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When Home Warranties Go Wrong

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Omaha, NEWhen homeowners purchase appliances, they often purchase home warranty insurance to protect themselves. After all, appliances can be expensive to replace - and can cause extensive damage when they break down. Getting a home warranty seems like a good idea, until the home warranty companies fail to honor their agreement and consumers find their insurance claim denied.

That is one complaint about home warranty companies: that they unfairly deny warranty claims for no reason. But another complaint is that when they actually get to the repairs, they fail to do a proper job. One couple in Omaha reportedly accused a warranty company of improperly replacing three furnaces in their home, according to a report by NBC News (1/30/13). In fact, the report notes that the furnace replacements did not include proper city permits or inspections.

According to the report, a lawsuit has been filed against American Home Shield, a home warranty company, alleging the company failed to provide proper repairs to warranty holders. Lawsuits have previously been filed against other home warranty companies, alleging they failed to honor the terms of their warranties, leaving customers without working appliances and refusing to cover the cost of repairs.

In 2011, American Home Shield settled a lawsuit alleging the company paid kickbacks to real estate agents for promoting the company to clients. The Real Estate Settlement Procedures Act makes payments for referral of any services related to the settlement of a home sale illegal.

American Home Warranty did not admit to any wrongdoing in the settlement. According to the Los Angeles Times (7/3/11), in 2010, American Home Warranty had sales of $657 million. Home warranties usually cost between $400 and $500.

But many clients say long wait times for service, combined with poor repair jobs and unreasonable denials make the policies useless. One policyholder writes that a home warranty company denied her claim because their contractor determined her heater’s motherboard was damaged by a water leak.

“There were no signs of any leaking in the house,” writes Sandra M. (real name withheld). “The repairman we hired to replace the heater determined that the motherboard was burned out due to normal wear and tear. No obvious sign indicated that the damage was caused by water leaking. When I requested for reimbursement, the home warranty company gave me a hard time and tried to deny my case.”

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