The Arizona Attorney General’s office has filed a Consumer Fraud Lawsuit against Choice Home Warranty for allegedly making false promises to consumers who purchased a home warranty policy. Since the beginning of 2016, the Arizona Attorney General’s Office has received 139 consumer complaints related to the company’s business practices.
The lawsuit alleges Choice Home Warranty collected millions from Arizona consumers, but used contract exclusions, payment caps, and bad-faith refusals to avoid paying for repairs.
According to the lawsuit:
CHW advertised its service contracts, which CHW sold for $420-$750 per year, on its websites, through television commercials, through direct solicitation to consumers through email, and through various other methods.
CHW’s advertising was misleading in at least seven ways.
First, CHW advertised that its service contracts would protect consumers against the “high cost” of unexpected repair or replacement of home systems and appliances, including refrigerators and air conditioning systems.
In reality, CHW did not protect against the high cost of unexpected repair or replacement. CHW’s basic service contract excluded refrigerators and air conditioners from coverage. Even the “total” service contract excluded many common appliance issues from coverage, and contained a $1,500 cap on CHW’s payment, even if far more money was necessary to repair or replace an air conditioner or a refrigerator. For plumbing issues, CHW’s service contract capped CHW’s payment at a mere $500.
Second, CHW advertised that if an appliance broke down, CHW would repair or replace it “even if it [was] due to normal wear and tear.”
In reality, CHW only covered appliance breakdowns that CHW deemed to be “normal wear and tear,” and a CHW-selected technician made that designation. Even then, CHW would often declare that the issue was not “normal wear and tear,” and deny the claim under other exceptions, such as blanket exceptions for rust, corrosion, or lack of maintenance. If lack of maintenance was cited, consumers could only overcome that finding by producing comprehensive maintenance records.
Third, CHW promised that consumers would save money and did not need to maintain an emergency fund, because CHW would repair or replace their appliances.
In reality, even if the consumer managed to avoid User Agreement exclusions and CHW’s advertising was misleading in at least seven ways.
First, CHW advertised that its service contracts would protect consumers against the “high cost” ofunexpected repair or replacement of home systems and appliances, including refrigerators and air conditioning systems.
In reality, CHW did not protect against the high cost of unexpected repair or replacement. CHW’s basic service contract excluded refrigerators and air conditioners from coverage. Even the “total” service contract excluded many common appliance issues from coverage, and contained a $1,500 cap on CHW’s payment, even if far more money was necessary to repair or replace an air conditioner or a refrigerator. For plumbing issues, CHW’s service contract capped CHW’s payment at a mere $500.
Second, CHW advertised that if an appliance broke down, CHW would repair or replace it “even if it [was] due to normal wear and tear.”
In reality, CHW only covered appliance breakdowns that CHW deemed to be “normal wear and tear,” and a CHW-selected technician made that designation. Even then, CHW would often declare that the issue was not “normal wear and tear,” and deny the claim under other exceptions, such as blanket exceptions for rust, corrosion, or lack of maintenance. If lack of maintenance was cited, consumers could only overcome that finding by producing comprehensive maintenance records.
Third, CHW promised that consumers would save money and did not need to maintain an emergency fund, because CHW would repair or replace their appliances.
In reality, even if the consumer managed to avoid User Agreement exclusions and payment caps, kept comprehensive maintenance records, and avoided unwarranted denials,
CHW often still would not repair or replace the appliance if doing so would be expensive.
Instead, CHW sent consumers a check for a fraction of the actual cost to repair or replace the system and declared that it had no obligation to do anything further.
Fourth, CHW claimed that if consumers’ appliances stopped functioning, their “home warranty [would] kick in and [they would] pay only the service fee specified in [their] contract.”
In reality, due to User Agreement exclusions, payment caps, and CHW’s policy of sending checks for a fraction of the cost to repair or replace expensive appliances, consumers were often forced to pay far more for appliance breakdowns than CHW’s service fee.
Fifth, CHW promised that it worked with repair professionals that it would dispatch to provide “swift and timely” service, so consumers would never have to “scramble” to get a repair done quickly.
In reality, CHW often failed to arrange for technicians to service consumers’ claims in certain geographic areas in Arizona because CHW had no contracted technicians in those areas. Thus, consumers in certain areas were left to find technicians on their own and then attempt to obtain reimbursement from CHW at a later time.
Sixth, CHW promised consumers “fast repair” that would be “swift and timely” thanks to “24/7 customer service.”
In reality, CHW’s service contract allowed CHW to wait up to four days before even contacting a technician about the issue. CHW could then wait additional days after the technician reviewed the issue before CHW decided whether it would cover the issue.
Seventh and finally, CHW advertised that it had exceptional customer reviews, including aggregate five-star consumer ratings from two different review sites.
In reality, CHW’s aggregate rating was at or below four stars on both review sites, and CHW manipulated consumer reviews by paying consumers to leave positive reviews. Furthermore, CHW also suppressed negative reviews through the use of “goodwill payments” that required consumers to keep quiet about CHW’s actual practices in order to get any payment for their previously denied claim.
Choice Home Network is a New Jersey-based company. The State’s lawsuit, filed in Maricopa County Superior Court, seeks consumer restitution, up to $10,000 in civil penalties for each violation of the Arizona Consumer Fraud Act, injunctive relief, and attorney’s fees and costs.
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