Ask AAA: Can My Warranty Company Deny A Repair Claim Because I Didn’t Get Prior Approval?

A reader asks:

My car had a breakdown last week, and it was towed to a reputable repair shop where I regularly service my car. They fixed the problem and emailed the invoice to my warranty company for reimbursement. However, my claim was declined because – according to the warranty company – I didn’t seek their approval before submitting a reimbursement claim. Can they do this?

Short answer: Yes, but that doesn’t mean you won’t eventually get paid.

Most Service Contract Claims Are Denied The First Time Around

Generally speaking, if you buy a service contract for your vehicle that isn’t affiliated with an automaker, any claims you submit will be denied as a matter of course. Most of the companies that sell service contracts assume that either:

1. They’re never going to have to pay claims (because vehicles don’t break very much) or,
2. They can deny claims and no one will call them on their BS

#2 is surprisingly common. In fact, I’ve been told point blank by people working at more than one service agreement company that they’re trained to deny every claim they receive. Every. Single. One.

So, basically, don’t believe that a denial is firm. Every denial should absolutely be appealed.

NOTE: Service contracts sold by automakers like Ford, Toyota, etc. are not at all like most service contracts. When you buy an official service contract from an automaker, they understand that their reputation is on the line. While they will deny claims from time to time, it’s a fairly rare occurrence. So, if you buy a service contract (aka extended warranty), be sure to get the official plan available directly from the automaker.

How To Appeal A Denied Service Contract Claim

If you file a claim with an extended warranty provider and they deny the claim, that’s just the first round in what could be a 12 round fight. Here’s a good plan of attack:

1. Follow-up any denied claims with a phone call. Write down when you called, who you spoke with, and then ask them to review and approve the claim.
2. If the person you start with can’t approve your claim, ask to speak to a supervisor. Be sure to write down names and phone numbers for everyone you speak with. If they have email, get that. If not, get their mailing address for all correspondence.
3. If your claim is still denied, ask the supervisor to explain why the claim was denied specifically. If possible, ask for this explanation to be given to you by email. If they won’t give you an email, take notes as best you can and then send a letter (via certified mail) documenting the phone call and what you understood.
4. If the claim was denied for mechanical reasons, ask your mechanic about it. If the mechanic feels the explanation is bogus, ask them if they will write a letter (or sign a letter you write for them) challenging the warranty company’s explanation. Then, get this letter to the supervisor you spoke with and ask for an appeal.
5. If the claim was denied for non-mechanical reasons, ask if the claim would have been approved otherwise. If the answer is yes, document this via email and/or certified mail.
6. Ask for the warranty company’s official name of record with the state that you live in. If you’re going to file a claim against this company with your state’s regulators, you need this info. Ask for a copy of their state business license or documentation proving that they are licensed in your state (they may not provide it, but it’s worth asking for).
7. Ask about the formal appeal process, and then follow it to the letter. Use certified mail for any written correspondence.
8. If the formal appeal process fails, consider filing a complaint with state regulators. Many states have some sort of regulatory authority that deals with service contracts/warranties, and you can file a complaint with them that can trigger yet another review of your claim.
9. File a claim in small claims court. If you’ve got documentation and you can argue that the warranty company is being difficult and/or refusing to pay a covered claim, you’ve got a good chance of winning in small claims court. Just make sure you have documentation of everything you’ve done (this is where the phone call notes pay off), all the messages you’ve sent and received, etc. Then, take them to court! This article is a good starting point.

Odds are good, however, that you won’t have to go to court to win. Warranty companies understand that the squeaky wheel needs to be taken care of, so if you follow the process as outlined, you’ll likely get offered some sort of compromise at some point. Sometimes, they’ll offer to pay for parts, or to pay for half, or to pay the claim and cancel the policy – whatever. If the offer is reasonable, take it.

Finally, Remember the Golden Rule

The greedy, unscrupulous people that own or run most of the 3rd party warranty companies are not deserving of anyone’s respect, in my opinion. Most of these people are severely lacking in morals. A good dressing-down is all that these people deserve.

However, the people that process and review claims are not the same people that own or manage the company. Odds are good that the person who you call and talk to is just as sick of the company they work for as you are, and if you’re nice to that person, they’re far more likely to reverse a denial.

So, be nice to the people you talk to. Unless you somehow manage to get the President of the company on the phone, it’s a good idea to be polite. Again, having spoken to many people that have worked at these types of companies over the years, I can tell you that most of them hate their jobs after just a few months. They’re often looking for someone to make an exception for just to “stick it” to the boss, so make it easy for them. Be nice, be charming, and don’t give up.

Good luck!

OBLIGATORY LEGAL ADVICE NOTE: Certified mail is legal correspondence. I use it for any interactions with companies as described above. However, I’m no lawyer, and an actual lawyer might not advise the use of certified mail in all circumstances. So, this is a disclaimer to say that if you’re going to use certified mail, there’s a risk you’ll say the wrong thing and undermine your position. If you’re concerned about these risks, talk to a lawyer.