HomeServe reaches settlement after allegations of misleading advertising in Maryland

Service plan provider has marketing deals with utilities in Charleston, Beaufort, Columbia

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HomeServe USA wants to sell you a service plan to cover the length of pipe that carries water from the meter in your yard to your house. - SCOTT SUCHY PHOTO ILLUSTRATION
  • Scott Suchy photo illustration
  • HomeServe USA wants to sell you a service plan to cover the length of pipe that carries water from the meter in your yard to your house.

Service plan provider HomeServe USA, a company that has a marketing agreement with the Charleston Water System, will offer refunds to Maryland customers who say they were misled by the company's advertising, according to the terms of a settlement with the Maryland Attorney General's Office.

In South Carolina, HomeServe has entered marketing agreements with at least three public utilities or municipalities since 2013: Charleston Water System (CWS), Beaufort-Jasper Water and Sewer Authority, and the City of Columbia. In the case of CWS, a ratepayer-owned municipal utility with a publicly elected board, HomeServe agreed to pay $120,000 plus a 12-percent commission for, among other things, the right to use the CWS logo in mailed advertisements.

In a press release Monday, the office of Maryland Attorney General Brian E. Frosh said that it had reached a settlement with Connecticut-based HomeServe "resolving allegations that they solicited water-line protection coverage by falsely implying the businesses were acting on behalf of municipal governments, among other alleged violations of the Consumer Protection Act." In addition to fully refunding premiums to customers who "believe they were misled" and did not renew their service plans after the first year, HomeServe will pay $115,000 to the Maryland AG's Consumer Protection Division.

Philip Ziperman, deputy chief of the Consumer Protection Division, says his office began investigating HomeServe in 2010. "We received complaints both from consumers and from municipalities who were complaining that the ads that were being sent to consumers appeared to be coming from municipal entities instructing consumers to buy this coverage," Ziperman says. "The municipalities and the consumers were both concerned that the ads were misleading."

Since the investigation began in 2010, HomeServe has entered a marketing agreement with the City of Baltimore to promote its services using the municipal seal. Under the terms of the settlement, HomeServe has not admitted guilt to any of the office's allegations.

HomeServe responds

HomeServe USA, a wholly owned subsidiary of the United Kingdom-based HomeServe plc, offers a variety of protection plans for a monthly fee, but its most broadly advertised product in South Carolina is service line protection, which is advertised as covering repairs on the length of pipe that carries water from the water meter to a house. Some home insurance plans do not include coverage for that particular pipe.

The Maryland AG's Consumer Protection Division alleged that HomeServe "illegally required consumers to release it from liability for damages it caused during repairs, provided only 11 months of coverage under its 'annual service' offer, and exaggerated the scope of its coverage by claiming 'any' or 'all' problems would be covered when, in fact, the home warranties contained numerous exclusions from coverage."

Asked for a comment about the settlement, a HomeServe spokesperson wrote that the company entered an Assurance of Discontinuance (AOD) with the Maryland Attorney General's office in 2010. "The AOD contains no finding of any violation of the law and HomeServe denies any wrongdoing in it, but entered into the AOD in order to put this matter behind us," the spokesperson writes. "The assertions in this agreement have nothing to do with current activities. Back in 2010, the company made many changes to its mailing materials used around the country and made other operational changes to improve the customer experience."

According to the spokesperson, HomeServe "voluntarily ceased marketing" in Maryland from 2010 until August 2014.

HomeServe is marketing its product in Charleston via the Charleston Water System website and mailers like this one.
  • HomeServe is marketing its product in Charleston via the Charleston Water System website and mailers like this one.

A troubled history

This isn't the first time HomeServe has been accused of deceptive marketing.

In January 2015, following a City Paper investigation, the Charleston Water System amended its marketing agreement to say that HomeServe could no longer use its logo on the outside of mailing envelopes or on the initial letter that customers see upon opening the envelope.

In 2014, HomeServe plc paid the UK's Financial Conduct Authority a £30,647,400 fine (about $47.7 million, the largest retail fine in the agency's history) after the FCA found that "during the period January 2005 to October 2011 [HomeServe] mis-sold insurance policies, failed to investigate complaints adequately, its board was insufficiently engaged with compliance matters, and its senior management were reluctant to address risks to customers if there was a cost implication involved."

It's also not the first time HomeServe has gotten the attention of state attorneys general. In 2010 and 2011, HomeServe (doing business in 2010 as Home Service USA) paid fines and changed its marketing practices following investigations by attorney general offices in Ohio, Kentucky, and Massachusetts. In South Carolina, consumer complaints can be directed to the state Department of Consumer Affairs. The S.C. Attorney General's Office also has a Consumer Protection & Antitrust Division that enforces the S.C. Unfair Trade Practices Act, but it does not handle individual consumer complaints.

Ziperman says that while his office made its allegations based on Maryland consumer protection laws, the laws are based on broad principles.

"I don't know what South Carolina's statute says, but most state UDAP statutes — Unfair and Deceptive Acts and Practices statutes — are based on the same principles as the Maryland statute, which is that when you're going to sell a consumer good, you can't make misleading claims," Ziperman says.

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