Olathe, KSArt Chartrand, an attorney with the National Home Service Contract Association, wants to get the record straight regarding some confusion over the American Home Shield Corporation. “There is no such thing as home warranty insurance,” says Chartrand, “and home warranty companies such as American Shield are not in the insurance business.”
American Home Shield is a member of The National Home Service Contract Association (NHSCA), a non-profit industry trade organization comprised of member companies serving home service contract providers and consumer interests throughout the US. It deals with existing homes and home services only.
Chartrand, who has represented the home service contract (home warranty) industry since 1992, wants the public to know that warranties and insurance is a complex industry comprising four separate industries. “I work mostly in the insurance industry and policies can be confusing,” he says, adding that the media can feed into the confusion. “One of the problems is that some people don’t understand what products are insurance, and the term insurance can get misused. As well, there is a misconception that a warranty means insurance, but there is no such thing as home warranty insurance.”
To make things more complicated, Chartrand says there are programs that new builders are involved with but his association has nothing to do with builders. “The bottom line is that you have new homes and builder warranty programs,” he explains. “Defects in construction have nothing to do with home warranty—it is a different area of law. And it has nothing to do with insurance that I am aware of. Further, warranty per se is generally regulated under federal law and insurance under state law—they are totally separate.”
So a defect in a new home and problems with builders and new homes have nothing to do with American Home Shield, although the media has pointed the finger at the home warranty company regarding these issues.
“It is unfortunate that some people confuse home warranty companies like American Home Shield with insurance companies and I am sure it happens all the time,” says Chartrand. “I just want to make it clear that they are separate. To reiterate, the home warranty industry is not the same as builder home warranty programs—they are two different industries.
“As for the lawsuit against American Home Shield, you can allege anything you want in a lawsuit and it is rarely proven in a class action. I want to emphasize that American Home Shield does not sell insurance. Neither do they have an insurance product, nor are they in the insurance business. Instead they sell home warranty, which is the same thing as home service contracts.”
(In 2010 American Home Shield settled a class action lawsuit that alleged the warranty company "engaged in a pattern and practice of failing to fulfill its contractual obligations to its customers” by failing to provide repair and replacement services even when customers were entitled to those services, and improperly denying claims during the first year of home service contracts. And last June 2011 another class action lawsuit alleged improper denials. And there are more recent allegations.)
“I admit that the NHSCA can be partially to blame for some confusion but it is historical,” adds Chartrand. “Most home service contracts have been historically sold in conjunction with the resale of a home and real estate agents just called them ‘home warranties’ and the moniker stuck.”
And one more thing: Although the term “home warranty” has been used historically throughout the industry, the correct term is “home service contract”. Got that clear? If not, Chartrand asks that you check out the NHSCA FAQ page.
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