TN Supreme Court Rules on Potential Liability of Home Inspector for Damages Sustained by House Warming Party Guest

By Drew H. Davis

The Tennessee Supreme Court recently decided that, in theory, a home inspector could be liable to third-party house guests for defects not discovered during a home inspection.

Mr. Charles Grogan was a social guest of a recent home buyer when he learned the hard way that the second-story deck rail had been built with finishing nails rather than galvanized nails. When the rail gave way and Mr. Grogan fell off the deck, he sustained damages and sued the new home owner, the previous home owner, the contractor who worked on the deck, the home builder, and the home inspector.

The trial court granted summary judgment to the home inspector, which found that Mr. Grogan could not establish crucial elements of his claim for negligence against the home inspector. The Court of Appeals agreed, so Mr. Grogan appealed to the Tennessee Supreme Court.

The Tennessee Supreme Court granted the appeal to discuss the potential liability of a home inspector to a guest of the home buyer. Although the Court noted that one who assumes a contractual duty to inspect the property of another may be liable for physical injuries suffered by a third-party, the facts of this case precluded such a finding.

The Tennessee Supreme Court first noted that it is a “well-worn” principle under Tennessee law that one who assumes to act, even though gratuitously, may thereby become subject to the duty of acting carefully. The Court noted that this principal was the “underpinning” of the Restatement of Torts (Second) Section 324A, which provides that “One who undertakes . . . to render services to another which he should recognize as necessary for the protection of a third person, or his things, is subject to liability to the third person for physical harm resulting from his failure to exercise reasonable care to protect his undertakings.”

The Court noted that several other jurisdictions have applied this section to home inspectors who negligently conduct their inspections.

With regard to Mr. Grogan’s claims, however, the Court held that the agreement between the home inspector and the new home purchaser expressly limited the scope of services rendered to exclude any opinion on compliance with building codes. Therefore, the fact that the railing used finishing nails rather than galvanized nails fell outside the scope of the inspection. Further, and more compelling, was the express limitation in the agreement that it was “only for the benefit of the Client and may not be relied upon by any other person.” Going one step further, the Court noted that the applicable statutes and regulations governing home inspectors make clear that the duty of care is owed to the home purchaser—not to any third parties.

Therefore, the Court held that based on the terms of the agreement and the applicable statutes and regulations, the home inspector did not owe a duty to Mr. Grogan. As such, summary judgment was proper, and the home inspector could not be held liable for Mr. Grogan’s damages.

The important lesson here is that under Tennessee law, a person performing services can under certain circumstances be liable for damages sustained by third parties. Therefore, it is crucial to define the scope of the services, the intended beneficiaries, and limitations on third-party liability in the services contract.

If you need assistance drafting or reviewing a service contract, please call Meridian Law at (615) 229-7499.