Extended warranty could be worthless due to bankruptcy
Nov. 10, 2003 12:00 AM
If you bought an extended warranty for your car, there's a good chance it might be worthless.
It's all because of a huge mess created by a company called National Warranty Insurance Co.
"Extended service agreement" is the official term for those warranties. It's basically an insurance policy for your car. A group of people pay into a pool, and claims are paid out of the money collected.
National Warranty handled that pool of money as part of a risk-retention group. It backed policies for hundreds of thousands of customers. All was going great until June 6. That's when a court in the Cayman Islands declared the company insolvent. In other words, it was in big money trouble.
National Warranty is now the focus of a major battle in bankruptcy court. It's hard to predict what will happen in court, but for some of you, the crisis could hit soon.
If you own an extended service agreement that was bought before June 6 and backed by National Warranty, you can't make a claim. Companies like Warranty Gold are telling their customers that there is no money to pay because it's tied up in the courts.
Of course, it's not that simple. Some people contend that not all the money went to National Warranty and that some of it should be available to pay claims. There is a class-action lawsuit on behalf of customers who are now victims.
Warranty Gold wasn't the only company selling policies backed by National Warranty. Many car dealers sold them under a variety of names. Some dealers have stepped up and done the right thing, fixing cars for customers who bought the policies. Others are playing the legal card, saying it's tied up in bankruptcy.
The first thing you need to do is find the contract for your extended service agreement. Find out if National Warranty was the underwriter. If it is and you've finished paying for it, get ahold of whoever sold it to you. Find out if claims are being paid.
If you haven't finished paying for it, stop the payments. Don't throw money into a policy that will probably never deliver. They'll tell you that if you stop paying you won't be able to collect when the bankruptcy is settled.
That's assuming there's any money left when the National Warranty mess is sorted out.
http://www.azcentral.com/arizonarepu...action10.html#
Klaus
"God made some men big and some men small, but Sam Colt made them all equal."