ALJDEC decisions subject to certification as final

08F-2490-ROC · Registrar of Contractors · 2009-04-13

STATE OF ARIZONA IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: April 8, 2009 APPEARANCES: Complainant appeared on her own behalf; Respondent was represented by attorney Kevin P. Nelson ADMINISTRATIVE LAW JUDGE: Michael G. Wales _____________________________________________________________________ Based upon the evidence of record, the Administrative Law Judge makes the following Findings of Fact, Conclusions of Law and Recommended Order:

FINDINGS OF FACT 1. Barrett Eastman, LLC, doing business as ServiceOne Home Warranties (“Respondent”), is the holder of License No. 185954, a Class B-3 contracting license issued by the Registrar of Contractors (“Registrar”). 2. On August 24, 2007, Laura Tokioka (“Complainant”) entered into a home warranty contract (“warranty contract”) with Respondent when she purchased a 20-year-old home at 15050 N. 6th Street in Phoenix, Arizona. Complainant paid Respondent a premium of $639.00 for the warranty through the title company handling the home purchase. 3. Complainant did not obtain a home inspection before purchasing the home. 4. The warranty contract required Respondent to replace or repair certain appliances and other home systems, if needed, for one year from the effective date of the warranty, August 24, 2007. Because Respondent’s contractors have agreed to respond to service calls dispatched by Respondent for $49.00, the warranty contract also required Complainant to pay a service fee of $49.00 to any contractor, at the time of service, dispatched by Respondent in response to a call for service by Complainant. Pursuant to the warranty contract, the fee applies when a diagnosis is made; applies whether a repair is made or not; and applies regardless of whether the item is covered under the warranty contract or not. The Dishwasher 5. In October 2007, Complainant contacted Respondent to request a repair for her Fisher Paykel dishwasher. Respondent dispatched J&H Appliance (“J&H”), an authorized Fisher Paykel service contractor. J&H was unable to coordinate a date and time for the service call with Complainant until November 21, 2007. 6. On November 21, 2007, the J&H technician performed a diagnosis and found that a significant amount of food particles and mold had built up on the filter screen. The technician also noted that the rotor had seized. The technician determined that the rotor had seized because the rotor had been sitting in dirty, moldy water for an extended period of time and the water had evaporated from the motor cavity leaving the rotor without any lubrication. The technician opined that the problem with the dishwasher had been caused by three to five months of non-use and neglect rather than wear and tear. 7. Complainant refused to pay the $49.00 service fee as required by the warranty contract. 8. Respondent’s Customer service manager, Kim Coffey, called Complainant and explained that the dishwasher was not covered under the terms and conditions of the warranty contract.

9. Section C. Warranty Coverage, states: In accordance with the terms and conditions of this warranty, ServiceOne Home Warranties will repair or replace systems and appliances described as Covered so long as they: 1. Are in good, safe working order and correctly installed at the premises on the effective date of this warranty contract; and 2. Became inoperative from normal usage (normal wear-and-tear) after the effective date of this warranty.

