State accuses home-warranty firm of defrauding consumers

EDISON A township-based company may have to pay back consumers it allegedly duped through its home-warranty program.

The state Division of Consumer Affairs (DCA) filed suit July 28 against CHW Group Inc., or Choice Home Warranty, alleging that it sold coverage for home appliances and systems but then left customers in the lurch when they submitted claims, according to state Attorney General John J. Hoffman.

The complaint quotes from CHW advertisements stating that its home warranties protect customers against the high costs of unexpected repairs or replacements of home systems and appliances. The ads also state that, should consumers need service, CHW will quickly respond by dispatching a licensed, insured technician.

According to Hoffmans office, CHW and its current and former principals, Victor Mandalawi, Victor Hakim and David Seruya, all believed to be of Brooklyn, N.Y., made it difficult or impossible for consumers to realize the benefits of their warranties.

Authorities said the company often denied claims based on consumers supposed failure to properly maintain covered home systems or appliances, or based on purported pre-existing defects. The company also denied claims even when technicians declared that covered items had been properly maintained, or had failed for reasons not related to poor maintenance or pre-existing problems, according to Hoffmans office.

Authorities allege that the defendants often demanded that customers provide years of records to prove that they performed regular maintenance on the covered items or be denied.

Home warranties from CHW also claimed that the company would replace items that could not be repaired, but it often offered cash buyouts for hundreds of dollars less than the consumers cost to replace the item, the lawsuit states.

Promises for prompt service also went unfulfilled due to cases of technicians going unpaid, authorities said. The DCA has received 16 complaints from technicians alleging nonpayment by CHW of outstanding invoices totaling at least $21,690.

Despite alleged failures to honor contract terms, CHW paid millions of dollars to each of its principals between 2010 and 2013, authorities said.

The DCA received complaints about CHW from 116 consumers, including 18 from New Jersey, seven from New York, and five from Pennsylvania. The state also has been provided with 902 complaints that were filed with the Better Business Bureau by individuals from various states.

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State accuses home-warranty firm of defrauding consumers