|NEWARK – Edison-based CHW Group, Inc., which does business as Choice Home Warranty, has agreed to pay the State $779,913.93 including consumer restitution; revise its business practices; and retain a compliance monitor for at least one year under a Final Consent Judgment resolving the lawsuit brought by the New Jersey Division of Consumer Affairs in July 2014 against the company and its current and former principals, Victor Mandalawi, Victor Hakim and David Seruya.
“Despite the representations in their contracts, these defendants allegedly used creative and deceptive means to deny their customers’ claims,” said Acting Attorney General John J. Hoffman. “We will continue to pursue so-called ‘warranty’ companies like CHW to make sure they live up to the promises they make to consumers.”
The Division’s Complaint, filed in Superior Court in Middlesex County, alleged that CHW induced consumers to buy the so-called “home warranties” – which were actually service contracts – by stating they offered “comprehensive” coverage. The Division alleged that CHW then used deceptive tactics to deny consumers’ claims, such as denying claims if the consumers were unable to submit multiple years’ worth of maintenance records. As a result, consumers who paid hundreds of dollars for CHW’s “warranties” were required to pay out-of-pocket for air conditioning, refrigerator, or other repairs that were purportedly covered.
“Choice Home Warranty allegedly deceived consumers by refusing to provide the services it promised – specifically, the ability to have major appliances or systems repaired or replaced,” Division of Consumer Affairs Acting Director Steve Lee said. “CHW did this after luring consumers with ads promising they would ‘Never Pay for Covered Home Repairs Again.’”
The Division received, directly or indirectly, 1,085 complaints about CHW and its practices, from consumers in New Jersey and throughout the country.
The Final Consent Judgment requires Mandalawi, Hakim and Seruya to execute Confessions of Judgment, enabling the State to seek payment from them in the event CHW fails to make the settlement payment.
The Judgment also requires CHW to retain and bear the costs of a State-approved compliance monitor. For up to two years, the compliance monitor will oversee CHW’s, Mandalawi’s and Hakim’s compliance with the terms of the Judgment, all applicable New Jersey consumer protection laws, and CHW’s internal policies and procedures. The compliance monitor will provide quarterly reports to the Division.
CHW, Mandalawi and Hakim also are prohibited from using the following business practices, among others:
- Representing that consumers who purchase residential service contracts will never pay for repairs to home systems or appliances.
- Representing that they will assign technicians to service consumers’ claims, unless they are able to make such assignments.
- Requesting maintenance records or other similar documents from consumers in the initial review of their claims.
They are also required to adopt the following business practices:
- Clearly and conspicuously disclose in advertisements that they offer service contracts, which are not warranties.
- Disclose that they may make payments to consumers instead of replacing their home systems or appliances.
- Provide, upon a consumer’s request, a written explanation for a claim denial.
- For a period of one year, resolve consumer complaints within 60 days of receiving such complaint from the Division, or have the complaints forwarded to the Division’s Alternative Dispute Resolution Unit for binding arbitration.
Seruya assets that his affiliation with CHW ended in May 2013. The Final Consent Judgment requires that he notify the Division if he ever operates a business in New Jersey, moves an existing business into New Jersey, or otherwise sells service contracts or any other merchandise in New Jersey.
Investigator Brian Morgenstern, of the Division of Consumer Affairs Office of Consumer Protection, conducted this investigation.
Deputy Attorneys General David Reap and Jeffrey Koziar, of the Consumer Fraud Prosecution Section within the Division of Law, represented the State in this action.
Consumers who believe they have been cheated or scammed by a business, or suspect any other form of consumer abuse, can file a complaint online with the State Division of Consumer Affairs or by calling 1-800-242-5846 (toll free within New Jersey) or 973-504-6200.