The Arizona Attorney General’s Office has reached an $11.8 million settlement with a New Jersey-based home warranty company accused of defrauding home owners.
Former Attorney General Mark Brnovich first filed a lawsuit against Choice Home Warranty in 2019 for allegedly defrauding Arizona homeowners who purchased warranty policies to cover expensive, unexpected home repairs to air conditioners and appliances.
Arizona Attorney General Kris Mayes, who continued to pursue the lawsuit after taking office in 2022, accused the company of selling policies to homeowners before refusing to pay for repairs. She claimed the company failed to disclose policy exclusions and limitations and preyed upon vulnerable people, including home owners suffering from dementia.
“In some cases, these representatives had apparently outright lied about what the warranties would cover,” Mayes said. “Families discovered too late that the fine print took away much of what the sales pitch had promised.”
The company settled litigation in New Jersey in 2015.
As a part of the Arizona settlement, Choice Home Warranty denied the allegations.
“Defendants expressly deny all allegations of liability and wrongdoing and enter this Consent Judgment solely to avoid the burden, expense, uncertainty, and distraction of continued litigation,” according to court filings.
But some of the company’s customers tell a different story.
Roger Pencek said he filed a claim after his air conditioner broke down in June 2019. He claimed a contractor hired by the company diagnosed the problem and considered it to be “normal wear and tear” covered by his warranty.
But Choice Home Warranty refused to pay and instead blamed the problem on a non-covered issue, Pencek alleged.
“They basically gave me the run around,” Pencek said. “Meanwhile, my family was living in 108 degree weather, heat in Phoenix.”
He ultimately paid $2,700 out of pocket to repair the system.
Philip Angelotti told a similar story, saying his 93-year-old father paid $5,800 to replace an A/C system in 2019 and being told “everything would be covered.”
Much like Pencek, Angelotti accused the company of fraudulently claiming that a covered problem was actually the result of “rust” — which was excluded under his policy.
“They just wanted him to give up and they were going to wait him out,” Angelotti said.
Mayes said the $11.8 million settlement is the largest of its kind in state history. Mayes said around 60,000 Arizonans may have bought policies from Home Choice Warranty.
Choice Home Warranty customers who purchased a warranty over the phone between January 2013 and January 2023 to cover a home located in Arizona may be eligible to receive restitution. The Attorney General’s Office will be releasing more information on how to apply in the future.
“My commitment to consumers is that we spend as much of the $11.8 million as possible on restitution to get money back to consumers in Arizona,” she said.
The judgement also requires the company to reform its sales practices and provide explicit disclosures to customers about what is covered by a policy.
Investigators with the Attorney General’s Office may also pose as customers to ensure the company is complying with those rules, Mayes said.
James E. Mostofi, CEO of Choice Home Warranty, issued this statement:
“We are pleased to have reached a resolution with the Arizona Attorney General’s Office regarding these claims, which were first raised more than seven years ago. Importantly, the resolution includes no finding of wrongdoing, no admission of liability, and no civil penalties.
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.
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.”
EDITOR'S NOTE: The story has been updated to add a statement from the Choice Home Warranty CEO.
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