10. Complainant did not present any evidence that she ever used the dishwasher prior to the service call but presented a repair invoice dated March 24, 2008 with the words “normal wear and tear” written on it. These words appear to be written over other writings on the invoice and clearly stand out from the rest of the language, making the writing highly suspect. 11. More importantly, Complainant did not present any evidence to this tribunal that the dishwasher was in good, safe working order on the effective date of the warranty contract. Thus, Complainant did not establish that Respondent failed to perform any obligations under the warranty contract in regards to the dishwasher service call. The Sprinkler System 12. On November 28, 2007 Complainant called in a service request claiming her sprinkler system in her front yard was not functioning. Respondent dispatched a company identified as Sun Rain to Complainant’s home. 13. On November 29, 2007, the technician from Sun Rain spent 1.5 hours examining Complainant’s multi-zone sprinkler system. The technician observed that zone 5 would not activate electronically. The technician observed that the zone 5 watering valve was operating properly when manually opened and that the timer was also operating properly. Both the valve and the timer were wired properly as well. The technician concluded that the underground wiring between the timer and the valve must be the problem. Complainant then informed the technician that she had recently employed landscapers to do landscape work in her front yard. The technician concluded that the workers must have hit the underground wiring with a shovel and caused the problem with the wiring. The technician concluded the wiring problem was not the result of normal wear and tear and the problem was not covered under the warranty contract. 14. Complainant again refused to pay the $49.00 service fee. 15. On December 14, 2007, Complainant called in again to schedule service on her sprinkler system. This time Complainant reported an extremely high water bill and felt that she must have a leak in her sprinkler system. Respondent dispatched Sun Rain to the property again. 16. Sun Rain performed another inspection of the sprinkler system. Sun Rain could not find any leak or any wet spots to indicate that the high water bill Complainant had received from the City of Phoenix was the result of a leak. Sun Rain ran the sprinkler system for one hour and, with Complainant, watched her water meter. The water meter did not show any signs of water consumption. The technician suggested the Complainant watch the water meter on watering days and if she finds high usage on watering days to call the technician again. Complainant did not report any further problems. 17. Pursuant to the warranty contract, no additional service fee was charged as the second call for sprinkler service was within 30 days from the first call for sprinkler service. 18. At hearing, Complainant insisted that because she had a high water bill in the month of December, 2007 there must have been a sprinkler system leak and Respondent failed to properly diagnose the sprinkler system. Complainant, however, presented no evidence of any leak and her water bills returned to normal after December 2007.

The Refrigerator 19. On November 28, 2007, Complainant called Respondent to report that the icemaker in her refrigerator was not working properly. Respondent dispatched Ultimate Appliance, an appliance repair company, to Complainant’s home. The appliance repair technician found that a drain was clogged on the refrigerator and made a repair to the icemaker. 20. On December 26, 2007, Complainant called Respondent to report that the door on her refrigerator was not closing properly. Respondent again dispatched Respondent dispatched Ultimate Appliance to Complainant’s home. The appliance repair technician adjusted the refrigerator door for Complainant. The icemaker was operating properly on that date. 21. On April 1, 2008 Complainant called Respondent to report that the vegetables in her refrigerator were freezing. Respondent dispatched Runyon Appliance, an appliance repair company, to Complainant’s home. 22. The technician from Runyon Appliance arrived at Complainant’s home on April 1, 2008 and determined that the refrigerator was operating properly. 23. On April 3, 2008, Complainant called Runyon Appliance and insisted that another technician come to her home. Runyon appliance dispatched a second technician who agreed with Complainant that white ice crystals were forming on the vegetables. The technician then readjusted the refrigerator settings to the factory default settings. 24. On April 8, 2008, still unhappy with the ice crystals on her vegetables, Complainant called Respondent to insist on another service call. Respondent informed Complainant that Respondent had discovered from the technician who was at the Complainant’s home on April 3, 2008 that the refrigerator Complainant was seeking service for was not the same refrigerator that was in the home on the effective date of the warranty contract, and, as such, Respondent does not cover items not in the home on the effective date of the warranty contract. 25. At hearing, Complainant admitted that she had purchased a used refrigerator after the effective date of the warranty contract and she was seeking service from Respondent on the second refrigerator. 26. Section C. Warranty Coverage, of the warranty contract provides that “In accordance with the terms and conditions of this warranty, ServiceOne Home Warranties will repair or replace systems and appliances described as Covered so long as they: 1. Are in good, safe working order and correctly installed at the premises on the effective date of this warranty contract; and 2. Became inoperative from normal usage (normal wear-and-tear) after the effective date of this warranty. (emphasis added).

