E&O Insurance: Can Your Pool Business Afford the Risk?

Picture this: You've been running a successful pool service business for 25 years, you're CPO and CPI certified, and you want to expand into pool inspections. Naturally, you think about getting errors and omissions (E&O) insurance to protect yourself. But when you call your insurance agent, they start asking tough questions that make you wonder if you're about to make an expensive mistake. This exact scenario happened to a pool professional in San Antonio, and it sparked an important conversation on the Talking Pools Podcast about a risk management topic that many pool pros overlook.

The Hard Truth About E&O Insurance Costs vs. Benefits

When it comes to errors and omissions insurance for pool businesses, the math often doesn't add up the way you'd expect. As Steve Sherwood from the Talking Pools Podcast explains, insurance agents aren't just being difficult when they question your need for E&O coverage—they're trying to save you from a financial mistake.

When I spoke with my insurance guy, I was really gung-ho about getting it. And he started asking me a bunch of questions and his main question was how many inspections are you doing? And he was like, I don't even care how many. He was like, how much of it of your revenue for the year is it? And he was like, if you're not saying that it's 75 to 90% of your revenue where you're doing, you know, hundreds or thousands of inspections throughout the year, then errors and omissions insurance might not be for you.

— Steve Sherwood, Talking Pools Podcast

The reality is stark: E&O insurance can cost $2,500 to $3,000 annually. If you're only doing 10-15 inspections per year at $200 each, you're essentially paying $500 per year to earn $2,000-3,000 in inspection revenue. That's a significant overhead that can quickly eat into your profits and make the service unprofitable.

This cost-benefit analysis becomes even more critical when you consider that not all insurance companies even offer E&O coverage for pool inspections. It's a niche market with limited options, which often drives prices higher and makes coverage harder to obtain.

Smart Alternatives: Protecting Yourself Without E&O Insurance

Just because E&O insurance might not make financial sense doesn't mean you should operate without protection. Smart pool professionals have developed strategies to minimize their liability exposure through careful documentation and clear communication with clients.

The key is setting proper expectations and boundaries before you even step foot on the property. Steve Sherwood has developed a comprehensive approach that protects his business while still providing valuable service to clients:

How I really cover myself and, you know, without having that add on insurance is I make sure that before I go out for the inspection, I'm sending them a form. And in that form it basically says that I am coming to do a visual inspection. And that anything that I touch, I am going to put back to the exact way that it was before.

— Steve Sherwood, Talking Pools Podcast

This pre-inspection form should include several critical elements:

• Visual inspection only: Clearly state that you're performing a visual assessment, not a comprehensive technical evaluation
• Equipment position documentation: Any equipment you touch will be returned to its exact original position
• Leak detection exclusion: Specify that leak detection is not included in the inspection service
• Structural limitations: Clarify that you're not a structural engineer and cannot assess structural integrity

The Leak Detection Dilemma: Why It's Worth Separating Services

One of the most common questions pool inspectors face is whether leak detection is included in their service. The answer should almost always be no, and for good financial and practical reasons.

Leak detection is a specialized service that requires different equipment, more time, and carries its own set of risks. More importantly, it often conflicts with the timeline expectations of inspection clients who are typically under pressure from real estate transactions.

Most of the time my leak guy when he comes, he's setting something up like a mini bucket test or he's taping off the wall after he's done the pressure testing and fixed something and saying, hey, client, you're going to look at this for the next few days. So most of the people with inspections when they call, they're usually under some sort of a time constraint as far as with escrow.

— Steve Sherwood, Talking Pools Podcast

By keeping these services separate, you can:

• Charge appropriate rates for each specialized service
• Meet client timeline expectations for inspections
• Reduce liability exposure from leak detection guarantees
• Refer leak detection work to specialists when needed

When E&O Insurance Actually Makes Sense

While E&O insurance may not be cost-effective for occasional inspections, there are scenarios where it becomes not just beneficial, but essential. Pool professionals who serve as expert witnesses or those heavily involved in inspection work should seriously consider comprehensive coverage.

Expert witness work carries unique risks because you're not just inspecting a pool—you're providing professional opinions that could influence legal outcomes involving significant money. The stakes are much higher, and the potential for claims increases dramatically.

If you're doing expert witness and you're taking on cases and you're working with lawyers and stuff then you got to be to the gills with all of your insurance. You know because now somebody could come and it's I mean it's weird like I've seen expert witnesses cases is where the expert witness cries on the stands.

— Steve Sherwood, Talking Pools Podcast

Other scenarios where E&O insurance makes sense include:

• Pool construction and renovation work
• High-volume inspection businesses (75-90% of revenue from inspections)
• Specialized consulting services
• Training and certification instruction

Digital Age Liability: What Courts Can Access

Modern pool professionals must also consider how digital communication affects their liability exposure. Courts today have broad access to electronic communications, and anything you write in emails, texts, or social media can potentially be used as evidence.

This reality has changed how careful professionals communicate about sensitive topics. Some avoid putting certain discussions in writing altogether, opting for phone calls when dealing with potentially problematic situations.

Best practices for digital communication include:

• Never admit fault or liability in writing
• Avoid discussing cash payments or off-the-books arrangements
• Don't make promises or guarantees you can't keep
• Keep all communication professional and factual
• Consider phone calls for sensitive discussions

Making the Right Insurance Decision for Your Business

The decision about E&O insurance ultimately comes down to your specific business model, risk tolerance, and financial situation. There's no one-size-fits-all answer, but there is a logical framework for making the decision.

Start by honestly assessing your inspection volume and revenue. If inspections represent less than 25% of your annual revenue and you're doing fewer than 50 inspections per year, E&O insurance is probably not cost-effective. Instead, focus on solid contracts, clear communication, and proper documentation.

However, if inspections are a major part of your business, if you're doing expert witness work, or if you're involved in construction and renovation projects, comprehensive E&O coverage becomes much more important.

Remember that insurance is ultimately about risk transfer. You're paying a premium to transfer potential financial risk to an insurance company. The question is whether that risk transfer is worth the cost for your specific situation.

Regardless of your insurance decision, every pool professional should have robust general liability insurance and should consult with both insurance professionals and attorneys familiar with the pool industry to ensure they're making informed decisions about their coverage needs.

Episode Chapters

• 00:00 Introduction and Hurricane Florence Check-in
• 05:30 E&O Insurance Question from Brian Heath
• 10:15 Cost-Benefit Analysis of E&O Insurance
• 15:45 Protecting Yourself Without E&O Insurance
• 22:30 Leak Detection vs. Pool Inspections
• 28:00 When E&O Insurance Makes Sense
• 35:20 Digital Communication and Court Evidence