situation include (Using report specific terminology; emphasis added): FAIR - Element was functional at time of inspection but has a probability of requiring repair, replacement or other remedial work at any time due to its age, condition, lack of maintenance or other factors. Have element regularly evaluated and anticipate the need to take action. POOR - Element requires immediate repair, replacement, or other remedial work, or requires evaluation and/or servicing by a qualified specialist.
In consideration of the above-referenced factors, please note that repairs to these elements are not eligible for reimbursement under the terms of the Guarantee, nor do we have any obligation or responsibility for the reported issues for the following reasons: 1. You were apprised of concerns with the water heater in the original Inspection Report. The water heater unit was rated in Poor condition and replacement was recommended. In addition, the applicable report terminology also indicated remedial action was required. Furthermore, you failed to follow-up on our findings and recommendations, as you had agreed to when you signed the order agreement. 2. You were apprised of concerns with the furnace in the original Inspection Report. The furnace was found to be operational but rated in Fair condition, with several deficiencies noted and a recommendation for further evaluation and servicing. The definition of Fair provided in the report also indicated remedial action was required. You failed to follow-up on our recommendations to have a qualified HVAC contractor inspect and service the unit due to the limitations of a non-invasive inspection, as you had agreed to when you signed the order agreement. Furthermore, a crack in the heat exchanger is a concealed or latent condition, which is not included in the scope of a home inspection, or eligible for Guarantee reimbursement. In addition, please note the following 3. The water heater was replaced prior to contacting us. While the water heater remedial costs would not have been eligible for reimbursement under the Terms of the Guarantee due to its reported condition; not contacting us until after work was done would, independent of reported conditions, made the replacement of the unit ineligible for reimbursement under the terms of the Guarantee. 4. In addition, you reported your concerns with the water heater and furnace six months after the inspection, which is beyond the Guarantee timeframe. Had these units not been excluded from Guarantee eligibility due to their condition, any associated remedial needs would not have been eligible for reimbursement, as notice was not provided to us within the required 90 days after closing or 120 days after the inspection. In summary, for any and all of the above reasons, we must respectfully decline any obligation or responsibility related to your water heater and furnace. In closing, we regret that you feel that you were not apprised of the concerns you have experienced; however, as you can see by reviewing the referenced areas of the Order Agreement, the Limited Inspection Guarantee, and the Inspection Report, you were made aware of the Terms and Conditions of the services provided, as well as the condition and concerns related to both the water heater and furnace at the time of
inspection. You were also apprised of action that needed to be taken on your part to address these concerns. Again, we value you as a client and appreciate your business. I trust you agree with the above facts, and can appreciate our position on this matter. Sincerely, Joe Office Manager ABC Home Inspection Service, Inc. Note: While not likely an issue with this type scenario, if, after reviewing the fact, you feel additional action on your part might be warranted due to the particular circumstances, adding something to the effect may be appropriate: While we do not accept any responsibility for your claims, as a good faith gesture (or, in the interest of customer service), subject to completion of the attached Client Report Form and release and our final review of the situation, we will refund the inspection fee pursuant to the Terms of the Inspection Order Agreement. Another option might be to indicate: Although this claim is not eligible for reimbursement per the Terms of the HouseMaster Limited Inspection Guarantee, in the interest of customer service, and as a good faith gesture, we will honor your claim under the Terms of the Guarantee, whereby an element (the furnace) cannot be repaired is subject to a $500 reimbursement. Complete the attached release and we will forward you reimbursement. The information provided herein is intended solely for the use of authorized HouseMaster Franchisees. DBR makes no warranty or representation, either express or implied, with respect to the accuracy, reliability or completeness of the information provided or the result of using any information. Further, please be advised that DBR Franchising, LLC does not provide any legal counsel or advice to any third party, including Franchisees, and any information contained herein shall not be construed as legal representation, counsel or advice. DBR advises obtaining independent legal advice on any concerns or matters arising in relation to its franchised business.