PHOENIX (CN) - A New Jersey-based home warranty company will pay $11.8 million to the state of Arizona in the largest home warranty consumer fraud settlement in state history. 

In a Tuesday press conference, state Attorney General Kris Mayes accused Choice Home Warranty of exploiting Arizona families, seniors and veterans by manipulating term language and concealing critical exclusions in fine print, leaving consumers without coverage when they needed it most. Mayes said her office received more than 1,500 consumer complaints against the company between 2013 and 2023.

"When I took office, I made consumer protection a top priority, particularly protecting homeowners and Arizona seniors from exactly this type of fraud," Mayes told a gaggle of reporters. "Arizonans deserve to know exactly what they're buying and what limitations exist."

Though Choice Home Warranty denies any wrongdoing, the consent judgment entered into on Jan. 23 requires the company to reform its sales practices and make "meaningful upfront disclosures" to consumers regarding exactly what is and isn't covered under the warranty before a consumer provides payment information. Additionally, the company will make monthly payments of $275,000 for 24 months, then $125,000 for 41 months until the $11.8 million is paid in full. 

Arizona consumers who purchased a warranty over the phone between 2013 and 2023 may be eligible to receive restitution. Mayes said her office will release eligibility information at a later date and will distribute restitution once adequate funds are received from the settlement. 

Mayes invited two Arizona consumers to share their stories Tuesday morning. 

Roger Pencek, a small business owner in Scottsdale, said his air conditioning unit failed in June 2019, when temperatures soared above 108 degrees Fahrenheit. He filed a claim with Choice Home Warranty, but the company's representatives changed the diagnosis of its own contractor from "normal wear and tear" to "short to ground, forced to fail."

"Language that conveniently converted that covered claim to a denial," Pencek said.

Pencek's claim was denied and received no support throughout the appeal process. Out of options, he said he was forced to pay more than $2,700 out of pocket. 

"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. 

Philip Angelotti Jr., whose father is 93 years old and a veteran, said his dad had a similar experience in May 2020. 

When Angelotti Sr.'s air conditioner evaporation coil failed, Choice Home Warranty told him his policy didn't cover rust and erosion, even though an independent contractor already concluded no rust or erosion was present. 

"This was exactly the kind of failure a home warranty should cover," Angelotti Jr. said. 

His father was forced to pay $5,800 out of pocket to replace the coil. He later canceled his policies on both of his Arizona homes, but was never reimbursed. 

"I know my dad's story is just one of thousands that are like it," Angelotti Jr. said. "They wore people down until they just gave up and paid out of pocket."

Former Attorney General Mark Brnovich first began investigating Choice Home Warranty after it settled a similar lawsuit in 2015 for $780,000. Consumer reports suggested the company hadn't cleaned up its act in Arizona. 

The investigation led to a consumer fraud lawsuit filed in 2019, which Mayes took over when she took office in 2023. 

This time around, the consent judgment allows Mayes' office to hold the company more accountable. She said agents of her office will periodically pose as homeowners and interact with sales representatives to assess compliance. 

"We will be checking up on them to ensure that they will not relapse into this bad behavior."

The case nearly reached trial last week, Mayes said, but the parties finally engaged in successful mediation. She said Choice Home Warranty fought every step of the way, forcing numerous discovery disputes that extended the case for years. 

In the end, Mayes said Arizonans came out victorious. 

"If you prey on Arizona consumers, if you hide behind deceptive practices, if you exploit our seniors and veterans and working families, we will come after you," she said. "We will investigate, we will sue you, and we will not give up, even if it takes years."

Source: Courthouse News Service