Home Warranty Insurance and the Manufactured Home

Washington, DCIt’s an extended warranty question that was bound to come up sometime and begs to be asked: when we have a conversation about home warranty insurance, where are the jurisdictional parameters when it comes to manufactured homes? Not mobile homes or trailers per se, but large buildings complete with front porches and the like.

Unlike a home that is constructed from scratch on-site, the manufactured home is put together in a factory and delivered to the site in pieces - usually, sections of the main structure (which come complete with interior drywall, cupboards and counters) and then the roof. Advocates of this kind of construction note that putting a house together inside a factory using dry materials is superior to exposing a house to all kinds of weather during critical construction phases.

Here’s the rub: what happens if there is a problem with the installation of the manufactured home? Does regular home warranty insurance apply? Are home warranty companies involved?

These questions were partially answered as the result of a lawsuit filed by plaintiffs who had issue with the contractor hired to install their manufactured home. The structure, valued at $160,230 in workmanship and materials, was described as a triple-wide manufactured home complete with upgrades such as multiple porches and decorative brick. Overall, the size of the home was described as encompassing 2,180 square feet.

The home warranty lawsuit was based on application of the Magnuson-Moss Warranty Act, which extends federal protection for faulty consumer products.

Is a manufactured home a consumer product?

That’s a question that was broached by an appellate court, after the US District Court for the Middle District of Tennessee ruled that the defendant in the case had violated the Act - as well as applicable law in Tennessee - by improperly installing the plaintiff’s manufactured home on its foundation.

The district court, however, did not determine whether the manufactured home qualified as a “consumer product.”

It came up, however, when the plaintiffs - apparently unhappy with the amount of the damage award - appealed and the appellate court questioned if there was, indeed, federal jurisdiction given the definition of a manufactured home as it relates to consumer products.

Is it a house? A home? A consumer product?

During ensuing oral arguments in Bennett v. CMH Homes, Inc.; MiLW No. 01-86911, the 6th US Circuit Court of Appeals determined that there was, indeed, federal jurisdiction in the case. However, the Court also found that a manufactured home did not qualify and could not be defined as a “consumer product,” and as such could not be tried against the Magnuson-Moss Warranty Act.

“The text of the Magnuson-Moss Warranty Act and its legislative history provide the guidance necessary to resolve this question of interpretation,” the appellate court said in a 14-page ruling. “During Senate hearings considering the Act, Senator Broyhill of North Carolina asked Senator Moss, a sponsor of the Act, ‘(w]ould a house be within the definition of consumer product?’ …

“Senator Moss answered that ‘(a] house would not fall within the definition of consumer product since a house is not “‘tangible personal property. ”’ …

“Here the house is not a house-trailer or a mobile home designed to be moved. Once it is constructed on the site, it is permanent. It would be taxed as real property and, at 2180 square feet, has the size and appearance of a regular house.

“The plaintiffs’ home is more like a house than ‘tangible personal property,’ and thus is not a ‘consumer product’ as was intended to be regulated by the Magnuson-Moss Warranty Act. …

“Dictionary entries for the words ‘consumer’ and ‘consumer goods’” during the general era of the Magnuson-Moss Act’s enactment describe products that are expendable or meant to be replaced periodically - not a permanent dwelling.”

Home warranty insurance would be extended from the manufacturer of the new home for an agreed period, with the potential for an extended warranty once the primary warranty period expires. To that end, any frustration felt by a homeowner living in a manufactured home covered under an extended warranty by an insurer practicing bad faith insurance is justified and understandable, especially if the basic tenets of a policy that remains in good standing include coverage and protections not provided by the insurer. Many a home warranty lawsuit has its basis in a legitimate insurance claim denied.

However, when it comes to manufactured homes, it appears as if the Magnuson-Moss Warranty Act does not apply. The appellate court noted that plaintiffs are free to pursue any claims they have concerning violations to state law.