The Heating System 27. In early January 2008, Complainant contacted Respondent to report that her heating system was not operating properly. 28. Respondent informed Complainant that the two past-due service fees of $49.00 each must be paid prior to Respondent dispatching an HVAC repair technician. The service fees were past due for the November 21, 2007 dishwasher diagnosis and the November 28, 2007 sprinkler system diagnosis. Respondent was unaware at the time that Complainant had also refused to pay a third service fee, due on November 8, 2007 for the Burn’s Pest Control service call. 29. When Complainant called Respondent regarding the hearting system, Complainant was given the opportunity to pay the outstanding service fees that were past due for the November 21, 2007 dishwasher diagnosis and the November 28, 2007 sprinkler system diagnosis. Complainant declined to make the payments. 30. Complainant presented no credible evidence that Respondent’s refusal to send a repair technician to Complainant’s home because the service fees were outstanding violated any subsection of A.R.S. § 32-1154A. 31. Within a day or two after the heating system repair request was declined for non-payment of the service fees, Complainant’s daughter contacted Respondent and explained that her mother was in the hospital. The daughter promised payment would be forthcoming. Upon the promise of future payment, Respondent agreed to resume warranty service, however, no further claims as to the heating system were ever made. 32. On February 12, 2008, Complainant paid the two outstanding service fees that were past due for the November 21, 2007 dishwasher diagnosis and the November 28, 2007 sprinkler system diagnosis. The Range 33. On January 4, 2008, Complainant called Respondent to report that her range was not working properly. Respondent dispatched Runyon Appliance, an appliance repair company, to Complainant’s home. The appliance repair technician found that the range control switch had failed, but that parts were no longer available for the range due to its age. As a repair would not be possible, Respondent agreed to replace the range. Complainant paid the $49.00 service fee. 34. Section G(7) of the warranty contract states: Determination of whether to repair or replace will be at the sole option of ServiceOne. When replacement is required, we are responsible for installing equipment comparable in features, capacity, and efficiency… We are not responsible for matching features that do not contribute to the covered appliance’s primary function. We are not responsible for matching identical colors, brands, and dimensions…ServiceOne reserves the right to offer cash back in lieu of repair or replacement in the amount of ServiceOne’s actual cost to repair or replace any covered item.

