Open home and property inspection liability: where the risk sits

Open homes, private inspections and on-site appraisals are one of the highest-frequency points of exposure for Australian property businesses. A look at where claims can arise and how Public Liability and Professional Indemnity may respond.

An open home is one of the most ordinary parts of business work and one of the most concentrated moments of exposure. The business has temporary control of a property it does not own, opens it to members of the public it has not vetted, and is the party managing the inspection while visitors are on site. Inspections, appraisals and pre-auction walk-throughs sit on the same spectrum.

The insurance response depends on who suffered the loss and what they say the business did or failed to do. The relevant policies are usually Public Liability and Professional Indemnity, and they are designed to respond to different categories of allegation.

Injury to a visitor

The most common open home claim is a slip, trip or fall by a visitor – a wet floor following rain, a step that was not adequately signed, a loose rug, a poorly lit stairwell. The business is the party present, and may be named in the first instance.

The defence comes back to the inspection of the property prior to opening it, the management of the visitor flow and any warnings given. Public Liability may help fund covered defence costs and, where appropriate, settlement, depending on the policy wording and circumstances. Where the underlying cause is a defect that pre-existed the open home and was the vendor's or landlord's responsibility, the vendor's or landlord's policy may also need to be considered, with contribution between insurers depending on the circumstances and policy wording.

Property damage to the home

A second pattern of claims concerns damage to the property itself during an inspection or open home. A visitor damages a fixture. A glass door is shattered. A floor finish is marked by the volume of foot traffic. The vendor alleges that the business failed to take reasonable steps to protect the property and seeks the cost of repair.

“The business walks in at 10:55am and leaves at 11:35am. In those 40 minutes it is managing risk for visitors, the vendor and, where relevant, the tenant. The policy question depends on the allegation.”

Public Liability may respond to physical damage involving property the business is in temporary control of, but the wording around 'property in care, custody or control' needs to be read carefully. Some Public Liability wordings exclude or sub-limit that exposure, and the open home is the type of situation where the carve-back matters.

Theft allegations and missing items

Theft allegations following an open home are a recurring source of disputes. A vendor reports an item missing after a Saturday open. A tenant reports the same following a routine inspection. The allegation is generally that the business failed to take reasonable steps to supervise the visitors.

These claims usually proceed as Professional Indemnity matters rather than Public Liability matters, because the allegation is about the business's conduct of the open home rather than a physical incident. The defence focuses on the sign-in process, the supervision arrangements, the number of visitors present and any subsequent investigation. Professional Indemnity may help fund covered defence costs, depending on the wording and circumstances.

Access, lockout and key disputes

A smaller but recurring set of claims arises from access. Keys lost or copied. Lockboxes opened in error. Entry to a tenanted property without proper notice. A vendor or tenant locked out following the inspection. These claims generally proceed as Professional Indemnity matters, and the defence comes back to the business's standard procedures.

Tenanted properties – the additional layer

Where the open home or inspection is conducted on a tenanted property, additional obligations may apply. The business may need to consider notice, supervision and the protection of the tenant's possessions under the relevant residential tenancy requirements. An allegation that those obligations were not met may be a Professional Indemnity matter rather than a Public Liability matter, depending on the circumstances.

What we look at when we review the policy

When we review a Public Liability and Professional Indemnity program for an agency, the open home conversation focuses on a few specific items. Whether the Public Liability wording may respond to property in the business's temporary care, custody or control without a restrictive sub-limit. Whether the Professional Indemnity wording may respond to theft allegations and access disputes as professional-conduct matters. Whether the wording may respond to inspection work on tenanted properties, taking relevant residential tenancy requirements into account. Whether the limits are appropriate for the volume of inspection activity the business conducts. And whether the business's standard open home procedure is consistent with the way the policies have been arranged.

Open homes and inspections are part of the day-to-day rhythm of a property business. The policies behind them should be reviewed before there is a dispute, not after one has already occurred.

If you would like a review of how open home and inspection exposures are arranged in your business program, including Public Liability, Professional Indemnity, care custody and control wording and inspection procedures, RMA Insurance Brokers can walk through it with you before renewal.