Lawsuits have been filed in the Atlanta area and elsewhere against several home warranty companies claiming that the companies unlawfully reject claims. Such companies offer extended warranties with maintenance agreements to keep household appliances and other mechanical devices working.
Retailers, such as Best Buy, Home Depot, Sears, and Wal-Mart offer customers the option of purchasing an extended warranty to insure coverage on their purchases after the usual one-year manufacturers warranty expires. However, the retailer doesn’t handle the extended warranty. The retailer only offers it at the time that the product is bought. Third party administrators (TPA) provide the services that are outlined in the extended warranty.
Home warranty or maintenance agreements usually cover such items as central air conditioners, dishwashers, garbage disposals, heating systems, ovens, refrigerators, and washers and dryers. However, additional coverage can be bought on pools, spas, and other mechanical devices.
The maintenance agreements cover damages caused by normal wear and tear. They do not cover pre–existing problems, misuse, or owner neglect. They simply extend beyond the manufacturers warranty. They do not overlap that warranty. Such warranties are provided by 2-10 Home Buyers Warranty, American Home Shield, Cross Century Home Services, Fidelity National Home Warranty, and Old Republic Home Protection.
The lawsuits claim that legitimate claims were denied the policyholders or put off by the insurance company. Bad faith insurance can also consist of not filing paperwork quickly enough, not investigating a claim correctly, and using irrational grounds to reject a claim.