FOR IMMEDIATE RELEASE

May 2003

RWC - More Choices ... Means a Better Fit for Builders

Since 1981, Residential Warranty Company, LLC (RWC) has provided Builders with a ten year insured, FHA/VA accepted new home warranty. With a few modifications to comply with state and local warranty regulations, RWC had been able to apply the “one-size-fits-all” concept. For the most part, this worked well for a number of years.

However, as customer service issues became more complex and potential for litigation increased, RWC looked for ways to “build a better mousetrap.” As the innovative leader, new concepts in home warranties were developed. Now instead of “one-size-fits-all”, RWC offers a Menu of Choices giving the Builder the ability to choose the warranty program that best suits his or her business.

The granddaddy of RWC’s programs, the full coverage ten-year warranty has remained intact and unchanged since it complies with VA/FHA and is the standard program for the industry. Additionally, Customized State Warranties are offered – an individualized warranty for each state which complies with arbitration rules, state statutes of repose and other criteria unique to a particular state.

For example, North Carolina has a 6 year statute of repose while Pennsylvania has 12 years. RWC’s Customized State Warranties address these different terms and many other specific details which apply to Builders and new home construction. Additional major changes include the following:

1. The second year systems coverage typical in the standard 10 year warranty has been eliminated. One of the most frequently asked questions over the past 25+ years was, “Why do I as a Builder have to extend the warranty on ductwork, pipes and electrical wiring to two years? Most of my subs only warrant their work for one year which means I have to pick up the 2nd year myself.” The answer was that since VA/FHA required the extended coverage, it became part of each warranty. Since the Customized State Warranties are not under the jurisdiction of VA/FHA approval process, RWC was free to remove the 2nd year systems from the warranty, unless otherwise precluded by a specific state statute.
   
2. The Builder’s liability under RWC’s Customized State Warranties is limited to first year workmanship and materials. Translation: the exposure for structural defects belongs to the insurer of the warranty, not the Builder. If a warranted structural defect occurs, RWC through its insurers is responsible to correct the defect.

An important feature of the standard program that remains in the Customized State Warranties is RWC’s effective complaint resolution process: informal mediation coupled with binding arbitration when needed. Customer service can be tricky and if not handled properly, it can be downright deadly to a Builder’s bottom line. The value of the warranty with its built in dispute resolution process is immeasurable when faced with an unreasonable homeowner threatening lawsuits. Either the homeowner or the Builder can request arbitration under the Customized State Warranty.

Clearly written warranty standards spell out the coverage; knowledgeable warranty advisors are available to assist both the Builder and the homeowner in understanding those standards. Having a neutral third party to help the homeowner interpret warranty standards increases their willingness to listen to reason. The Builder may not always be able to convince a disgruntled homeowner of what is or is not legitimately warranted but the “expert” from the “Warranty Company” is more readily perceived as having that authority.

When all else fails, binding arbitration, a formal legal process, is available to resolve the most complex of service issues. Binding arbitration puts a finite end to the dispute and holds up legally in a court of law. If a Builder is forced to deal with customer service issues through a lawsuit, costs skyrocket. Between attorney fees and time spent dealing with the issue, which can last in indeterminate amount of time, the Builder ultimately loses – even if he prevails in the suit. With binding arbitration, the fee for the arbitration is a set fee known at the start of the proceeding and there are specific time frames in which the matter must be settled. So controls are in place which ultimately keeps expenses down. Typically, the arbitration fee is paid by whichever party loses the arbitration however, some states prohibit charging the fee to the homeowner.

RWC and its affiliated companies have been put to the test in court, and because the arbitration clause is clearly written and conforms with the Federal Arbitration Act, as well as any State mandated wording in the Customized State Warranties, the decisions hold up. The following case outlines clearly how this feature can benefit a Builder. A purchase agreement was entered into by homeowners and a Member Builder. The agreement stated that the Limited Warranty would be provided at closing, which the homeowner received after signing the Application for Warranty Form. A provision, which is noted in all Application for Warranty Forms, providing for mandatory binding arbitration of all unresolved warranty issues, was acknowledged by the homeowners. However, the homeowners filed suit against the Builder asserting various customer service issues. The Builder filed a motion to compel arbitration, but the trial court would not allow it, so the Builder appealed the trial court’s decision. Later the Appeals Court found the trial court should have compelled arbitration.

The presiding justice of the Appellate Court ultimately found that the arbitration clause in the Limited Warranty, calling for mandatory binding arbitration, required the homeowner to submit their claims against the Builder to arbitration, rather than civil court. Since the Judge concluded that the language in the Limited Warranty was appropriate, the Federal Arbitration Act now requires trial courts to compel arbitration when the Limited Warranty arbitration provision is invoked. The point to understand is that the Limited Warranty arbitration provision is valid and enforceable to compel arbitration of homeowners’ warranty claims. And in this day and age of litigation, not having the warranty as a shield or first line of defense just doesn’t make any sense.

The age of electronic everything is upon us. RWC has unveiled Warranty Express, a streamlined electronic enrollment process for Builders. This one-step system allows a Builder to enroll homes online, saving both time and postage spent on manual form preparation. Warranty Express is available for RWC Builder programs including Standard, Customized State and Structural Only warranties. Warranty Express eliminates initial enrollments and deposits. Immediate confirmation is sent that the enrollment has been received. Warranty books and closing documents may be printed from the convenience of the Builder’s office.

Builders who are looking for options in their coverage, for reliable warranty protection, and for assistance in dealing with complex customer service issues are looking to RWC and its Menu of Choices. For more information about Residential Warranty Company, LLC, the Customized State Warranty Program, or the Warranty Express electronic enrollment system, please call 1-800-247-1812 ext. 2139 or click here to send us an e-mail through our website. You can also visit RWC’s website at www.rwcwarranty.com