Appellate Division Creates Split on Learned-Professionals Exception to New Jersey Consumer Fraud Act

In a recent opinion, Shaw v. Shand, the Appellate Division held that home inspectors are not “learned professionals” exempt from liability under the New Jersey Consumer Fraud Act (CFA). Instead, the court held that only professionals who have historically been recognized as “learned” based on the requirement of extensive learning or erudition are exempt under the CFA.

In Shaw, the plaintiffs hired the defendant, a licensed home inspector, to examine a home for defects. The defendant wrote a report concluding that the property was built with professional workmanship, was made of quality materials, and would only require typical maintenance and upgrades. The plaintiffs purchased the property in reliance on that report. Soon after the plaintiffs made the purchase, however, the property’s front porch collapsed. Plaintiffs then learned that the roof, windows, and sliding glass doors all leaked and required complete replacement and that the driveway would need to be replaced as well. They then discovered that the house had a significant mold problem. At the time the Appellate Division decided Shaw, the plaintiffs had spent tens of thousands of dollars repairing those conditions, and expected to spend tens of thousands more.

Defendant’s inspection of plaintiffs’ home was his first as a licensed inspector. As a licensed inspector, defendant was subject to the requirements set forth in the Home Inspection Professional Licensing Act (HIPLA) and its implementing regulations. In order to become licensed, he had to receive schooling, serve forty hours of apprenticeship with a licensed home inspector, and take a state-mandated test.

The Appellate Division concluded that home inspectors are not “learned professionals” and thus are not exempt from liability under the CFA. It held that the exception should be limited to historically recognized learned professions such as law and medicine. Though the court recognized that its prior decision Plemmons v. Blue Chip Insurance Services, Inc. had applied the learned-professionals exception to “semi-professionals” who are regulated by a separate regulatory scheme, it disavowed that decision, concluding that a more restrained exception was warranted going forward. Instead, the court looked to the New Jersey Supreme Court’s decision in Lemelledo v. Beneficial Management Corporation of America, which held that a separate regulatory scheme only exempts individuals from liability under the CFA if the scheme creates a “direct and unavoidable conflict” with the CFA. The court then interpreted HIPLA and its implementing regulations and concluded that they do not conflict with the CFA because HIPLA did not preempt the CFA. Thus, the court concluded that the CFA is “supplemental to and in furtherance of the remedies of,” and therefore does not conflict with, HIPLA.

This decision narrows the learned-professionals exception and as such creates new risks of liability for many different groups of semi-professionals. It also creates a split between published Appellate Division opinions as to the proper reach of the learned-professionals doctrine and is, as Judge Sabatino noted in his concurring opinion in Shaw, a good candidate for certification to the New Jersey Supreme Court. The future will tell whether this case continues to reshape the learned-professional exception to the CFA.