Bad Faith Insurance Lawsuits Filed against Home Warranty Companies

Consumers who are upset about their treatment by home warranty companies have filed home warranty lawsuits, alleging that those companies practice bad faith insurance. Among the companies that have reportedly faced such lawsuits are American Home Shield and Fidelity National Home Warranty.

Bad Faith Insurance Lawsuits Filed against Home Warranty Companies

One such lawsuit was reportedly filed against Fidelity National Home Warranty in 2009, by Dan Kaplan and James Baker. The lawsuit, as reported by Home Warranty Wiz (11/21/11), alleges that Fidelity National Home Warranty sold home warranty plans but wrongfully denied legitimate customer claims on items included in the home warranty plans. Plaintiffs filed the lawsuit on behalf of customers who purchased a Fidelity warranty agreement on or since July 18, 2002.

According to the court documents, Fidelity National Home Warranty "failed to comply with its duty to properly adjust submitted claims under the home warranty plans, resulting in improperly rejected claims and damages to Plaintiffs and the class." The court documents note that Fidelity started business as Alliance Home Warranty in January 1995 and was founded by former employees of American Home Shield.

Plaintiff Dan Kaplan alleges in court documents that he made four claims with Fidelity, three of which were not properly adjusted and were improperly denied. His first claim involved a leaky toilet, which a third-party plumber determined was a construction defect and not covered by the warranty. According to court documents, the plumber refused to put the toilet back in place but still charged Kaplan a $50 service fee. A plumber for the developer was then sent out, who determined that the previous plumber was mistaken in his diagnosis of the leak.

Fidelity then sent out another plumber, who put the toilet back and resealed it. The plumber also charged a $50 service fee. The toilet was reportedly put back improperly, however, so it continued to leak. Following the incidents with the leaky toilet, Baker alleges he had his claims improperly denied two more times.

The plaintiffs allege that Fidelity third-party service providers are trained to deny legitimate claims. Furthermore, they allege that Fidelity refuses to authorize replacement of appliances and increases the number of service calls, which increases the money made from service fees ($50 per visit). Finally, they claim that Fidelity rewards contractors who deny claims by giving them more calls.

In addition to the lawsuit against Fidelity, lawsuits have been filed against other home warranty companies for allegedly improperly denying clients' claims.

Bad Faith Insurance Lawsuits Filed against Home Warranty Companies

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