35. Respondent determined that Complainant had a model ARH660HRE/smooth top, delay start, 30” range. Respondent offered Complainant a model FEF368G replacement range. Respondent’s Vice President, Steve Smith, testified that the FEF368G was comparable in features, capacity and efficiency to the Complainant’s model ARH660HRE/smooth top, delay start, 30” range. 36. On March 5, 2008, Complainant declined Respondent’s offer to replace her range with the model FEF368G for reasons she did not articulate at hearing. 37. On April 1, 2008, Respondent elected its option, pursuant to section G(7) of the warranty contract, to offer cash back in the amount of $505.00 in lieu of replacement. The $505.50 reflected the amount of Respondent’s actual cost to replace and install the covered item. 38. Complainant accepted the offer of cash back when she cashed the check for $505.00. 39. While Complainant contended that the check was not enough for her to buy the range she wanted to purchase, Complainant presented no evidence that the $505.00 cash back, which she accepted, was not Respondent’s actual cost to replace the covered item. The Microwave 40. On April 1, 2008, Complainant contacted Respondent to report that her microwave was not functioning properly. 41. Respondent dispatched a technician from Runyon Appliance to Complainant’s home. 42. The technician examined the microwave and found that the microwave was capable of boiling water within a reasonable time and that the microwave was functioning properly. 43. At hearing, Complainant and Complainant’s adult son testified that Respondent failed to properly repair or replace the microwave because Complainant’s roommate says the microwave will not melt her white chocolate. No further evidence as to the microwave was offered. The Washing Machine 44. On April 3, 2008, Complainant contacted Respondent to report that her washing machine was not operating properly. 45. Respondent dispatched a technician from Runyon Appliance to Complainant’s home. 46. The technician found that the washing machine needed parts, including a band and a pump. The technician obtained the parts and repaired the washing machine. 47. At hearing, Complainant testified that her washing machine makes loud noises, but presented no evidence that the machine was not operating properly or that she had ever contacted Respondent to report additional problems with the washing machine after the repair was made. The Dryer 48. At hearing, Complainant testified that she had to replace her dryer as it was not functioning properly. Complainant sought reimbursement from Respondent for the cost of buying her new dryer. 49. Complainant did not present any evidence that prior to the replacement, she ever notified Respondent that the original dryer was not functioning properly and was in need of repair. Respondent’s representative, Vice President Steve Smith, testified that Respondent has no record of Complainant ever contacting Respondent regarding a dryer not functioning properly. 50. Respondent was never provided any opportunity to diagnose the original dryer or determine if it needed repair or replacement prior to Complainant’s purchase of a new dryer. The Pool Equipment 51. On October 9, 2007, Complainant contacted Respondent to report that her pool filter pump was not operating properly. 52. Respondent dispatched a pool repair contractor to Complainant’s home. 53. The pool contractor repaired the pool pump. Complainant paid the $49.00 service fee. 54. At hearing, Complainant testified that she was told on April 30, 2008 by a home inspector that a loose electrical wire was present somewhere near the pool equipment. Complainant alleged that the technician for the pool repair company should have noticed the wire and advised her of the dangerous condition. Complainant provided no further detail as to the location of the wire and whether it was visible to the technician. 55. On April 8, 2008, Complainant again contacted Respondent, this time claiming the pool filter was broken and the pool sweep, or vacuum, would not pickup dirt from the pool. 56. Respondent dispatched All State Pool Service to Complainant’s home. 57. Upon arrival, the technician found the pool to be green and that the dimetrious earth filter had backwashed into the pool. The technician also noted that a vacuum hose had been improperly inserted into a regulator valve, rather than the skimmer, which had caused high water pressure to bear on the filter. The technician noted that the filter housing was cracked and the filter manifold had been breached. The technician determined that the pool and pool cleaning equipment had not been properly maintained and used by Complainant, and as such, the filter was not a covered item. 58. At hearing, Complainant contended that the filter should have been replaced and that All Star Pools, like the previous pool repair company, had failed to advise her of a dangerous wire at or near the pool equipment. 59. Complainant presented numerous estimates for a new sand filtration system and pool filtration pump as well as replacement and upgrades of her pool electrical system which she apparently wanted Respondent to pay for. 60. Section C (Warranty Coverage) of the warranty contract states: In accordance with the terms and conditions of this warranty, ServiceOne Home Warranties will repair or replace systems and appliances described as Covered so long as they:

1. Are in good, safe working order and correctly installed at the premises on the effective date of this warranty contract; and

2. Became inoperative from normal usage (normal wear-and-tear) after the effective date of this warranty. (emphasis added).

61. Complainant failed to present any evidence that the service technicians responding on behalf of Respondent observed any dangerous condition or, if observed, had a duty to report such a condition. Likewise, Complainant failed to present any evidence that the service technicians failed to properly diagnose the conditions on the calls to which they responded. 62. Complainant failed to establish that Respondent committed any violation of A.R.S. § 32-1154A with respect to the pool service calls. The Cancellation 63. On September 13, 2007, Complainant contacted Respondent to report an ant infestation at her home. Respondent dispatched Burns Pest Control (“Burns”), a licensed pest control contractor, to treat the home. 64. On September 17, 2009, Burns treated the home for ants. As required by the warranty contract, Complainant paid the $49.00 service fee to Burns. 65. On October 4, 2007, Complainant again contacted Respondent complaining that she was seeing ants again. Respondent dispatched Burns. On October 9, 2007 Burns retreated Complainant’s home at no charge to Complainant. 66. On October 29, 2007, Complainant again contacted Respondent complaining that she was seeing ants again. Respondent dispatched Burns and, on November 8, 2007, Burns again provided pest control services. Because the November 8, 2007 service was more than 30 days after the original service date of September 17, 2007, Burns sought the $49.00 service fee from Complainant. Complainant refused to pay the service fee. 67. After multiple attempts to collect the service fee from Complainant, on January 21, 2008, Burns invoiced Respondent for the service fee, which Respondent paid on Complainant’s behalf. 68. Respondent then invoiced Complainant for the $49.00 Respondent paid to Burns on the Complainant’s behalf. Complainant never paid the service fee. 69. On May 1, 2008, Respondent sent Complainant written notice of cancellation of the warranty contract. The cancellation was based on Complainant’s failure to pay the $49.00 service fee due since November 8, 2007 service by Burns Pest Control described above. 70. On March 8, 2008, one week after the warranty contract was canceled, Respondent issued a check in the amount of $52.78 to Complainant which represented the prorated share of unused premium on the warranty contract, as well as deductions for the unpaid $49.00 service fee and a $50.00 administration fee, as allowed under the terms of the warranty contract. 71. Complainant accepted and cashed the check for the unused premium. 72. Section F(3) (Warrantyholder’s Obligations) of the warranty contract states: For each separate trade item, you are responsible to pay a $49.00 service fee to the contractor upon arrival. Repairs are guaranteed for 30 days. Should failure of that item occur within 30 days, another fee will not be charged.

