Most people purchase a vehicle service contract for one simple reason: they want to avoid being left with a significant repair bill if something goes wrong with their car. Unfortunately, many consumers pay thousands of dollars for this added protection, only to find that when their engine, transmission, electrical system, or another major component fails, the service contract company suddenly refuses to pay. This can place a consumer in a very difficult financial position. That being said, a denial does not necessarily mean the company is right, and if the repair should be covered under the language of the service contract, the consumer may have grounds to challenge the company’s decision. Continue reading and reach out to a New Mexico car dealer fraud lawyer to learn more about what happens when service contracts refuse to cover repairs. Here are some of the questions you may have:
Why Do Vehicle Service Contract Companies Deny Covered Repairs?
A vehicle service contract is essentially an agreement wherein a provider, in exchange for payment, agrees to cover certain repairs, replacements, or maintenance for a specified period. Though these contracts are frequently referred to as extended warranties, they are separate agreements and contain their own terms, exclusions, and claim procedures. Some of the most common reasons service contract companies give for denying repairs are as follows:
- The damaged component is excluded from the contract
- The mechanical problem existed before coverage began
- The vehicle was not properly maintained
- An uncovered component caused a covered component to fail
- The consumer failed to obtain advance authorization
- The damage resulted from misuse, neglect, or a modification
- The proposed repair is unnecessary or excessively expensive
Of course, certain denials may be supported by the terms of the agreement. However, in other cases, the company may attempt to stretch an exclusion far beyond its reasonable meaning, claim that maintenance records are insufficient, or otherwise search for a technical reason to avoid paying for a repair that should be covered.
Simply put, a company should not be permitted to collect thousands of dollars for protection and then disregard the contract when that protection is actually needed.
What Should Consumers Do After a Service Contract Claim Is Denied?
First, consumers should request a written denial that identifies the precise reason the claim was rejected, as well as the specific contract provision supporting the decision. A verbal explanation from a representative may be incomplete, unclear, or difficult to prove later on. Consumers should then begin gathering and preserving all relevant evidence, including the following:
- The complete vehicle service contract
- The purchase and financing agreements
- Maintenance records and receipts
- Diagnostic reports
- Written repair estimates
- Advertisements or brochures describing coverage
- Emails, text messages, and denial notices
- Notes regarding telephone conversations
From here, the consumer should compare the denial with the sections of the agreement discussing covered parts, exclusions, maintenance duties, inspections, and prior authorization. For example, if the contract specifically covers the transmission, the company should not be able to deny the entire repair by relying on an exclusion that has little or nothing to do with why the transmission failed.
People should also exercise caution before authorizing major repairs. If the contract requires the provider to inspect the vehicle or approve the work beforehand, completing the repair too soon may give the company an additional reason to dispute the claim.
Can a Lawyer Help Challenge a Wrongful Service Contract Denial?
Fortunately, in many cases, the answer is “yes.” A New Mexico consumer lawyer can review the service contract, the company’s explanation, the mechanic’s findings, and any representations that were made when the agreement was sold.
New Mexico regulates these providers under the Service Contract Regulation Act. Service contracts must explain the provider’s obligations, limitations, exceptions, and exclusions in understandable language, and providers must register with the New Mexico Office of the Superintendent of Insurance before selling these agreements within the state. Moreover, failure to pay for a repair that should be covered will constitute insurance bad faith.
Depending on the circumstances, wrongfully refusing to pay for a covered repair may lead to a breach of contract or consumer protection claim. Evidence that the dealer or provider misrepresented the coverage, concealed important exclusions, changed its explanation, or applied the contract inconsistently may prove especially important.
The bottom line is that these can be strong cases, particularly when a consumer paid a substantial amount for coverage and was later left with thousands of dollars in unexpected repairs. If your service contract provider has refused to cover a repair that you believe is included in your agreement, contact a knowledgeable New Mexico consumer and car dealer fraud lawyer from Feferman, Warren & Mattison today to discuss your case and your legal options going forward.
