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What To Do If a Home Warranty Is Not Honored
By Chris Ozarowski MONEY RESEARCH COLLECTIVE
Having your home warranty claim denied can be a frustrating experience. If you believe your home warranty provider has denied your claim unjustly, there may be things you can do. Read on to learn more about what to do when a home warranty is not honored, including how to appeal a denied claim and when to seek other alternatives.
Why is your warranty not being honored?
Home warranty providers specify coverage limits in their home warranty service contracts. Home warranty coverage generally extends to home systems or appliances that break down due to normal, expected wear and tear. If the appliance or home system components in need of repair are not included in the coverage terms or the damage did not come as a result of normal wear and tear, the home warranty company will deny your claim.
Here’s more on the reasons home warranty providers may refuse to cover the repair or replacement of home systems or appliances.
Improper installation and maintenance
Home warranty companies may refuse to repair or replace covered home appliances or home system components if they determine that the initial installation was done improperly. Such an error could mean your home system or appliance is forced to function in a way it wasn’t designed to do. In turn, that allows home warranty companies to argue that any malfunctions resulted from that mistake, rather than from normal wear and tear.
Obviously, problematic installations can easily result from DIY efforts by the homeowner. But they may occur even if a licensed contractor performed the work, but did so incorrectly.
Then there’s how well, or not, you took care of the warrantied items. Under all home warranty service agreements, the homeowner is responsible for ensuring all covered systems and appliances are adequately maintained. If an appliance or home system doesn’t get that care, a home warranty provider may hold faulty maintenance as responsible for any malfunction or breakdown, and deny a claim for repair or replacement.
Lack of warranty coverage
One of the simplest reasons for denial of home warranty claims is if the appliance or home system component is not covered under the warranty policy. Even when a home warranty plan covers particular appliances or home systems, such as a washing machine or plumbing, the service agreement may exclude certain components or stipulate situations in which coverage does not apply.
For example, the glass components of home appliances (such as the glass door of an oven) are often not covered. And electronics, such as the display and motherboard of a smart fridge, may also be beyond the scope of coverage.
Improper use
Since your home warranty plan only covers repairs and replacements in the event of damage caused by normal wear and tear, your home warranty company requires that items be used normally. It can deny claims, then, that it deems are due to improper use.
For example, if the home warranty company concludes that a washing machine broke because it was overloaded, it could deny the claim, citing improper use.
The warranty’s coverage limits
Coverage under your home warranty policy may be capped at specific dollar amounts, either for overall repair costs or for specific systems or appliances.
Those caps may mean that repairs for the year above a certain amount may not be covered. Home Warranty of America, for example, has a total annual coverage limit of $15,000. If the company pays $15,000 worth of repairs or replacements by say, the spring of a given year, you will have reached the coverage limit. Subsequent claims will be denied through the end of the year.
Other home warranty providers also limit their total liability for repairs by individual systems or appliances. For example, Select Home Warranty has a $3,000 annual limit for repairs to heating and air conditioning systems and a $500 limit for appliances and other home systems (such as HVAC, plumbing and electrical).
As with the annual limit, once you reach the annual coverage limit to repair or replace a covered appliance or home system component, you’ll have to pay out of pocket for additional repairs until your next policy cycle begins.
Secondary damage
Home warranty companies don’t generally cover secondary damage that occurs as a result of the malfunction of a covered home system or appliance. In many cases, secondary damage is more costly than repairing the initial malfunction.
For example, suppose a malfunction of your covered washing machine or water heater causes water to overflow, damaging your carpet and hardwood floors. In that case, your home warranty company might pay for the repair or replacement of the damaged appliance but will not pay to replace your floor, carpet or for any other damage resulting from the overflow.
How to handle home warranty claim denials
If you believe your home warranty claim was denied without cause, there may still be ways to get reimbursed for the repair or replacement of your covered system or appliance.
1. Verify your coverage documents
The first step after your home warranty company notifies you it has denied your claim should be to review your home warranty coverage to verify that the reasons cited for the denial comply with your warranty provider’s coverage terms.
Obvious inconsistencies between your company’s denial justification and the terms of your contract should be a trigger to action.
2. Reach out to your warranty provider
The next step should be to contact your warranty provider and ask about the documents it requires to appeal a claim denial. Write down the names of all the customer service representatives you speak to, what they told you, and the dates and times of your conversations with them. These may prove useful later on in the appeal process.
