Court upholds limit on damages from inspector
On January 4, 2016
By Peg Ritenour, OAR Vice President of Legal Services/Administration
Most buyers today have a home inspection done before proceeding with the purchase of a home. And many of the inspectors hired by those buyers have language in their inspection agreement limiting their liability to the cost of the inspection. But have you ever wondered if that type of clause is enforceable? According to a recent Ohio Appeals Court decision, it is.
The case involves buyers who hired an inspection company owned and operated by David Shevel to inspect a property they were in contract to purchase. The inspection agreement signed by the buyers contained a clause limiting the liability of the company and its agents and employees to the amount of the fee paid for the inspection, which was $500. Of that amount, $150 was for a radon test, and $350 was for the inspection.
Shortly after the transaction closed the roof leaked, causing damage to the property. The buyers filed suit against both the inspection company and Mr. Shevel alleging that the inspection was done in a negligent manner. They also alleged that the clause in the inspection agreement limiting their damages to the cost of the inspection ($350) was unconscionable under the Ohio Consumer Sales Practice Act and was therefore unenforceable.
The company and Shevel filed a Motion for Summary Judgment seeking dismissal of the case. On the claim of negligence, the trial denied the motion, finding that there was a genuine issue for the jury as to whether the inspection had been done in a negligent manner. However the court upheld the clause in the inspection contract limiting any damages incurred by the buyer as a result of the inspection to $350. The court also held that only the inspection company could be liable, and not Mr. Shevel personally. The buyers appealed.
On appeal, the Eleventh Appellate District Court upheld the lower court’s ruling. Although the Ohio Consumer Sales Practice Act prohibits unfair and unconscionable acts, it did not find this limitation of liability clause to be either unfair or unconscionable. In reaching this conclusion, the court found the following: the clause was in a separate paragraph in the contract; Mr. Shevel reviewed and explained the contract to the buyers; the buyers admitted they only skimmed the agreement even though it stated in bold upper case language “PLEASE READ CAREFULLY;” the buyers weren’t rushed or prevented from asking questions and there was no evidence that they were deprived the opportunity to negotiate more favorable terms. Thus the appellate court found that the transaction between the buyers and the inspection company was not unconscionable and the buyers’ understanding of the transaction was not manipulated such that the Consumer Sales Practice Act was violated.
As to whether Mr. Shevel could be personally liable for negligence based on the inspection or a violation of the Consumer Sales Practice Act, the court also ruled in his favor. The court found that the buyers had hired the inspection company, not Mr. Shevel and even though he was the sole shareholder of the company he cannot be held personally liable. Therefore only the buyers’ claim of negligence against the company could go forward to the trial court
So the “take away” for your buyer clients is to be sure to read the agreement with the inspector they hire carefully because it may limit their ability to recover from that inspector if they are damaged by the inspector’s negligence. For this reason it is important for your buyer to do their homework to make sure they are hiring a qualified inspector. And remember, to protect yourself, the decision as to which inspector to hire should be the buyer’s – not your’s.