A liner assembly and method for lining a damaged pipe junction between a main and lateral pipe is provided. The liner assembly includes a main liner member and a lateral liner tube. A collar disposed near the juncture between the main liner member and lateral liner tube is impregnated with a liquid hydrophobic or hydrophilic material capable of curing in a flexible or rigid state with the material expanding in the presence of water. The hydrophobic or hydrophilic material can also be applied without the use of the collar. When the liner assembly is pressed against the main and lateral pipes, a portion of the hydrophilic or hydrophobic material is forced into the damaged pipe junction.