Types of Сlaims for Failure to Pay Warranty
You sign up for a warranty, and the company fails to pay a legitimate claim. What kind of claims can you bring? I'll try to explain. My office handles warranty claims as do other lawyers, but part of this page is to help people handle claims on their own. This page deals with types of claims; other pages deal with negotiation and other topics.
Lawyers talk about liability (grounds for holding someone responsible) and damages (what type of financial or other injury a person suffered). This page discusses liability.
1. Breach of Contract
The basic claim is breach of contract: the company agreed to pay for certain claims and failed. Proving that may be more complex than you think because it involves reviewing your agreement. Sometimes a dealer may paint a picture of broad coverage, but the reality involves exclusions and disclaimers.
Dealing with Disclaimers
If there are ambiguities, some legal doctrines come into play. A consumer's reasonable expectations should be fulfilled—an agreement marketed to cover an engine should not have an exclusion for the engine.
The "theory of reasonable expectations places substance over form and seeks to avoid frustration of an insured's reasonable expectations as to insurance coverage.” Carper v. State Farm Mut. Ins. Co., 758 F.2d 337 (8th Cir. 1985). In analyzing the meaning of an insurance policy provision, it is necessary to determine the reasonable expectations of the average insured. If there is a reasonable basis for a difference of opinion as to the meaning of an insurance policy, the language at issue would be deemed ambiguous and thus interpreted in favor of the insured.
Federal Ins. Co. v. International Business Machines Corp., 942 N.Y.S.2d 432 (2012)
2. Magnuson-Moss Act
The basic rule in American courts is that each party pays their own attorney's fees. That can sometimes lead to disappointment—you mean I'm supposed to get a $5,000 repair paid but, after lawyer's fees, will only receive $2,500? For claims of breach of a consumer warranty, the Magnuson-Moss Act can allow the consumer to recover legal fees.
That can not only enhance the recovery but lead some lawyers to take the claim relying upon what's called fee-shifting.
It's not all roses—people usually have a hard time understanding what they don't want to understand. Dealers will pretend not to understand or refuse to pay such claims.
3. Deceptive Practice Claims
Some states provide additional damages for deception or fraud. If you can prove that not only did the warranty company fail to pay the claim but deceived the consumer, you can recover additional damages, triple in some states.
Additionally, Consumer Fraud or Deceptive Practice laws provide for attorney's fees, but again warranty companies will resist. Sometimes the threat of such claims can lead the company to at least pay the amount they are required to, leading to a reasonably quick resolution.
4. Failure to Provide Proper Disclosures
Some states require warranty companies to register and provide certain disclosures in their warranties. The warranties are supposed to be written in plain language but are often confusing, with critical language sometimes contained on the back page or in small print.
5. Plain Language Law
Many states have Plain Language Laws which apply to consumer contracts generally and again require they be written in clear language which the warranty companies routinely ignore. When the companies try to defeat legitimate claims with obscure disclaimers, one can note this violates Plain Language Laws.
Plain language law requires consumer contracts to be written in nontechnical, easily understood language. This accords with national standards set forth by the Federal Trade Commission (FTC):
- Prominence: Is the disclosure big enough for consumers to read easily? The fine-print “disclosure” and its TV cousin, the fleeting super, have long been the subjects of FTC law enforcement. Consumers shouldn't have to scan an ad with a magnifying glass to pick up on material details of the deal.
- Presentation: Is the disclosure worded in a way that consumers can easily understand? Using legalese or technical terminology reduces the likelihood that consumers will get the message. Burying important information in a dense block of text is another common tactic that signals “don't read me.”
- Placement: Geography matters. Is the disclosure where consumers are likely to look? An FTC settlement challenged as ineffective a key disclosure that ran down the side of a print ad perpendicular to the main text.
- Proximity: Is the disclosure close to the claim it modifies? Tiny type aside, another problem with footnotes is their distance from the prominent headline or splashy text designed to draw the consumer in. If you need to include key qualifications or conditions, remember this maxim: What the headline giveth, the footnote cannot taketh away.
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Keywords: consumer rights attorney, consumer fraud lawyer, breach of warranty