73. Section I (Cancellation) of the warranty contract states: This contract shall be noncancelable by ServiceOne, except for nonpayment of warranty fees, fraud or misrepresentation of fact material to the issuance of this warranty contract….

74. Burns applied treatment for ants on September 17, 2007; October 9, 2007; and November 8, 2007. 75. At hearing, Complainant contented that Respondent improperly cancelled the contract because the $49.00 for the November 8, 2007 pest control service should not have been charged to her. 76. Complainant argued that pursuant to Section F(3), which guarantees repairs for 30 days, she received the treatment for ants for the third time on November 8, 2007, exactly 30 days after the Burns second application on October 9, 2007 and, therefore the third service was within the 30 day window. 77. Respondent contended that Section F(3) is a guarantee for 30 days from the initial repair, which in this instance was the September 17, 2007 initial ant treatment by Burns and, a recall, such as the one on October 9, 2007 does not extend the 30 day window. 78. This tribunal interprets Section F(3) in the same manner as does Respondent. To hold otherwise would provide an absurd result, i.e., it would allow a homeowner to repeatedly and continuously have a service contractor out to his or her home within 30 days after the last call to check appliances, equipment and home systems, regardless of whether anything is malfunctioning or in need of repair, free of any and all service fees except the initial fee. This would last for the life of the contract; perhaps years if the contract is renewed. 79. Complainant failed to pay the service fee for the November 8, 2007 pest control application and, after paying the contractor themselves and waiting for months for payment from Complainant, Respondent justifiably canceled the contract with Complainant. The False Advertising Claim 80. Complainant alleged that the statement contained on a comparison chart in the home warranty application, that “This document has been reviewed by the Arizona Department of Insurance” is false, misleading or deceptive. However, the June 25, 2008 letter from the Department of Insurance, speaking to this very contention, states that the chart provided by Complainant does not include an edition date and “we are unable to determine if the comparison chart was ever filed with or approved by our Property and Casualty Division.” The letter continues to state that a comparison chart was reviewed by the Department of Insurance in 2002 and, in response to that review, Respondent did amend certain statements in the comparison chart. 81. On this evidence, this tribunal does not find Complainant met her burden of persuasion that the statement at issue is false, misleading or deceptive whereby any member of the public may be misled and injured. The Vistalli Letter 82. Complainant presented an undated and unverified letter from Gary Vistalli, a purported claims manager employed by Respondent’s direct competitor Old Republic Home Protection. While the letter was devoid of any concrete conclusions as to whether Respondent and/or its service representatives failed to meet industry standards or did not abide by the terms of the contract, the letter was somewhat critical of Respondent’s customer service. Complainant admitted that Mr. Vistalli never visited her home or examined any of her appliances or systems. Complainant further admitted that Mr. Vistalli’s opinions were based solely on information provided to him by Complainant. 83. Bids, proposals and reports from competitor contractors, not present to testify at the hearing, purporting to identify certain described deficiencies in the Respondent’s work may not properly be equated with sufficient valid proof of wrongdoing on the part of Respondent for the purposes subjecting Respondent’s contracting license to disciplinary action. The hearsay quality of the introduced documentary evidence, without any ability to examine the author as to his experience, motivation, bias and overall credibility, must necessarily impact adversely upon the probative value of the report. Thus, this tribunal gives minimal weight to Mr. Vistalli’s criticisms.

