Home Inspectors Found Subject To New Jersey Consumer Fraud Act

This case originated with plaintiff Thomas Shaw contracting to buy a home located in Overlook Court in Hampton Township.  He hired the defendant home inspector Brian Shand (“Shand”), sole owner of All Points Home Inspection & Services, to inspect the property, who thereafter e-mailed his report to the plaintiff Jodi Shaw (“Shaw”).  Plaintiff Shaw claimed that the home inspection report failed to report that the house was in poor condition, requiring a great deal of major repairs.  After moving into the home, the plaintiffs filed a lawsuit against the defendant home inspector on a number of basis, including a violation of the Consumer Fraud Act. The issue in Shaw v. Shand, 2019 N.J. Super. LEXIS 129 (App. Div. August 15, 2019) was whether the home inspector could be sued for a violation of the Consumer Fraud Act.

The home inspection report concluded that the structure appeared to be well built, using quality materials and professional workmanship and it just needed typical maintenance and upgrading.  In reliance on the report, the plaintiffs purchased the property.  Upon moving into the property, the plaintiffs quickly learned that the house was in fact in poor condition and required a great deal of major repairs including a replacement of the roof, repair of their front deck/porch which collapsed when they moved in, the replacement of the driveway and replacement of windows and sliding glass doors due to leaks.  The plaintiffs claimed that they were forced to spend tens of thousands of dollars in repairs and spend even more on a mold issue in the home.  The plaintiffs sued the defendant home inspector alleging negligence, violation of the Consumer Fraud Act (“CFA”), common law fraud, and breach of contract.

The defendant home inspector filed a motion for summary judgment requesting a dismissal.  The trial court dismissed the CFA claim on the basis that home inspectors should be considered semi-professionals exempt from the CFA.  The trial court judge found that home inspectors are regulated by New Jersey regulations and hence could satisfy the “learned professional” exclusion under the CFA.  The trial court noted that New Jersey had a Home Inspection Professional Licensing Act with regulations, governing the conduct of home inspection professionals.  The court held that the regulations showed that home inspectors are semi-professionals.  Hence, the trial court concluded that the defendant’s status as a semi-professional exempted him from liability under the CFA and granted the defendant’s motion for summary judgment, dismissing the CFA claim.

The Appellate Division took the plaintiffs’ appeal on an interlocutory review, limited to the issue whether home inspectors qualified as “learned professionals” exempt from the CFA liability.  The Court noted that the issue as to whether home inspectors are entitled to the judicially created learned professional immunity turned on the statutory interpretation of two laws: the CFA and the Home Inspection Professional Licensing Act.

The Appellate Division noted that the learned professional exemption to the CFA is a judicially created doctrine.  In prior case law, the Court determined that professionals were not subject to the Consumer Fraud Act. The Attorney General who filed a brief in this matter took the position that home inspectors were subject to the Consumer Fraud Act.

The Appellate Division herein agreed with the Attorney General that the learned professional doctrine would threaten to become the exception that swallows the rule unless it was narrowly construed.  The Court accepted the Attorney General’s argument that to the extent the Supreme Court continues to recognize a “learned professional” doctrine, that doctrine should be narrowly construed to include only those professions who have historically been recognized as “learned” based on the requirement of extensive learning. 

The Appellate Division also accepted the Attorney General’s concern that “a wide ranging interpretation of the learned profession exception would unfairly restrict the ability of private litigants and the Division to seek redress for fraudulent commercial practices.”  Accordingly, the Court found that home inspectors and other licensed semi-professionals are not learned professionals simply because they are otherwise regulated.  Therefore, they remain subject to liability unless there is an unavoidable conflict between the application of the CFA and the application of other regulatory scheme or schemes.             

In summary, the Appellate Division found that the Consumer Fraud Act’s remedial intent and the exceptions to the remedial statutes must be narrowly construed and, hence, declined to extend the learned professional exception to licensed home inspectors simply because they are regulated by the Home Inspection Professional Licensing Act.  The Court found no reason to disagree with the Attorney General that the learned professional exception should be limited to only historically recognized learned professionals, such as doctors.  Accordingly, the Appellate Division reversed the trial court’s dismissal of the plaintiffs’ Consumer Fraud Act claims and reversed and remanded the matter back to the trial court for further proceedings.

Tags: Consumer Fraud Act