What to Do When a Car Warranty Company Refuses to Pay a Claim

Do you have an extended warranty or service contract that you bought from a dealership? Is the warranty/service contract company refusing to pay for a repair? If so, this article is for you.

Most automotive service contract companies (aka extended warranty companies) refuse to pay claims until you make a big stink. However, the way you go about making a big stink is important…you need to start with re-submitting your claim, then reach out to the selling dealership, and then work on the dealership’s general manager (GM). I explain all of this in detail below.

NOTE: I’m going to call an extended warranty a service contract in this article. That’s technically what they’re called in almost all cases.

Service Contract Companies Usually Deny Claims The First Time

In my years of working in the car business, I saw the exact same thing over and over:

Person has an extended warranty/service contract on their car
The car breaks, and the repair shop says it’s a problem that should be covered under the warranty/contract
The service contract provider (aka extended warranty company) says they can’t cover the repair

When it comes to service contracts, denying claims is standard procedure. Service contract companies deny nearly every claim they see, because they know some people will hear no and give up.

So, the first thing to remember is this: Just because they denied your claim, don’t assume it’s over. Often times your denied claim will magically be approved once you re-submit and prove you’re going to be difficult to brush off.

Read Your Contract, and Then Check Your Claim Paperwork

Even if you’re certain that the repair you need is covered by the service contract, it’s important to read the agreement and make sure you understand what is and is not covered. When you’re arguing with the people that work at the service contract company, it’s helpful to be able to quote the relevant sections of the agreement to them. It’s also good to know what the service contract says about appealing denied claims, cancellation of the service contract, and refunds.

NOTE: If the agreement doesn’t cover your repair, or the agreement is vague, you’ve got your work cut out for you. But even if the agreement probably doesn’t cover the repair, it’s worth your time to try. Even a partial payment on a typical repair is going to be hundreds of dollars in your pocket.

Next, after you read your agreement, it’s a good idea to check the claim paperwork that you or your repair shop submitted. It may be that the repair shop didn’t submit enough supporting documentation, or that they weren’t specific enough as to the cause of your vehicle problems and the repairs needed.

Re-Submit Your Claim Along With A Letter

When you submit your claim again, you want to attach a letter to the claim explaining why you believe your claim was incorrectly denied:

Be sure to explain what component failed and why it’s covered.
State that you expect the repair to be covered in full, and that you intend to appeal anything less than full repair coverage.

Be sure to attach all required documentation to your letter, make a copy of everything, and then physically mail the letter to the contract company. If you can, scan a copy of all the paperwork so you can email it to anyone that requests it too.

Follow-Up On Your Re-Submitted Claim Daily

Once your letter is sent, it’s time to start calling the service contract company. Call them every day until they verify that they’ve received your letter. Then, call them everyday until they respond to your claim. Whenever you speak with someone, keep a record of that person’s name as well as the day and time of your call.

The only rule here is to be courteous when you call. Most of the people that work at these service contract companies are underpaid and overworked, and most of them get yelled at a lot. So, being nice to the people who answer the phone is good strategy. They’re much more likely to remember someone nice than to remember someone rude, and often times they can make sure your claim gets seen by the right person.

If Your Claim Is Denied Again, Talk To The Selling Dealer

If your claim is denied for a second time, it’s a good idea to contact the dealership that sold you the car and the service contract. Ask for the finance manager (that’s the person that sells service agreements in most dealerships), and explain to them that you’re having problems getting the claim covered. Be sure to give them all the details – how expensive the repair is, how difficult it’s going to be to pay, how hard it’s going to be for your family – lay it on thick.

Then, start asking questions:

Does the service contract company usually deny claims? If they say no, ask them who they would recommend calling. If they say “I don’t know” or “I’m not sure,” ask them why they sold you the service contract in the first place.
If they haven’t given you the info already, ask the finance manager for the name and phone number of someone working at the company. If they just give you the 1-800 number, ask them to give you a real point of contact instead.
Ask the finance manager if the warranty can be cancelled and refunded.
Ask the finance manager if they think you’d have more luck with your claim at the dealership’s repair shop, or another shop they recommend.

