If your home inspector missed termite damage, the first thing to check is whether termites were actually in the inspection’s scope, because most standard home inspections exclude wood-destroying insects entirely. If the contract did cover termites and the inspector overlooked visible signs, you likely have a negligence claim. If it didn’t, your better targets are the seller or a separate pest inspector. Either way, what you do in the next few weeks, from preserving evidence to watching the filing deadline, will shape what you can recover.
Start With the Inspection Contract
Pull out the agreement you signed and the written report. The scope section is the whole ballgame. The two largest home inspector associations both exclude pests from a general home inspection. ASHI states that an inspector is not required to determine “the presence of wood destroying insects and organisms.”1ASHI. Home Inspection Standard of Practice 2026 InterNACHI’s standards similarly exclude “the presence of evidence of rodents, birds, bats, animals, insects, or other pests.”2InterNACHI. Home Inspection Standards of Practice
Many contracts repeat this with language like “this is not an inspection for pest, dry rot and other wood destroying organisms.” An inspector following those standards can walk past mud tubes on a foundation wall with no professional obligation to flag them. If your contract has that exclusion, a negligence claim against the inspector is weak no matter how obvious the damage looks in hindsight, and your energy belongs on the seller and any separate pest inspection instead.
If you paid for a termite add-on, or your contract specifically included a wood-destroying insect (WDI) inspection, that changes the picture completely. So does a situation where a separate pest inspector performed a WDI inspection; a claim there runs against that inspector or their company, not the general home inspector.
Was a Separate WDI Inspection Required?
If you financed with a VA loan, a termite inspection was likely required at closing. The VA mandates them in states where infestation risk is moderate to heavy, which covers most of the southern, eastern, and central United States.3VA Home Loans. Local Requirements FHA loans require one when there’s visible evidence of infestation, when state or local law requires one, or when it’s customary in the area.4HUD. Pest Control Reference Guide The standard form is the NPMA-33, and it states on its face: “This is not a structural damage report.”5HUD. Wood Destroying Insect Inspection Report Dig out that report if you have one; it’s the document that tells you who looked and what they said.
When the Inspector Did Owe You a Termite Check
If termites were in scope, the question is whether the inspector met the standard of care, meaning the competence a reasonably qualified inspector would show under the same circumstances.6American Institute of Inspectors. Standards of Practice
A negligence claim has four pieces. The inspector had a duty under the contract to look for wood-destroying insect evidence. The inspector breached that duty by missing signs a competent inspector would have caught in the same conditions. You relied on the clean report, either in deciding to buy at all or in agreeing to the price. And you suffered a measurable loss, usually extermination plus structural repair.
Breach is where most of these claims live or die. A WDI inspector is expected to spot mud tubes on foundation walls, hollow-sounding or damaged wood in accessible areas, discarded wings near windows, and frass. The inspector is not expected to tear open walls, pull up flooring, or move heavy objects. If the damage was entirely concealed inside a wall cavity with no external indicators, proving breach gets much harder. A second inspection by a qualified professional, with a written opinion on whether the signs were there and accessible on the original inspection date, is often the piece that decides the case.
Clauses That Will Shape What You Recover
Two other parts of the contract matter almost as much as scope.
The Liability Cap
Most inspection contracts cap the inspector’s financial responsibility, often at the inspection fee itself. If you paid $400, the contract may say $400 is the ceiling, regardless of actual damage. These clauses are enforceable in many states and adjusters know it. A few states ban them outright for home inspectors, and courts elsewhere have refused to enforce them where the inspector’s conduct amounted to gross negligence or where the clause was buried in fine print and never explained. Whether yours holds up is a state-law question worth asking a local attorney early.
Mediation and Arbitration
Check whether the contract requires mediation, arbitration, or both before you can sue. Arbitration sends the dispute to a private decision-maker whose ruling is usually final with no appeal. Mediation is lighter: the mediator facilitates negotiation but can’t impose anything. Skipping either step and filing suit directly can get your case dismissed.
Document Everything Before You Repair Anything
Repairs can wait. Evidence can’t be recreated once it’s gone.
- Take wide photos showing where damage sits in each room or structure, then close-ups of the detail: mud tubes, hollowed wood, live insects.
- Record walk-through video narrating what you see and where. Video captures spatial relationships photos miss.
- Pay special attention to anything the inspector should have caught, like mud tubes on an accessible foundation wall or exposed damage in a crawl space. Photograph those with the original report in mind.
- Hold off on cleanup and repairs until the documentation is complete.
Then get written estimates from at least two licensed pest control companies or contractors, with treatment and structural repair itemized separately. Hire a qualified pest control professional or a second home inspector to do a fresh inspection. Ask for a written report that specifically addresses whether termite activity was visible and accessible at the time of the original inspection.
The Seller May Also Owe You Money
Nearly every state requires sellers to disclose known material defects, and termite damage qualifies. If the seller knew about an infestation or prior treatment and failed to disclose it, you may have a fraud or misrepresentation claim against them on top of anything against the inspector.
Proving it means showing the seller actually knew and intentionally concealed the problem. Look at the property records for prior termite treatment contracts. Look at the damage itself for patched or painted-over areas that suggest someone tried to hide it. Ask neighbors whether they remember a pest control truck at the house. A seller who genuinely didn’t know is hard to hold responsible. A seller who treated for termites six months before listing and checked “no” on the pest history disclosure is a different situation entirely.
How to Actually Pursue Compensation
Send a Demand Letter First
A formal written demand to the inspector is the standard first move. Lay out what was missed, attach your documentation and repair estimates, and state the dollar amount you’re seeking. Keep it factual. The letter puts the inspector on notice and usually prompts them to contact their Errors and Omissions (E&O) insurance carrier.
E&O insurance is professional liability coverage built for exactly this situation. Roughly half of U.S. states require licensed home inspectors to carry it. Once a claim is reported, an adjuster will compare the original report to your evidence and decide whether to negotiate. If the inspector carries no E&O coverage and has no real assets, collecting on even a strong claim gets difficult.
Mediation, Arbitration, or Court
Follow whatever dispute resolution clause your contract contains. Mediation is worth a genuine try; it’s faster and cheaper than court, and a mediator who works in construction or real estate disputes can help both sides size up the claim honestly. If that doesn’t produce a fair result, a lawsuit is the remaining path. Small claims court handles disputes up to limits that range from roughly $2,500 to $25,000 depending on the state. Termite damage running into tens of thousands in structural repair will usually need a higher civil court and an attorney. Most states follow the American Rule, so each side pays its own legal fees unless the contract shifts them or your state has a specific exception.
File a Licensing Complaint
About 35 states license home inspectors, and in those states you can file a complaint with the licensing board separately from any money claim. A complaint won’t put cash in your pocket directly, but it creates an official record, can lead to additional training requirements, probation, or license suspension, and generates documentation that can support your civil case.
Watch the Filing Deadline
Every state puts a statute of limitations on negligence claims, and the clock is already running. For professional negligence of this kind, the deadline typically falls somewhere between two and five years. Some states start it on the inspection date; others start it on the date you discovered the damage or reasonably should have. Miss that window and the strongest evidence in the world won’t help. If you’ve found termite damage your inspector should have caught, confirm your state’s deadline with an attorney before you focus on anything else.
What a Settlement Does to Your Taxes
If you recover a settlement or court award for the termite damage, the money usually reduces your home’s tax basis rather than counting as taxable income. The practical effect is no income tax on the settlement when you receive it, but potentially more capital gains tax when you eventually sell, because your basis is lower. If the settlement exceeds your basis, the excess can become taxable gain. Run the specific numbers past a tax professional before you treat the check as clean money.