Mailing from water-line insurance firm raises questions

Some Wauwatosa and Milwaukee residents this week received a mail solicitation for water-line service insurance from HomeServe USA Repair Management Corp., a company based in Connecticut.

HomeServe has been criticized in media reports for misleading advertising tactics, and residents have contacted NOW to express wariness about the service. Under pressure from the Better Business Bureau, it has adjusted its marketing and received a good rating, but its value as protection is an open question.

Repairs to water laterals that connect a house to the city right of way and the municipal water mains are the responsibility of homeowners, Public Works Director William Porter said. Full lateral replacement can cost from $5,000 to $10,000.

Typical homeowners insurance does not cover this, said Loretta Worters, of the Insurance Information Institute. HomeServe is one of a number of companies filling this niche, she said.

The question of replacement and repair of leaking laterals has arisen in Wauwatosa as the city carries out major street repair projects. It arose particularly in a town hall meeting in the fall when Porter outlined plans to rebuild Milwaukee Avenue next summer.

"They've targeted this market previously," Porter said of HomeServe.

HomeServe has been accused in the past of using deceptive advertising techniques, employing logos that give the impression they are sponsored by government or utility companies. Under an agreement with the Better Business Bureau, the company agreed to end the practice of using state silhouettes by the end of 2013. The recent mailing did not include such a logo.

The mailer says, "Please respond before January 31, 2014," which may give the impression that the offer for coverage has a limited term, when in fact the insurance can be purchased at any time, said Myles Meehan, a senior vice president of the company.

For a monthly rate of $4.99, HomeServe offers to repair or replace failed water lines to a limit of $3,000 per call, or $6,000 for two service calls over the course of a year. It contracts with local plumbers to carry out its service.

Meehan said that symptoms that may indicate the need for service might be a drop in water pressure, or standing water on the ground.

Fine print on the company's website outlines 23 conditions excluded from the coverage, such as problems arising from pre-existing defects; unusual water lines serving swimming pools, sprinklers or fire lines; and external features such as gutters and downspouts.

Another exclusion is "emergency breakdown arising from the disconnection from or interruption to the main water supply."

The company also says it is not responsible for "repair or replacement or unblocking of covered parts, equipment or systems due to the gradual reduction in performance caused by normal wear and tear where an emergency has not occurred."

"All I can tell you is, we cover wear-and-tear breaks every day," Meehan said.

"You might be skeptical by reading this, but I can tell you that we're doing this every day," he added. "If a customer's water line is leaking, and there's pooling of water in their front yard, or the leaking is causing water to go into their basement or something, or they've got no water pressure or low water pressure because of a leak or a break, we'll come out and fix it, and that's the value of this plan for $5 a month."

The BBB gives the firm an A- on a scale of A+ to F.

The Better Business Bureau lists 307 complaints, all of them closed, over three years. Meehan termed the number of complaints low, compared to a customer base of 1.3 million.

The company is working for formal accreditation with the BBB, Meehan said.

Complaints about the company have mostly been related to its marketing methods, although these complaints are becoming fewer, the BBB said. Other complaints "allege delays in receiving emergency service" and difficulty canceling services and receiving refunds or credits, which the BBB says the company has addressed.

HomeServe also offers other utility-related coverage plans, though Meehan said its water-line coverage had the most customers.