CONCLUSIONS OF LAW 1. The Registrar has jurisdiction over Respondent and the subject matter in this case. 2. Pursuant to A.A.C. R2-19-119(B), Complainant has the burden of proof in this matter. The standard of proof is preponderance of the evidence. A.A.C. R2-19-119(B). 3. Respondent did not violate the provisions of A.R.S. § 32-1154(A) (1), as alleged in the Citation and Complaint issued by the Registrar. Respondent responded appropriately to all calls for service by Complainant. Additionally, in accord with paragraph F3 of the warranty contract, Respondent justifiably canceled the contract with Complainant on May 1, 2008 due to Complainant’s failure to pay the service fee appropriately charged for a service call by Burns Pest Control on November 8, 2008. 4. Respondent did not violate the provisions of A.R.S. § 32-1154(A)(7), as alleged in the Citation and Complaint issued by the Registrar. The evidence of record does not support any allegation that Respondent committed any wrongful or fraudulent act, nor does the evidence support any contention that Complainant suffered any substantial injury due to the actions, or inactions, of Respondent. 5. Respondent did not violate the provisions of A.R.S. § 32-1154(A)(9), as alleged in the Citation and Complaint issued by the Registrar. Respondent did not fail to complete a project or operation for the price stated in the contract. As stated above, Respondent justifiably canceled the contract with Complainant on May 1, 2008 due to Complainant’s failure to pay the service fee appropriately charged for a service call by Burns Pest Control on November 8, 2007. On March 8, 2008, one week after the warranty contract was canceled, pursuant to the terms of the warranty contract, Respondent properly issued a check in the amount of $52.78 to Complainant which represented the prorated share of unused premium on the warranty contract, as well as deductions for the unpaid $49.00 service fee and a $50.00 administration fee. 6. Respondent did not violate the provisions of A.R.S. § 32-1154(A)(16), as alleged in the Citation and Complaint issued by the Registrar. As discussed above, Complainant did not meet her burden of persuasion that the statement in Respondent’s comparison chart is false, misleading or deceptive whereby any member of the public may be misled and injured. 7. Respondent did not violate the provisions of A.R.S. § 32-1154(A)(17), as alleged in the Citation and Complaint issued by the Registrar. No evidence was presented that Respondent was contracting beyond the scope of its license. Complainant did not address this allegation at the hearing. The Citation and Complaint do not give a factual basis for the allegation. 8. It must be held, under all the evidence and testimony of record, that, irrespective of a high degree of personal dissatisfaction on the part of Complainant with Respondent and its service representatives, Complainant did not sustain her burden of proof, applicable in these administrative disciplinary proceedings, by sufficiently establishing that any of the actions of Respondent were deficient, unacceptable, or in violation of A.R.S. § 32-1154A. Therefore, dismissal of the Citation and Complaint is warranted.

RECOMMENDED ORDER The Citation in this matter (No. 08-2490), together with the Complaint upon which it is based, is dismissed in its entirety. In the event of certification of the Administrative Law Judge Decision by the Director of the Office of Administrative Hearings, the effective date of the Order in this matter will be forty (40) days from the date of that certification.

Done this day, April 13, 2009.

Office of Administrative Hearings

__________________________ Michael G. Wales Administrative Law Judge

Original transmitted by mail this ____ day of ____________, 2009, to:

Registrar of Contractors William A. Mundell, Director c/o Legal Department 3838 N. Central Ave. Phoenix, AZ 85012, Director

By ___________________________

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Office of Administrative Hearings 1400 West Washington, Suite 101 Phoenix, Arizona 85007 (602) 542-9826