Colonial Warranty Files for Bankruptcy Protection in New Jersey

This is a guest post by Kevin Wallach. Author Bio is provided at the bottom of this article.

When asked me to write an article about Colonial Home Warranty’s recent announcement that it was closing its doors my first thought was what will happen to all their customers? As a marketer and blogger who works in the home service contract space I’ve seen a few companies go out of business and it never worked out well for the customers.

As of March 17th, 2014 the New Jersey headquartered company, Colonial Warranty Group, Inc., closed its doors and filed for Chapter 7 bankruptcy protection from a New Jersey court. But the protection it is seeking from creditors probably doesn’t include all of its customers, those unfortunate souls left holding worthless home service contracts. So I set out to get some answers to the questions I was asking and those the consumers were asking on

Colonial Home Warranty BanckruptcySince specializes in compiling consumer reviews about home warranty companies in the U.S., also referred to as home service contract or residential service contract companies, I started by asking what they had heard directly from their readers. One customer of Colonial Home Warranty who asked to be identified only as Mike M. from Ashburn told a member of the staff at about his three year contract, signed in 2012, which should have been in effect until February 2016. Colonial had enticed him to pay for all three years upfront in exchange for three free months of service. Mike also shared that leading up to the news of Colonial’s closing the more expensive of his repair claims were already being denied for reasons he did not feel were in keeping with his contract.

Customers React To The News

Mike’s experience was certainly not unique and the customers of Colonial were not just voicing their complaints on A search on Google led to a number of consumer websites with complaints from Colonial Home Warranty’s customers. On one such website I read a testimonial from a consumer who purchased a contract from Colonial Home Warranty less than a month before the bankruptcy filing in New Jersey. With that sort of story the obvious question came to my mind. What was Colonial thinking when they sold new contracts so close to their bankruptcy filing? Unfortunately’s request for comment from the bankruptcy attorney for Colonial went unanswered.

A few readers who wished to remain anonymous purchased three year contracts from Colonial and had received one year or less of the service promised by the company. The testimonials on’s Colonial Home Warranty page and on other websites tell similar stories. But some customers claim in their online testimonials that they are taking their complaints further than Internet testimonials. Whether or not any customer of Colonial Home Warranty has filed suit against the company or made any type of plea to the bankruptcy court was not clear at the time of publishing this article though. I did request comment or information from the bankruptcy court in New Jersey but was informed that they do not comment on cases or offer legal advice. Their advice to me was to seek guidance from a consumer advocacy group.

A reader who emailed us with her story, Kristi from Texas, tried to reach a company she believed to be the parent company of Colonial Home Warranty called XPD Warranty Group in order to find out if that company was servicing claims from Colonial Home Warranty’s customers. She is not alone in asserting that XPD Warranty Group is a parent company or holding company for Colonial Home Warranty. Her attempts to reach XPD Warranty Group by phone were unsuccessful but she did learn that her state is starting an investigation into the dealings of Colonial Warranty Group, Inc. with residents of Texas. Texas’s entity which regulates what it calls residential service contract companies is called TREC or the Texas Real Estate Commission. Kristi wrote that those she has spoken with at TREC have been very helpful and she recommended other Texas residents with complaints against Colonial Home Warranty contact that office for more information. I contacted TREC to find out about the association between Colonial and XPD. I was able to confirm that XPD Warranty Group is licensed to operate as a provider of residential service contracts within the state of Texas. I was also told that in 2012 Colonial Warranty Group, Inc. entered into a written agreement with the state of Texas to stop selling, renewing and servicing residential service contracts for Texas residents. After that point Colonial was to relinquish control of its contracts with Texas home owners to XPD Warranty Group. Finally I confirmed that TREC is following up on at least a few complaints lodged against XPD Warranty Group by Texas residents relating to issues with contracts originally issued by Colonial Warranty Group.

I also gained some insight into the relationship between Colonial Warranty Group and XPD Warranty Group thanks to another reader of, Lanny Teague from Sanger Texas. Lanny’s story gave credence to the assertion other readers have recently made that Colonial and XPD are, in fact, working together, if not the same company. Lanny told me about the 13 different contracts which were purchased from Colonial Home Warranty, each contract having a three year coverage term and each one being paid in full upfront. Lanny also informed me that Colonial didn’t handle the claims associated with the contracts. Whenever a claim was filed it had to be addressed to the company acting on behalf of Colonial in Texas, XPD Warranty Group. And when Lanny asked to cancel the contracts covering Texas properties the cancellation was handled through XPD, not Colonial. Sound strange? Well, it gets stranger.

