Action 9: Should you avoid this warranty?

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ORLANDO,Fla. - Duke Energy customers are getting letters that look like a warning from their power company. It urges an extra payment on your power bill to protect against huge losses. Action 9's Todd Ulrich found the offer is really from an out-of-state company that’s been in trouble for its sneaky warranties.

Jerricka Gunter thought the letter she received had to come from her power company.

“I would think that Duke Energy sent (the letter),” said Gunter.

It came in a Duke envelope and read, "Attention Duke customers." It warns that water heaters can fail and damages can be expensive.

 “It looks like its seriously urging customers to have this service,” said Gunter.

The warranty would have added $6 a month to Gunter's power bill to cover hot water tank repair or replacement. At the bottom of the letter there’s a disclosure that some customers missed. It said HomeServe USA, not Duke, is selling the plan.

“You would not suspect it's from somewhere else,” said Gunter.

Consumer groups urge caution with any home warranty since the coverage may be unnecessary and there are many exclusions.

“I absolutely would not buy it,” said Bill Newton with Florida Consumer Action.

Newton said the plan generates profits not regulated by the PSC, just by selling a customer list.

“The power company is not worried about your water heater. They hand over the list and they get paid,” said Newton.

HomeServe has a history. Three attorneys general found past letters deceptive and HomeServe paid fines and changed marketing without admitting guilt. The BBB asked the company to change and now gives it an A minus rating.

HomeServe CEO Tom Rusin told Ulrich, its solicitation is a fully disclosed optional service plan and it's worked with Duke since 2008.

“Those customers who purchased a water heater protective plan, 9-point-1 out of 10 are extremely happy with the product,” said Rusin.

He said past problems involved a marketing plan shut down in 2010.

Duke would not say how much it collects from the monthly fee.

“Duke is using its name to get more money from customers,” said Gunter.

Duke Energy said customers can opt out of mailings from its third party vendors.

HomeServe said its plan is regulated as insurance, and it gives refunds to anyone not satisfied

Home Serve also sent us Action 9 names of two local customers who recently used the hot water protection plan.   

Action 9 contacted Beatrice Hernandez in Orange County who said when her hot water tank failed this month, she contacted Home Serve. She said within three days the heater had been fixed at no cost after paying the monthly fee for at least 4 years.

 PDF: HomeServe USA response to Action 9 report

PDF: Duke Energy response to Action 9 report