3. Bring in a third-party contractor
If your home warranty provider denies your claim because of improper installation, improper use or lack of maintenance, you can choose (at your expense) to bring in a reputable, third-party service technician to verify whether the company’s assessment is accurate. Get an inspection report from your contractor listing the cause and extent of the damage to your home system or appliance. If your third-party contractor believes the cause of the malfunction is different than the one given by your home warranty provider, this may help your case during your appeal.
4. Start the appeal process
An appeal or the process of dispute resolution can provide a chance of getting reimbursed in the end. To start the appeal process, reach out to your home warranty provider and indicate you would like to appeal its decision to deny your claim.
To do so, begin by calling the phone number on your home warranty contract or emailing customer service. Follow the home warranty’s appeal requirements. You will probably need to gather and submit any documentation that can support your case, including receipts, repair estimates and the third-party inspection report listing the cause of damage.
Keep in mind that filing an appeal can be a lengthy process. You may have to follow up with your warranty provider several times. And even if your appeal is successful, you may only be reimbursed for a portion of the repairs.
5. Consider taking legal action
If my appeal is denied, can I sue my home warranty company? The answer is “it depends.”
Since a home warranty is a type of contract, you may be able to file a breach of contract lawsuit against your home warranty provider if it refused to honor its side of the agreement. If you win the lawsuit, you could get reimbursed for system/appliance repair costs as well as legal fees. Consult attorneys in your area that specialize in consumer protection or contract law.
Now, however, some home warranty contracts limit your ability to take legal action by forcing you into arbitration. It’s a form of alternative dispute resolution that takes place outside the traditional court system. If your home warranty contract includes a dispute remedy or arbitration clause, you would have to employ the services of an arbitrator as opposed to an attorney. The arbitrator would have the sole authority to resolve the dispute, and their decision would be final.
6. File a complaint
In some states, the proper recourse for dealing with local home warranty companies is to contact the attorney general’s office. Attorneys general often deal with insurance or extended warranty fraud cases. Check your attorney general’s website or call the office for information on how to file a complaint against a home warranty company.
You may also file a complaint with the Better Business Bureau. As BBB’s rating calculations include the number of unresolved complaints against a company, home warranty providers who value their reputation may seek to offer resolutions to customer complaints.
How to avoid denied claims
A few steps can minimize your odds of a home warranty claim denial.
1. Check your manufacturer’s warranty
You might not need a home warranty at all in order to enjoy protection. Check whether your appliances are covered under the manufacturer’s warranty or if your credit card offers extended warranty protection. It’s important to understand the scope and length of coverage of a service contract, especially in light of the average lifespan of your systems or appliances and their repair or replacement cost.
2. Conduct routine maintenance on appliances and home systems
Properly maintaining your home systems and appliances can help you extend their useful life. Yet it can also improve your odds of approval for a claim filed under a home warranty. Keep a maintenance log for all your systems and appliances. It could serve as evidence should your home warranty provider ever deny a claim on the basis of improper maintenance.
3. Choose a reputable warranty company that fits your needs
Like insurance companies, home warranty providers make a profit by receiving more in premiums than they pay out in claims. With this in mind, it’s important to understand what your home warranty covers — and excludes — before you sign a contract. It’s equally important to research your options carefully and choose a warranty provider with a good reputation for customer service. Check whether the company replies to customer complaints on sites like bbb.org and read customer feedback to spot potential problems.
4. Understand your rights under warranty law
When you sign a warranty contract, you and the company commit to fulfilling certain requirements. The home warranty provider is legally obligated to uphold their end of the bargain. If they fail to do so, you may be entitled to restitution in a court of law.
However, as noted above, you may never get to a courtroom. Some home warranty contracts include a clause that prevents you from seeking litigation against the warranty provider and forces you into a dispute resolution process called arbitration.
Read your contract carefully to understand your options and take the time to verify whether the company clearly outlines its cancellation, claims and appeals processes. Doing so can help you avoid surprises and potential scams.
Stay protected with the right warranty plan
If you intend to switch to a new home warranty provider or would like to purchase your first home warranty plan, it’s good to know who the top home warranty companies in the U.S. are and how they compare to one another. To learn more about home warranties and providers, consult our ranking of the best home warranty companies of 2022.
