Homeowner insurance policy/courtesy of Matt Benoit/Shutterstock.com Homeowner’s insurance policy/courtesy of Matt Benoit/Shutterstock.com

In a case that drew the attention of bar groups and the land title industry, a state appeals court has declined to recognize a legal malpractice cause of action for failing to advise a property buyer of the importance of homeowner’s insurance.

The Appellate Division, in its decision Monday in Bianchi v. Ladjen, also declined to reinstate claims against the seller and title company, lodged after water pipes in a newly purchased home froze between the time of the scheduled closing and the time the buyer gained physical access to the property.

On the issue of whether real estate lawyers must advise clients on the importance of homeowner’s insurance, Judges Jack Sabatino, Mitchel Ostrer and Lisa Rose said, “No legal ethics opinion or published case law to date has pronounced whether or not such duties exists.”

“Instead,” the court said in the per curiam decision, “the precise standards of care on this subject are within the zone of fair dispute for a jury to evaluate, provided that the plaintiff presents sufficient and competent expert opinion to support his or her contentions.”

According to the court, plaintiff Marco Bianchi in October 2013 executed a contract to buy the Glen Rock property at issue from then-owners Boris and Nadia Ladjen for $360,000, in a deal in which he would pay cash and not obtain a mortgage. Representing Bianchi was attorney Andrew G. Freda.

Freda had handled real estate transactions previously, though it was not the mainstay of his practice, the court noted.

The day of the scheduled Dec. 31, 2013, closing, Bianchi performed the customary “walk-through” at the property and found no issues, according to the decision. Later that day, he appeared at the closing with a certified check, rather than having the purchase funds wired to the title company beforehand, the court said.

The parties took care of the normal tasks of a closing, including signing various documents, but added an extra step and executed a two-sentence escrow agreement, through which it was agreed that Freda would hold the keys to the property until the funds cleared. After the New Year’s holiday and several days of apparent back-and-forth, Bianchi obtained the keys on Jan. 7, accessed the home, and found ice throughout the house, after the furnace ceased working and the water pipes froze, according to the court.

Bianchi in 2014 filed an action in the Law Division against Freda, the Ladjens, and the title company, Main Street Title & Settlement Services, asserting contract and negligence claims.

Bianchi had not obtained homeowner’s insurance before closing, and his suit contended that Freda committed legal malpractice in allegedly failing to advise his client on the importance of doing so. Freda testified in a deposition that he couldn’t specifically recall discussing insurance with Bianchi, but said in the normal course of a representation would do so, according to the decision.

Bianchi’s expert, a real estate practitioner, opined that Freda fell short of his duty to the client in allegedly failing to advise on obtaining insurance for the property. He retained a separate expert for the claim against Main Street Title.

The defendants moved for summary judgment, which was granted after Bianchi’s expert reports were deemed net opinion.

The judge below, not identified in the appellate ruling, was Gregg Padovano of the Bergen County Superior Court, according to an attorney involved in the case.

The New Jersey State Bar Association joined as an amicus, contending that the expert report didn’t establish liability on Freda’s part.

Also joining as amici were the New Jersey Association of Justice, the state’s plaintiff bar group, and the New Jersey Land Title Association.

The Appellate Division, in an unpublished decision, affirmed the ruling below, at times adopting and at other times parting company with Padovano’s reasoning.

The panel took exception to Padovano’s holding that the duty to advise on homeowner’s insurance is “beyond the scope of representation for contracting and closing title on property.”

“We decline to adopt these categorical declarations” and “do not rule out the possibility of reasonable disagreement among qualified legal experts about whether the standards of care for a buyer’s attorney include an obligation to advise a client on the importance of obtaining homeowner’s insurance when the buyer takes title to the property,” the court said.

But it agreed that the expert report amounted to net opinion missing a “demonstration that the alleged standard of care is a widely-accepted baseline requirement within the profession at large.”

The court rejected an argument by the New Jersey Land Title Association that a lawyer’s duty to advise on insurance in transactions not involving a mortgage was established in at least one 2008 legal treatise by Arnold S. Horn and Edward C. Eastman Jr. The court said “the term ‘should’ within the treatise is, at best, ambiguous in establishing a mandatory duty.”

The panel also expressed “doubts about whether plaintiff reasonably could establish causation” since the sales contract included a notice about insurance.

Dismissal of the claims against the Ladjens was affirmed, too. The panel again parted company with Padovano, who found that title was transferred when the deed was executed at the closing. Instead, the appeals court said, the sale was finalized when the escrow agreement’s terms were satisfied. When the funds cleared is uncertain based on the record, the court said, though it pinned the sale as having closed Jan. 2—not Jan. 6 or Jan. 7, as Bianchi argued. The panel also found no evidence that the Ladjens, as Bianchi alleged, turned off the furnace, causing the damage.

“We may never know exactly how or why the heater ceased operating in this house between December 31 and January 7,” the court said. “But that unknown cause cannot justify imposing liability upon these sellers.”

As for the claims against Main Street Title—that it breached a duty to timely notify all parties when the funds cleared—the court again affirmed dismissal. The panel was “disinclined to endorse a novel theory of liability for title agents that could have a significant public policy impact, in the absence of the recognition of such proposed duties by the Supreme Court or regulatory authorities.”

John Burke of Burke & Potenza in Parsippany, who represented the sellers, said the fact pattern in Bianchi’s case is unique, but the lesson is clear: “You can’t be buying a house without a homeowner’s policy.”

Freda, of Freda Law Group is Saddle Brook, was pro se. He didn’t return a call seeking comment.

Neither did Adam S. Tuttle of Teaneck, for Bianchi, or Robert Ricco of Nazor Cengarle & DeCarlo in Hackensack, for Main Street Title.