CCPIA’s Commercial Inspection Legal Case Library is a compilation of summaries of legal cases involving lawsuits in the commercial inspection industry. Some cases involve commercial building property owners or developers, insurance companies or claims, mold inspections, and fraud on the part of the seller. All of the cases are compelling and educational, whether you’ve been on the business-end of a lawsuit, or not.
Although we’ve included dozens of examples, these case summaries were not written by lawyers, nor are they meant to substitute for legal guidance or advice. Always consult your own attorney.
Sher v. Lafayette Ins. Co.
Supreme Court of Louisiana, 2008
During Hurricane Katrina, an apartment building owned by Sher was flooded up to 4 feet at ground level. An inspector for Lafayette, who insured Sher, determined that most of the damage was caused by poor maintenance and flooding. As the policy excluded flooding from recovery, Lafayette paid out minimal amounts.
At trial and on appeal, the court found that the use of “flooding” in the context of Lafayette’s list of exclusions was ambiguous, without being defined, and in context of other exclusions. Both courts awarded Sher with significantly higher damages. The Louisiana Supreme Court found that “flood” should be taken at its plain meaning, and flood damages were excluded from the claim. Sher did, however, win further damages on other claims.
988 So. 2d 186
Celotex Corp. v. AIU Ins. Co.
United States Bankruptcy Court for the Middle District of Florida, Tampa Division
Celotex and Carey Canada, Inc., manufactured products containing asbestos, for which several suits had been brought against them. The companies sought coverage through their insurance for these claims by establishing that the presence of asbestos in buildings is property damage in itself, and should be covered by their insurance policies through AIU. The court found that in the cases brought, the presence of asbestos at a level which could cause human harm was an “occurrence” under the policies, and insurance companies could be liable for asbestos as property damage.
152 B.R. 647
Developers Diversified of Tenn., Inc. v. Tokio Marine & Fire Ins. Co.
United States District Court for the Middle District of Tennessee, Nashville Division, 2016
Following the collapse of a store roof insured by Tokio, they sued the developer for failing to make sure the building was up to code, and for negligence of the inspectors. Over the years before Tokio’s purchase, the building was inspected on numerous occasions by both private and city inspectors, none of whom found fault in the design, and City inspectors certified the design as in line with code. The court found that Developers, meeting the City’s standards, and without any evidence of faulty design that could be found by the various inspectors, had no liability to ensure the roof’s efficacy, and that Tokio failed to prove by a preponderance of the evidence that there was any violation.
Prudential Ins. Co of Am. v. Jefferson Assoc.
Supreme Court of Texas, 1995
Plaintiff purchased an office building “as is” from Prudential. Three years after the purchase, while attempting to refinance the building, Plaintiff had to prove that the building contained no asbestos. He received a letter from the architects which said as much; however, when the building was inspected, asbestos was discovered. Plaintiff sued Prudential for fraud, negligence, breach of the duty of good faith and fair dealing, and deceptive trade practices. The court found that the only way to find asbestos was through inspection. Because the plaintiff bought the building “as is,” Prudential made no attempts to interfere with Plaintiff’s inspection, and as they were themselves unaware of the presence of asbestos, Plaintiff could not recover.
896 S.W.2d 156
Northpoint Props. v. Charter One Banks
Court of Appeals of Ohio, Eighth Appellate District, Cuyahoga County, 2014
Charter One obtained a commercial building in 1996 though a deed in lieu of foreclosure. They had the building inspected, and it was suggested that a fire-protection expert be retained to recommend changes to the building’s hose and sprinkler systems, which Charter One did not act on.
Northpoint expressed interest in the property in 1997, and as there were no reported major issues or code violations, they purchased it “as is” without hiring an inspector. Charter One had provided inspection reports, but only the ones more favorable than the one recommending substantial changes. After discovering some problems, Northpoint hired an inspector and paid $280,000 to repair water lines and the fire-suppression system, and to install a fire pump.
Northpoint sued Charter One for fraud. The court found that their failure to disclose the inspection report that found significant flaws was fraudulent, and awarded Northpoint the cost to repair, a figure which was higher than the trial court’s award of the loss in value.
Washington Courte Condo. Assoc. – Four v. Washington-Golf Corp.
