Arizona reveals $12M settlement against home warranty firm

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(The Center Square) – Arizona Attorney General Kris Mayes on Tuesday announced the largest settlement against a home warranty company in the state's history.

The nearly $12 million settlement involves Choice Home Warranty, a New Jersey-based service contract company operating in Arizona and other states.

The Democratic attorney general began a Phoenix news conference by saying that “Choice Home Warranty denies the allegations and has not admitted any wrongdoing as part of this settlement agreement." She went on to tell reporters the settlement stems from a 2019 lawsuit alleging the company “spent years exploiting Arizona families, veterans, and senior citizens.” 

That, said Mayes, is something she will not allow as attorney general. 

“Companies that prey on our most vulnerable residents hide behind the fine print and pocket millions while leaving hardworking Arizonans without the protection that they've paid for and desperately needed,” said Mayes. “These were not simple misunderstandings or a few isolated incidents.”

According to Mayes, since 2013, more than 1,500 Arizona consumers have filed complaints against this company with the Attorney General’s Office, the Arizona Department of Insurance and Financial Institutions, and the Better Business Bureau.

“They paid for warranties believing they would cover major repairs or replacements when air conditioning units failed in the brutal Arizona heat, or when their water heaters gave out, or when their appliances broke down. But when they [consumers] needed that coverage the most, Choice Home Warranty was not there for them,” said Mayes. “Instead, we heard from customers who told us that they found themselves on the phone with sales representatives who had failed to disclose critical exclusions and limitations, and in some cases, these representatives had apparently outright lied about what the warranties would cover.”

One of the Arizonans featured at Tuesday’s press conference was homeowner and Choice Home Warranty customer Roger Pencek. In June 2019, when temperatures in Phoenix reached 108 degrees, his air conditioning compressor failed.

“I filed a claim, but what followed was not the process designed to help,” Pencek told reporters. “It was a process allegedly designed to avoid paying.”

Choice Home Warranty’s technician determined “clearly and  unequivocally that the compressor had failed due to normal wear and tear,” which the warranty is supposed to cover, Pencek said.

But he added, “Choice Home Warranty authorization department took that technician’s honest diagnosis and re-characterized it as language that conveniently converted that covered claim to a denied claim.”

Pencek said that while in his presence, the technician called Choice Home Warranty three times in a single day to reaffirm that his diagnosis was normal wear and tear. Even so, Pencek said, “Choice ignored him.”

Mayes also told reporters Tuesday that “Choice Home Warranty had already been investigated and settled with the New Jersey Attorney General's Office in 2015 for $789,000” before “expanding their operations and selling policies to consumers all across the country,” including Arizona.

When approached for comment, Choice Home Warranty told The Center Square that it is pleased to have reached a resolution with the Arizona Attorney General’s Office regarding these claims.

“Importantly, the resolution includes no finding of wrongdoing, no admission of liability, and no civil penalties,” James E. Mostofi, CEO of Choice Home Warranty, told The Center Square Tuesday. “While we strongly believe our practices have always been fair and compliant, we agreed to reimburse the State of Arizona for certain legal costs in order to put this long-running matter fully behind us and avoid further expense and distraction.”

Mostofi added that, for more than a decade, Choice Home Warranty has focused on delivering reliable service and peace of mind to homeowners nationwide.

“We appreciate the opportunity to close this chapter and remain committed to serving our customers with integrity, clarity and accountability,” said Mostofi.

The lawsuit was filed in October 2019 by then-Arizona Attorney General Mark Brnovich.

During Tuesday's press conference, Mayes didn't answer questions about the Republican-controlled Legislature's resolutions calling for her resignation following her comments about federal immigration officers. Mayes has refused to resign, as reported previously by The Center Square.