When you get off the phone, make notes about all the finance manager’s answers, as well as the date and time of your call. Hopefully, the finance manager gave you the contact information of a person at the service contract company that can actually help you. If so, call that person, explain your problem to them, and ask them to see if they can help.

But even if the finance manager didn’t give you a name and number, they gave you notes you can use down the line. Just remember to be courteous and calm at every step along the way. The dealership finance manager can help you, as can the person that they tell you to call. Be nice to these people so they feel compelled to help you.

Follow the Claim Appeal Process, Then Try The Dealership Again

If you still don’t have your claim approved, it’s time to follow the appeal process as laid out in the agreement. Appeals can work, so you should follow the process in detail.

If the appeal doesn’t work, you should call the selling dealer and ask to talk to the finance manager again. Explain to them that they sold you a service agreement that isn’t being honored, and that you need them to do the right thing. If they can’t or won’t help you, ask to speak to the dealership’s general manager.

When you get the general manager on the phone, start at the beginning. Explain what went wrong with your car and how the shop determined it was covered. Explain that your claim was denied, and that you re-submitted. List off all the times you called and the people you talked to. Tell the general manager that you called the finance manager who sold you the service agreement, and who they said to call.

You have three goals when you talk to the dealership GM:

You want them to know that you’ve been dragged thru the mud, and you want them to sympathize with you
You need to ask them if they have the power to make things right. If they say yes, great! If they say no, ask them why they’re selling a service contract that they don’t have any control over?
Ask the GM if the dealership can give you a full refund of the service agreement, unless they can get the repair covered

If this call goes well, the GM will probably try to do something on your behalf. Dealership GM’s have pull with the service agreement company, so be nice to the GM and make them your friend.

If you can go and see the selling dealership GM face to face, even better.

If That Doesn’t Work, Talk To A Consumer Protection Lawyer (Or Three)

At this point, you’ve done everything by the book. You should have a detailed account of everything you’ve said and done, what the service agreement company has said and done, and what the dealership has said and done. Now is a good time to speak with a couple of attorneys that specialize in consumer protection.

Most attorneys will give you a free consultation, and you’d be smart to call a few lawyers and get free consultations from each of them. Beware any lawyers that want a big retainer, or lawyers that promise you that they can get your claim covered.

But if you have a really good case, all the lawyers you talk to should be willing to work with you and open to doing something simple (like sending a letter) for a small fee. If you can’t afford the fee, or if all the lawyers all tell you it will be hard to win, than you’re probably “stuck.” But that doesn’t mean you can’t cause some trouble for the dealership and the service contract provider…

Reach Out To Local Media

Try sending an email to all the local TV news reporters that specialize in troubleshooting/consumer issues. Every TV station has a reporter that specializes in this kind of story, and local TV news is always looking for stories about car dealers that aren’t doing right by their customers.

When you call or email the reporter, keep it simple:

You bought a car from a local dealership (tell them the name)
The dealer sold you a bogus extended warranty
The repair shop says your warranty should cover the repair
The dealership is refusing to help you
You have records of everything and you’re happy to share

If you can explain all of the above to a TV reporter in less than 60 seconds, there’s a chance they’ll ask for your records. If your records are compelling, there’s a chance they’ll call the dealership for comment. If the dealership cares at all about their reputation with the local news, they’ll contact you and try to make things right.

Remember: Reporters are busy, and they talk to a lot of crazy people. Be succinct and straightforward when you tell them your story. If you do a good job on the phone, you’ll probably be a good interview in front of a camera.

Complain To The Government

If you’ve tried everything you can think of and you’re not satisfied, you should file a complaint with the following entities:

Your state attorney general
Your state consumer affairs board (sometimes, this is also the attorney general’s office)
Your state auto dealer licensing entity or dealership regulator
Your state insurance regulator
The federal Consumer Financial Protection Bureau

Odds are, these complaints won’t get you what you want. But you never know…a few state attorney generals have sued service contract companies, and they usually win:

And, even if the complaints don’t help you, they might make life a little harder for the dealership and the service agreement company.

Good luck!