Arizona has secured the largest home warranty consumer fraud settlement in state history, with Choice Home Warranty agreeing to pay $11.8 million to resolve allegations of deceptive business practices. Attorney General Kris Mayes announced the settlement Tuesday, describing a pattern of fraud that targeted Arizona families, seniors, and veterans through manipulated contract language and concealed exclusions.
The settlement addresses more than 1,500 consumer complaints filed against the New Jersey-based company between 2013 and 2023. Mayes accused Choice Home Warranty of exploiting vulnerable consumers by hiding critical warranty exclusions in fine print, leaving customers without coverage when they needed it most.
"When I took office, I made consumer protection a top priority, particularly protecting homeowners and Arizona seniors from exactly this type of fraud," Mayes said at a Tuesday press conference. "Arizonans deserve to know exactly what they're buying and what limitations exist."
Under the consent judgment entered Jan. 23, Choice Home Warranty denies wrongdoing but must implement significant reforms to its sales practices. The company must provide "meaningful upfront disclosures" to consumers regarding warranty coverage and exclusions before collecting payment information. This represents a fundamental change from the company's previous practice of burying important limitations in fine print.
The financial settlement will be paid through a structured payment plan spanning more than five years. Choice Home Warranty will make monthly payments of $275,000 for the first 24 months, followed by $125,000 monthly payments for an additional 41 months until the full $11.8 million is satisfied.
Arizona consumers who purchased warranties over the phone between 2013 and 2023 may be eligible for restitution from the settlement funds. The attorney general's office will release specific eligibility criteria and distribution procedures once adequate funds are received from the settlement payments.
The scope of the alleged fraud became clear through consumer testimonials shared at Tuesday's announcement. Roger Pencek, a Scottsdale small business owner, described how his air conditioning claim was denied during Arizona's brutal summer heat in June 2019, when temperatures exceeded 108 degrees Fahrenheit.
Pencek filed a claim after his AC unit failed, but Choice Home Warranty representatives allegedly manipulated their own contractor's diagnosis. The original assessment of "normal wear and tear" was changed to "short to ground, forced to fail," language that Pencek said "conveniently converted that covered claim to a denial."
"Choice Home Warranty collected premiums and made promises, and when the time came to honor those promises, they seemed to fabricate a reason why they would not pay," Pencek said. He was forced to pay more than $2,700 out of pocket after his claim was denied and his appeals were rejected.
Philip Angelotti Jr. also shared his family's experience, describing how his 93-year-old veteran father was affected by the company's practices. The testimony highlighted how Choice Home Warranty's alleged deceptive practices particularly harmed elderly consumers and veterans who relied on warranty coverage for essential home repairs.
The settlement represents a significant victory for consumer protection enforcement in Arizona. The attorney general's office investigation revealed systematic problems with Choice Home Warranty's business model, which allegedly relied on collecting premiums while finding ways to deny legitimate claims through technical contract language.
The reforms required under the settlement go beyond financial penalties. Choice Home Warranty must fundamentally change how it communicates with potential customers, ensuring that warranty limitations and exclusions are clearly disclosed before any financial commitment. This transparency requirement aims to prevent the kind of misleading sales practices that generated hundreds of complaints.
The case demonstrates the impact of sustained consumer advocacy and regulatory enforcement. The 1,500 complaints filed over a decade provided the foundation for the attorney general's investigation, showing how consumer voices can drive accountability in the marketplace.
For Arizona consumers, the settlement provides both compensation for past harm and protection against future deceptive practices. The restitution process will help victims recover some of their losses, while the business practice reforms should prevent similar fraud from occurring.
The Choice Home Warranty settlement reflects broader trends in consumer protection enforcement, particularly in industries that serve vulnerable populations. Home warranty companies often market to seniors and homeowners facing expensive repairs, making clear disclosure requirements essential for preventing exploitation.
This enforcement action sends a clear message to other home warranty companies operating in Arizona about the consequences of deceptive business practices. The substantial financial penalty and operational reforms required under the settlement demonstrate the state's commitment to protecting consumers from warranty fraud.
The attorney general's office will monitor Choice Home Warranty's compliance with the settlement terms, ensuring that the promised reforms are implemented and maintained. This ongoing oversight provides additional protection for Arizona consumers considering home warranty purchases in the future.