As of March 2014, Colonial Home Warranty filed for chapter 7 bankruptcy in New Jersey and is no longer honoring the policy claims of its customers, although it continued to sell home warranty policies up until the time of its bankruptcy filing. According to the Better Business Bureau and Home Warranty Reviews sites, even before the bankruptcy filing, in most instances Colonial did not cover the claims of its customers.Continue Reading
In 2012, the Texas Real Estate Commission ordered Colonial Home Warranty to stop selling residential service contracts and turn over its policies to another insurance company. In 2013, the Florida Office of Insurance Regulation issued an order for the company to stop doing business with state residents. Also in 2013, the California Department of Insurance forbade Colonial Home Warranty from selling and renewing home warranties. In all three states, the company had been selling home warranties without proper licensing and then not providing the customer service stipulated in its contracts. This opened the company up to millions of dollars in fines. For instance, in California the penalty for illegally operating an unlicensed business was $5,000 per day.
To recover at least part of the home warranty policy fees paid in advance to Colonial Home Warranty, homeowners had to file a claim or petition to the New Jersey Bankruptcy Court.Learn more about Insurance