Homeowners Get Second Crack at Fidelity Home Warranty Class Action Lawsuit

A California appeals court has revived a class action lawsuit accusing Fidelity National Home Warranty Co. of unfairly denying claims, citing a recent state Supreme Court decision regarding insurance providers and the tenets of the Unfair Insurances Practices Act.

Fidelity sells home warranty plans in California and several other western states. According to court documents filed Dec. 17, Fidelity’s warranty contracts cover specific repairs and/or replacement of home systems and appliances. Under Fidelity’s standard warranty agreements, an individual submits a claim by contacting Fidelity, which is required to contact a qualified contractor within three hours during normal business hours and 48 hours on weekends and holidays. The contractor must then directly contact the contract holder to schedule a mutually convenient appointment time. There is a $50 fee for each service call payable at the service time, even if the contractor decides the claim is not covered by Fidelity’s plan. If a claim is covered, Fidelity pays for the covered repair/replacement costs.

In 2008, the two named plaintiffs filed separate class action lawsuits against Fidelity, alleging they had entered into home warranty agreements with Fidelity and had made claims under the agreements, but Fidelity failed to properly adjust and/or improperly denied the claims. Plaintiffs alleged Fidelity violated its contractual obligations and engaged in unfair and unlawful business practices. Plaintiffs later consolidated their Fidelity home warranty class action lawsuits and added class allegations.

The consolidated Fidelity class action lawsuit alleged that Fidelity left claims administration in the hands of third-party contractors in violation of the Unfair Competition Law, and that it falsely advertised that it would adjudicate claims in a reasonable and fair fashion although it allegedly offered financial incentives for claim denials.

Fidelity was able to successfully have the class action lawsuit dismissed four times.

At the crux of the appellate court’s decision to reinstate the previously dismissed class action lawsuit are the differences between Zhang v. Superior Court, decided in 2013, and Textron Financial Corp. v. National Union Fire Insurance Company, decided nearly 10 years prior. Both govern how consumers can seek redress from insurers, of which home warranty providers are one group, without the assistance of the Unfair Insurance Practices Act.

That statute was not written or designed to provide legal remedies for homeowners and others who said that a company violated a section on properly investigating the home warranty claims of consumers, according to established case law. However, Textron had initially held that when plaintiffs alleged violations of other statutes, such as the Consumer Legal Remedies Act or Unfair Competition law, that were also covered by the UIPA, they could not file claims under separate statutes.

In the decision, the appeals court noted that the “plaintiff alleges causes of action for false advertising and insurance bad faith, both of which provide grounds for a UCL claim independent from the UIPA. Allowing [the plaintiff] to sue under the UCL does no harm to the rule established in Moradi-Shalal,” which protects insurers and home warranty providers from UIPA attacks.”

However, the court refused to take a de novo review of whether or not these same companies could be sued under the Consumer Legal Remedies Act, deciding that it had been established that insurance companies did not sell goods or services. In addition, the fourth amended complaint filed by class action lawyers for the plaintiff improperly enlarged a class after about three years of litigation, the California Court of Appeal decided.

The plaintiffs will have a new opportunity to file an amended complaint with the constrained Class, numbering roughly 800,000 Fidelity home warranty customers who dealt with allegedly wrongful claim denials in violation of the Unfair Competition Law, even if they may also be violations of the Unfair Insurance Practices Act.

Plaintiffs are represented by class action lawyers Francis Bottini Jr. and Yury Kolesnikov of Bottini & Bottini Inc.

The Fidelity Home Warranty Class Action Lawsuit is Dan Kaplan, et al. v. Fidelity National Home Warranty Co., Case Nos. D062531 and D062747, California Court of Appeal, Fourth Appellate District.