Protecting Lenders with Errors & Omissions Insurance in CRE Inspections

Errors & Omissions (E&O) insurance is a critical safeguard for lenders when working with third-party CRE inspection firms. Without it, financial institutions may find themselves fully exposed to fraud, mismanagement, or overlooked construction issues—with no legal recourse to recover losses. 

 The Danger of Uninsured Inspection Firms

Imagine this scenario: A lender receives inspection reports stating that a project is 85% complete. Everything looks great on paper. But when the lender conducts a surprise site visit, they discover a major issue—the building’s façade is complete, but there’s nothing behind it.

“The inspector had been taking bribes from the general contractor and had no Errors & Omissions insurance,” says Stephanie Goins, Senior Vice President at CMR Partners. “There was no protection in place for the lender as the GC had left town with all of the cash.”  

Without E&O insurance, the lender had no way to recover their losses. They were left with a partially built project, missing funds, and no accountability from the inspection firm.  

What E&O Insurance Protects Against  

Errors & Omissions insurance provides financial protection in cases of: 

• Fraudulent inspections (e.g., an inspector falsely approving incomplete work). 

• Missed construction issues that lead to financial loss. 

• Negligent reporting errors that cause funding problems. 

E&O coverage ensures that if something goes wrong, the lender isn’t the one left paying the price.  

Why Lenders Should Demand E&O Coverage from Their Inspectors 

 

If a third-party inspection firm doesn’t carry E&O insurance, lenders are taking on unnecessary risk. A reputable firm should have clear policies in place that protect clients from fraudulent activity, negligence, and reporting errors. 

“CMR Partners sets itself apart from other firms because we take every step to mitigate lender risk,” Goins explains. “Our team is made up of licensed construction professionals who understand the details of every project. We also carry full Errors & Omissions insurance, so our clients have peace of mind knowing they are fully protected.”  

Choosing the Right Inspection Firm  

Before selecting a third-party CRE inspector, lenders should ask: 

• Does the firm carry Errors & Omissions insurance? 

• What safeguards are in place to prevent fraud or reporting mistakes? 

• Can I trust this firm to protect my financial interests?  

  
  

At CMR Partners, we don’t just check boxes—we set the industry standard for transparency, accuracy, and lender protection. With experienced professionals, a commitment to risk mitigation, and full E&O coverage, we ensure that lenders can trust their inspections, their reports, and their investments.