CDRS HOME WARRANTY ARBITRATION PROCEDURES
EACH HOME WARRANTY COMPANY HAS A DIFFERENT PROCESS TO FOLLOW TO UTILIZE THEIR ARBITRATION SERVICES THAT MAY DIFFER SLIGHTLY FROM THE PROCEDURES SPECIFIED IN THIS DOCUMENT.
NEW JERSEY ARBITRATIONS – PLEASE SEE THE NEW JERSEY HOME WARRANTY ARBITRATION INFORMATION SECTION ON THIS WEBSITE
CONTACT HOME WARRANTY COMPANY
The first step in commencing the arbitration process with a Home Warranty Company is to contact the Home Warranty Company (HWC) and submit a request for arbitration utilizing the forms provided by the HWC. The HWC will then provide a list of “approved” arbitration providers for you to utilize, such as Construction Dispute Resolution Services, LLC (CDRS).
Proceed to the CDRS website and utilizing the left side navigation bars, locate the “Arbitration Forms and Documents” section. The first document in that section is the “Request for Dispute Resolution Services” (Request). Please download and complete the Request. The cost of the arbitration process is comprised of a $450 filing fee ($700 in California and Maryland) and an additional arbitration fee of $600. It will only cost additional if there is a lengthy distance required for the arbitrator to get to the residence or if the arbitration becomes involved and requires extra time to hear the entire case. Forward the CDRS Request for Dispute Resolution Services along with your check for $1,050 ($1,300 in Maryland and California) to the Home Warranty Company. A copy of the Request is required to be sent to CDRS. (Keep in mind that most Home Warranty Companies allow for the homeowner to be reimbursed for the costs of the arbitration as part of the arbitration award if the arbitrator finds in favor of the homeowner, which is explained later in this document.)
Note: Most HWC require the Builder to be listed as the Respondent during the first (and second year) of the warranty period and the HWC to be listed as the Respondent during the second and/or third through the tenth year of the warranty period. Some HWC also list the builder as a Respondent during the second and/or third year through the tenth year. Please check with the HWC to determine who should be listed as the Respondent.
CDRS FIRST RESPONSE
Upon receipt of the Request and the appropriate fees from the Home Warranty Company, CDRS will assign an arbitrator based on the geographic location of the homeowner’s residence, the nature of the dispute, and the availability of the arbitrator. CDRS will then forward to the appropriate Parties, a copy of the “Agreement to Arbitrate” that will indicate the terms and rules and procedures of the arbitration.
CDRS SECOND RESPONSE
Upon receipt of the signed Agreement to Arbitrate from the appropriate Parties, CDRS will send out a list of available dates to hold the arbitration hearing, as selected and provided by the arbitrator. Each Party shall indicate all dates that will be convenient for them and shall forward their preferred dates to CDRS. Hopefully, all Parties will have selected at least one common date for the arbitration hearing that is convenient for all of the Parties. (On occasion, arbitration dates may be forwarded to the parties along with the Agreement to Arbitrate.)
CDRS THIRD RESPONSE
CDRS will then send a “Notice of Arbitration” to the Parties that will specify the date, time and location of the arbitration hearing along with other related information. If all parties can not agree on a convenient date, CDRS Home Warranty Rules and Procedures allow CDRS to select the date and time for the arbitration hearing. The arbitration shall take place in the homeowner’s residence unless all Parties and the arbitrator agree to hold the hearing at another location.
THE ARBITRATION HEARING
There are three different types of arbitration hearings:
- Covered or Not Covered – The sole responsibility of the arbitrator is to determine if an issue in dispute is covered or not covered by the HWC policy. The question of whether an item is covered by the HWC rests entirely on what is specified in the HWC Warranty booklet (booklet) that was issued at the time that the warranty was purchased. The arbitrator’s scope is to interpret if the item meets all of the requirements as specified in the booklet. As an example, if the booklet specifies that there are three conditions that must be met in order for an item to be called a “major structural defect”, if only one or two of those conditions have been met, the arbitrator must declare that item as “not covered”. If there were several items in dispute between the HWC and the homeowner, the entire arbitration award will consist of a list of those disputed items as covered or not covered. The arbitrator will not give any reason for his/her decision other than to reference to the applicable section of the coverage booklet that he/she used in rendering his/her decision or if the arbitrator decides that an issue needs clarification.
