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  1. #1

    Default Cannot Pursue Home Warranty Claim for HVAC Due to Inadequate Repair by Contractor

    My question involves a consumer law issue in the State of: AZ

    I apologize upfront for the length of this post.

    I bought a foreclosure under a FHA203K loan. The initial Home Inspection showed many items that needed to be addressed. One of the items was the HVAC on the roof. The house is a tri-level and there are two units; one large which handles the upstairs and main floor, the smaller handles the lower level. The Home Inspection report showed three items regarding the HVAC: 1) the split was too low and the units needed "service and assessment"; 2) the condensation lines needed to be replaced; and 3) the cover to an electrical fuse box was missing. I was "recommended" to a rehab 203K contractor from the mortgage broker - we'll call them "AAA Contractors". When discussing what work we wanted to have done with AAA and made a lengthy list, however we decided initially to NOT have the ac units replaced with new units since - according to the inspection report - the units "worked" but just needed to be "serviced and assessed". The other two items were included in the contractor’s items list - replacing the condensation lines and replacing the fuse box cover.

    When the home closed, I purchased a Home Warranty through a national and well-known warranty company only after speaking to the Vice President. I was upfront and told the Vice President that the units on the roof were 20 years old, yet the Home Inspection did not "fail" the units but simply stated they needed service and assessment. I asked if the units failed would they replace the units. The Vice Pres specifically told me "yes".

    AAA started work on the house and several things were shoddy. It was a battle with the contractor the entire process, from using substandard contractors, to poor materials, to delays. During much of this work, we shut down the HVAC so the construction dust would not go into the coils. Prior to shutting down the units, the contractor sent out an AC Service company to review the units. His initial report was that the units needed to be charged (which he did) but otherwise were operational with a 16 degree split. I was pleased that according to his report that the units did not need to be replaced or have further service work needed, so we shut down the units during construction.

    3 weeks later, we fired up the ac and it blew cool. The contractor was done with his construction work and wanted to get "signed off" on the project so the final draw would be sent. I reviewed the checklist of items with the contractor and he specifically told me that the 3 items regarding the ac were resolved; the units were serviced an operational, the condensation lines replaced, and the fuse box cover replaced. I signed the final draw and acceptance of his work.

    2 days later, cool air- not cold - was blowing from the larger of the two units. This was during record heat of 117 degrees. We decided to let the ac run all night long figuring the extreme heat was affecting performance. In the morning, the ac was not cold at all. I called the contractor and he told me his work as done, but if I wanted to pay for "his guy" to come back out I could. Instead, I called the Home Warranty Company and reported the units were failing, since, according to the contractor, all the work was done and the units were "operational and in good working order".

    The Warranty Company sent out their "own" ac repair company to assess the units. They reported the coils had "irreparable leaks" in them and the units needed to be replaced. Because the warranty was purchased only a few months earlier, the Warranty Company requested a copy of the Home Inspection report, showing "the units were in good working order" before the warrant would take effect. The latest date after all three items were repaired would be the “effective date” of coverage and as long as the unit failed AFTER that date, then the units should be covered. I explained the Inspection report would show problems but those problems were fixed - according to my contractor. They requested a copy of the service invoice showing the work was done. I contacted the contractor who gave me the name of "his guy" who eventually sent me a letter stating the units were serviced and charged and operational. I sent in the information to the Warranty Company as requested.

    The Warranty Company denied the claim stating there were other factors that needed to have been fixed prior to the units failing that were not shown on the initial letter from the ac service company. If I could produce documentation that the condensation lines were repaired and the fuse box was fixed and the ac units were “operational and in good working order” prior to the failure, where “good working order” meant that all the items on the Home Inspection were resolved, they would then cover the claim and replace the unit with a new one.

    The next several days I asked MULTIPLE times for documentation from AAA Contractors. They kept stalling and postponing. Finally I got a pdf of an invoice showing an "electrical disconnect" was replaced. I asked the contractor if that meant the "fuse box" was fixed and he said yes. I then asked about the condensation lines, and he referred me to the ac guy he hired. I STILL haven’t gotten confirmation yet.

