You diligently made payments on your car warranty, but now the engine failed, and the warranty company wants you to pay for diagnosis.  Their purpose seems clear, impose a large cost to prevent you from filing,  What do you do?   Let's look at the caselaw, statutes, and strategies.  If they horse you around, you want to file a claim in court or arbitration and here are some arguments.  

1. Cases on tear-down and contract language

"the disputed language in the contract was the sentence “[t]he limited warranty holder is responsible for all charges relating to the tear down and diagnosis of the vehicle,” specifically the meaning of the word “diagnosis,” which the court found ambiguous and the court ultimately agreed with Tang that the contract requires only that the car owner pay for the investigation to determine whether a covered part has failed, and does not give CARS the right to require a car owner to pay for an investigation to determine what caused that part to fail... this interpretation was supported by the immediately following sentence—“If it is determined that the covered component has failed and that the estimate for the repairs is agreed upon by the adjustor, an authorization number will be issued ...”—which suggests that the purpose of the diagnosis is to determine whether a covered component has failed, not why it failed. The court reasoned that because by March 25, 2006, three different mechanics had concluded that covered parts, cylinders and rings, were damaged and that the engine needed to be replaced, CARS was obligated to either approve repairs or inspect the engine at its own expense. Because CARS failed to issue the authorization number or inspect the engine, the court concluded that CARS breached the contract, and the implied covenant of good faith."  Tang v. C.A.R.S. Prot. Plus, Inc., 301 Wis. 2d 752, 767, 734 N.W.2d 169, 176 (2007)

2. Types of claims

There the Court relied upon the contract language and there's a doctrine saying any ambiguities are construed against the drafter. Secondly, the company may advertise prompt payment of claim, and their promotional material may not mention a fee.

Claim may be filed saying the company violated state deceptive practice laws. For example, if the policy was marketed by phone, a federal regulation states, "It is a deceptive telemarketing act or practice and a violation of this Rule for any seller or telemarketer to engage in misrepresenting, directly or by implication, in the sale of goods or services, any of the following material information: a. Any material aspect of the performance, efficacy, nature, or central characteristics of goods or services that are the subject of a sales offer, 16 C.F.R. §310.3(a)(2)(iii)."

Another case said

"automobile advertising by dealers, whether printed or broadcast, should be in plain language, clear and conspicuous, and nondeceptive. Deception may result from direct statements in the advertisement or from reasonable inferences that may be drawn from an ad, or from disclaimers that contradict, confuse, unreasonably limit or materially modify a principal message of the advertisement. Deception may also result from the failure to clearly and conspicuously disclose any material facts, including limitations, disclaimers, qualifications, conditions, exclusions, or restrictions.”, Carovillano v. Sirius XM Radio Inc., 715 F. Supp. 3d 562, 574 (S.D.N.Y. 2024).

3. Magnuson-Moss, Plain Language and State Warranty Laws

The Magnuson-Moss Warranty Act ("MMWA") is "a remedial statute designed to protect the purchasers of consumer goods from deceptive warranty practices." The MMWA is a "consumer protection statute that requires transparency in warranties on consumer products and establishes minimum criteria for different types of warranties and warranty-like products." Ware v. Best Buy Stores, L.P., 6 F.4th 726, 728 (7th Cir. 2021)

The Magnuson-Moss Act provides:

Any warrantor warranting to a consumer by means of a written warranty a consumer product actually costing the consumer more than $15.00 shall clearly and conspicuously disclose in a single document in simple and readily understood language, the following items of information:

(2) A clear description and identification of products, or parts, or characteristics, or components or properties covered by and where necessary for clarification, excluded from the warranty;

(3) A statement of what the warrantor will do in the event of a defect, malfunction or failure to conform with the written warranty, including the items or services the warrantor will pay for or provide, and, where necessary for clarification, those which the warrantor will not pay for or provide;

Additionally state warranty or Plain Language laws can have similar requirements.

4. Sue the dealer too

Sadly many simply rely upon the company's self-serving interpretation of laws instead of researching this on their own. Many consumers who pursue these matters frequently get some reasonable form of satisfaction.  Sometimes the policy will be sold by the dealer and then both the warranty company and the dealership should be included. Thus the dealer could be conceivably responsible if it said the warranty covers the cost of transmission or engine repair without disclosing the tear down requirement or other limitations.

Sadly many simply rely upon the company's self-serving interpretation of laws instead of researching this on their own. Many consumers who pursue these matters frequently get some reasonable form of satisfaction.