- Method of addressing the covered items or cost settlement- After the arbitration award is issued, the HWC will contact the homeowner to discuss and plan for the repair, replacement or applicable treatment, including a cash settlement, that they will take to correct the problems that were specified as “covered” in the arbitration award. If for any reason, the homeowner does not agree with the manner selected by the HWC to address the covered items, it may be necessary to return to arbitration to have the neutral arbitrator decide on the appropriate method to remedy to dispute in question including determining the correct amount of a cash settlement.. The same arbitrator may be utilized depending on the technical construction knowledge and availability of the arbitrator.
- Quality of corrective action – After the repairs, replacement or applicable treatment of the covered items is complete, if the homeowner is not satisfied with the quality of the work performed or with the quality of the materials used, it again may be necessary to return to the arbitration process to allow the arbitrator to decide if the repairs were completed according to the agreement with the HWC/Builder and the homeowner. Please keep in mind that any procedures specified in the HWC booklet that were in effect at the time of the purchase of the warranty will take precedence over any current industry guidelines that may be now specified by a manufacturer or other neutral organization.
Remember that the decision of the arbitrator is “final and binding” on all parties and is not subject to appeal other than on certain very limited procedural grounds. All arbitration awards shall be “unreasoned” and shall specify the award without providing a specific reason for the decision of the arbitrator other than referencing to the appropriate section of the HWC booklet used in the arbitration or if the arbitrator decides that an issue needs an explanation or a clarification.
COST AND PAYMENT OF THE ARBITRATION PROCESS
Although many HWC policies specify various methods of handling the costs and payments related to the arbitration process, the following are the standard methods generally followed by the HWC industry.
- In most instances, the homeowner or person filing the request for arbitration is required to pay all up-front costs related to the arbitration process with the understanding that the arbitrator will re-allocate the expenses to be paid according to whomever he/she feels is the prevailing party after the arbitration has concluded. If the arbitrator determines that the majority of issues in dispute were decided in favor of the homeowner, the majority of the expenses will be paid by the HWC and the homeowner will be reimbursed for the expenses and deposits paid up-front by the homeowner. If the arbitrator determines that the builder or HWC was the prevailing party and was correct in most of the disputed items, the insured will not be reimbursed for the expenses they paid up-front. The arbitrator may, as part of the award, allocate the expenses in any percentage or in any manner that he/she determines to be fair to the Parties.
- In most instances, the homeowners will be required to first pay a non-refundable filing fee and a fee to cover the cost of the arbitration process to be submitted with the “Request for Dispute Resolution Services”. Although it rarely occurs, after a review of that request by CDRS, the homeowner may be required to submit an additional deposit covering the estimated cost of the arbitration that will be determined by the number of items in dispute, the complexity of those items, the distance that the arbitrator may have to travel to the residence and other expenses related to the arbitration.
- At the conclusion of the arbitration, the arbitrator will submit the “Arbitration Award” to CDRS along with a recap of his/her fees and expenses. If the deposit received by CDRS that was paid by the homeowner covers or exceeds the total costs of the arbitration process, the arbitration award will be issued to the Parties. If the deposit was not adequate to cover the total costs of the arbitration, CDRS will invoice the appropriate Party(s) for the amount that is due. The arbitration award may not be issued to the Parties by CDRS until the amount due is paid in full. (Please check the CDRS Arbitration Rules and Procedures for additional information on alternative payment options related to the issuance of the arbitration award.)
- If the arbitration is properly cancelled subsequent to a deposit being paid by the Claimant but prior to the arbitration hearing, a refund may be sent to the Claimant after all appropriate expenses have been deducted including but not limited to the arbitrator’s preparation time and related expenses, any administrative costs of CDRS that have been expended or any other expenses that were incurred. Note that the CDRS Case Filing fee is non-refundable.
EACH HOME WARRANTY COMPANY HAS A DIFFERENT PROCESS TO FOLLOW TO UTILIZE THEIR ARBITRATION SERVICES THAT MAY DIFFER SLIGHTLY FROM THE PROCEDURES SPECIFIED IN THIS DOCUMENT. IF YOU HAVE ANY QUESTIONS AS TO THE PROCEDURES TO BE FOLLOWED WITH YOUR ARBITRATION, PLEASE CALL YOUR HWC TO DISCUSS YOUR INDIVIDUAL ARBITRATION AND ITS SPECIFIC PROCEDURES THAT WILL BE FOLLOWED.