Appellate Court of Illinois, First District, First Division, 1994
During construction of the condos and after its completion, Washington-Golf was aware of issues with leaking due to structural problems, but rented out the units anyway. Unit owners reported water leaking, and the developers assured them that the problems were minor and unit-specific, and had been, or soon would be, cured. None of the problems were readily apparent without careful inspection by an expert. Without disclosing the problems, nor making any attempts to remedy, Washington-Golf transferred the property to Washington Courte. Washington-Golf assured Courte in this process that there were no problems with the property. Following the purchase, Courte hired an inspector, who discovered defects. The court found Golf liable for misrepresentation, and that they should have either made efforts to repair or to reveal the defects before the sale.
267 Ill. App. 3d. 790
Nat’l Fire & Marine Ins. Co. v. 3327 W. 47th Place, LLC
United States District Court for the Northern District of Illinois, Eastern Division, 2017
Fire & Marine’s insurance coverage required safeguards, including an “Automatic Burglary Alarm, protecting the entire building that sends signals to an outside central station or a police station,” in order to cover fire damage. When 47th Place was damaged in a fire, Fire & Marine sought a declaration of no coverage due to failure to maintain alarms.
Prior to coverage, Fire & Marine had sent an inspector to determine any defects that would negate coverage; however, Fire & Marine did not receive the report until more than 60 days after the beginning of the coverage. The first floor of the building, occupied by Z-Mattress, had a security system through ADT, which covered the whole floor and outside. Fire & Marine never gave a summary of defects to 47th, and renewed their policy with 47th, charging them their premium.
In April 2016, a mattress in Z-Mattress caught fire, with an employee present. The alarms, which were active at the time of the fire, were never triggered. In June 2016, Fire & Marine cancelled the coverage, but did not return the premium to 47th. The court rejected 47th’s arguments that they had materially complied with the alarm requirement, that the alarm requirement was immaterial to the damage (and should thus be covered), and rejected 47th’s arguments that Fire & Marine was waived or estopped from precluding coverage, and that the requirement was ambiguous, finding for Fire & Marine on all issues.
Young v. Rohrbough
Supreme Court of Nebraska, 1910
Rohrbough constructed a building with rooms to be leased out, the third floor of which was to be leased as a lodge, and the fourth as a gym. During the meeting of a group that leased the lodge, plaster on the ceiling fell, killing a woman in attendance. Rohrbough subsequently transferred the property to another company, which continued to lease the space. The decedent’s family brought suit against the developers for negligence in construction and operation, and for leasing the fourth floor as a gym, which caused vibrations that led to the collapse. Several inspectors, contractors and builders testified at trial as to the efficacy of the construction, and that the failure was caused by the building’s “settling,” which could not be avoided. After determining that the result should be determined by a jury trial, a jury found the company liable for negligence in its operation.
88 Neb. 101
Booth v. Kit, Inc.
United States District Court for the District of New Mexico, 2009
Occupants of a hotel owned by Kit were subject to carbon monoxide poisoning in the hotel, which resulted from a faulty design in the mechanical room that housed the pool’s heating equipment. Kit was sued under vicarious liability for the negligence of its contractors, including contracted inspectors and governmental inspectors. The court found that businesses could be vicariously liable for the negligent actions of any contractors under New Mexico law, including private commercial inspectors, but not for those of government inspectors.
Langston v. Bigelow
Court of Appeals of Mississippi, 2002
A storm allegedly caused damage to Langston’s property, and he filed a claim with his insurance company. Bigelow was sent to inspect damage on behalf of the company, and the company denied the claim after no damage was found. At Langston’s request, Bigelow conducted another inspection with a contractor that Langston had chosen, and they too found no damage. Langston filed suit alleging bad faith, breach of contract, breach of fiduciary duties, intentional and/or negligent infliction of mental and emotional distress and anguish, and negligence. The court found that the inspector had performed his due diligence in his inspection, that the insurer owed no duty where no damage was found, and that Plaintiff’s lack of sleep did not constitute emotional distress.
820 So. 2d 752
Porter v Joy Realty, Inc
Pa. Super. 2005
An inspector noted a defect in his report. The real estate agent then made negative statements about the inspector to the inspector’s client. The trial court granted the agent’s motion for summary judgment, but the appellate court reinstated the lawsuit, holding that the inspector had alleged a valid claim.
872 A.2d 848
Sessa v. Shaffer and Angie’s List, Inc
Wisc. App. 2004
In 2012, a Virginia home inspector won a judgment for $11,000 for defamation, and an additional $11,000 in punitive damages. The inspector and defendant lived in the same condominium complex. They became involved in a dispute over HOA issues. The defendant then created an alias on Angie’s List and wrote a negative review of the inspector, even though she had never hired him to perform an inspection.
872 A.2d 848