A typical component of the purchase and sale of residential real estate in California is an inspection and report by a licensed pest inspection company. In Formet v. The Lloyd Termite Control Co., the California Court Court of Appeal ruled that the scope of a pest inspector’s potential liability for a negligent inspection or report did not extend beyond those who contracted for the inspection.
In Formet, a woman inherited property from her mother. She hired a pest inspector who issued a report noting general wood damage on a second floor patio. No one hired a contractor to repair the damage. The property was then sold. A guest of the new owners was injured after falling off the second floor patio when the patio railing failed. The guest sued several parties, including the pest inspector.
The trial court ruled that, as a matter of law, the pest inspector was not liable to the guest. The trial court reasoned that the pest inspector’s duty was limited to those hiring the inspector and intended beneficiaries (e.g., someone the inspector knew to be relying on the report). The trial court ruled that the guest did not fall within either category.
The Court of Appeal affirmed the trial court’s decision. The Court of Appeal noted that the purpose of the report was to permit parties considering the purchase or sale of real estate to evaluate the extent and cost of necessary repairs. Further, the Court of Appeal noted no direct connection between the inspector’s failure to specifically identify rot near the railing and the guest’s injury. The Court noted that no one undertook any of the repairs that the inspector did identify, so there was no reason to believe that anyone would have repaired the railings if the railings had been mentioned in the report. Accordingly, the Court of Appeal concluded that the scope of the inspector’s potential liability did not extend to the injured guest.