    Going on 2 weeks now, I decided to climb to my roof and look myself. Once on the roof, I was angered to see the condensation lines were NOT replaced, the fuse box was NOT fixed, and even the shingles in the "mechanical area" under the ac units that were supposed to have been replaced were not!

    Here’s my problem. I now know the work was NOT done on the units prior to me reporting the failure to the warranty company, who now have documentation that the one unit has failed. I can’t knowingly continue to pursue the claim since I know now that not all the work was done, and I don’t want to be accused of attempting insurance fraud - plus it’s just not honest. Since the unit failed "prior" to the units being fully repaired, there is no way now that the warranty company will honor the claim. Due to the contractor’s shoddy work, poor follow up, mistruth and deceptive practices, I now have a house I can’t live in and I cannot afford to replace the ac unit out of pocket. If they HAD done the work in a timely fashion as they had told me, then the warranty company WOULD have replaced the units. I also have multiple emails from the contractor stating the work was done as evidence of their mistruths. Due to their actions, I feel I have a claim against the contractor for not only completing his work, but also for a new ac unit since it was their LACK of work which ultimately was the cause for the denial of the claim.

    Thoughts?

  2. #2
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    Default Re: Cannot Pursue Home Warranty Claim for HVAC Due to Inadequate Repair by Contractor

    If the contractor's AC service company examined the units, determined that they needed to be charged, and stated that they would work with a 16 degree split, and you were happy with that assessment, then that's what happened. As you note, when you later tested the units they worked.

    The contractor apparently was neither asked nor contracted with you to replace the fuse box - you apparently asked only that he replace the cover. I don't know why the contractor would answer "yes" to the question of whether repairing an "electrical disconnect" involved the replacement of a fuse box, but we're obviously not even close to synonymous concepts. Given that the AC subcontractor indicated only that "the units needed to be charged" it is more than reasonable to infer that the subcontractor did only that. I'm not sure about how "the shingles in the 'mechanical area'" factor in, as you don't mention them until the end; it's not clear how they might affect the operation of the air conditioners.

    The first question is thus one of contract - what did you hire the contractor to do, and did he do it. If you hired him to bring out an AC sub to investigate the unit and to perform the repairs identified by that sub, and he did that, the issues become more difficult. Did he have an incentive to bring out a sub who would identify fewer repairs than were needed, for example if he agreed to perform the repair for a set fee and was paying the sub out of that fee, or was he simply passing the sub's charges on to you? Did he have any cause to believe that the sub's work would be, or was, inadequate?

    The second question is whether, if the contractor through his sub did less than the contract called for, did the problem relate to the need for additional repairs? If the contract was (for example) "replace the coils" and they were not replaced, you paid for new coils and you should get them. If the contract was "replace shingles" and they were not replaced you should get new shingles but it remains unclear how that would affect the performance of the A/C units.

    The third issue is whether the home warranty company was being completely straight with you. They make money when they deny claims and, in your case, would be looking at what sounds like a substantial loss on the policy if they approved the claim. So their inspector has an incentive to find problems, or to magnify the seriousness of problems, that a typical consumer might first try to resolve with a less costly repair.

    Basically, if you paid for repairs that you did not get, you should get the repairs. If the failure to perform the repairs for which you contracted resulted in additional damage to the units, you can attempt to argue that the contractor should also repair the additional damage. But absent an express understanding with you contractor in relation to the homeowner's warranty, your contract would presumably call for for the repair of the units - such that their breach might justify their correcting inadequate work, or an award of damages to cover having the work corrected (and additional damage, if any, caused through operating the units with contractually insufficient repairs) by somebody else, but would not require them to either provide or pay for new units. After all, you did not hire them to replace the old units with new, you hired them to perform certain repairs and knew that you would end up with the old units post-repair.

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