When Lanny requested a refund for the unused years of the 3 year contracts that had been purchased XPD Warranty Group did agree to issue partial refunds amounting to more than half of what had originally been paid per contract. That sounds awfully strange for a company that has allegedly told others that it is not associated with Colonial Warranty Group. For readers interested in the timing of these refunds, these refunds were very recent. The refunds, according to Lanny, were issued on April 10th of this year.

I attempted to reach someone from XPD Warranty Group, Inc. but at the time of publication of this article I had not received any response from that company. If that should change then this article will be updated. Readers are encouraged to check back regularly here and also email [email protected] with any questions they would like posed to the company.

Another reader, Manishee Gupta, told how he purchased not just one but three separate three year service contracts from Colonial Home Warranty about two years ago. Purchasing multiple home service contracts as in the case of Lanny and Manishee is not as unusual as it may sound. Many owners of investment properties choose to cover those homes with a home service contract in order to make the work of managing rental properties easier. Mr. Gupta told us how his tenants were even able to report problems with covered items in the homes to Colonial.

In theory this can make life simpler for a landlord but only if the company keeps its promise to customers. But now that Colonial is seeking Chapter 7 relief from its debts Mr. Gupta wonders “if there will be any recovery” for customers like himself. The overall sentiment of readers who  have communicated with me and with is pessimistic though. Most believe that nothing will be done to address the possibility that Colonial acted with criminal intent to defraud consumers, signing multi-year contracts even on the eve of filing bankruptcy.

Why Did Colonial Warranty Group Declare Bankruptcy?

The main concern of the readers who have contacted is a common one. These are consumers who paid in advance for something they now will not receive. They’re upset and rightfully so. But let’s step back for a moment and ask why this happened. Why did Colonial Home Warranty make what seems like a sudden decision to file for bankruptcy protection? The answer to that question may start with the state of California.

I contacted the regulatory entity that oversees insurance companies selling to residents of California and requested information about any open or resolved legal matters regarding Colonial Warranty Group, Inc. In their reply I learned that on November 8th, 2013 Colonial was ordered by the California Department of Insurance to cease all operations selling and renewing home protection agreements. Colonial, according to the order issued by the California Department of Insurance, had been selling such contracts to California residents without required licensing since not later than January 23rd, 2012. For California residents who did business with Colonial Home Warranty this means that any contracts sold to them by the company were not legally issued. Whether or not this could lead to any recovery of customer fees paid to Colonial I don’t know. But one thing was very clear in the order to Colonial. For every day Colonial did business illegally in California it is liable for $5,000 in fines. If you do the math that total fine liability comes to millions of dollars. Was this the cause of Colonial asking a New Jersey court to protect it from its creditors? The answer to that question should become clearer when Colonial’s Chapter 7 request is handled by the court.

California’s insurance regulator was not the first to take action to stop Colonial Home Warranty from selling home service contracts to its residents. In August 2013 the state of Florida Office of Insurance Regulation ordered the company to cease doing business with Florida residents due to violation of a state law which requires a license in order to sell home warranties. And of course Texas had already told the company to stop selling contracts to its residents prior to issuing the order in 2012.

What Can Colonial Home Warranty Customers Do?

There are two options to  consider:

1. Readers who wish to submit a petition or claim to the court handling the Chapter 7 bankruptcy proceedings for Colonial Warranty Group, Inc. should strongly consider retaining professional legal assistance in order to do so. I asked the appropriate Clerk of Courts for information regarding submitting such petitions or claims and was informed that their office is not in a position to provide comments on pending cases or legal advice. Colonial Warranty Group, Inc.’s Chapter 7 Bankruptcy filing will be handled by Judge Donald H. Steckroth of the New Jersey Bankruptcy Court and is identified as Case number 2:14-bk-15949. A representative of also tried to reach the attorney for Colonial Warranty Group, Richard Honig of Hellring, Lindeman, Goldstein & Siegal, for comments or information about the bankruptcy case but at the time of this article’s publication had not received a reply.

2. Before issuing business license, many states require such companies to pledge bonds. If you are one of the customers that lost money, you may want to approach your State Insurance Department. If the State has collected pledge bonds, you may recover a portion of your money paid to the company.

Practice Caution While Purchasing A Warranty

While I cannot say that any actions taken by state regulators directly led to the closure of Colonial Home Warranty or the Chapter 7 bankruptcy filing there may still be a lesson for home warranty customers to learn from all of this. Doing business with a company that has operated without proper registration or licensing in your state could be your problem as much as the home warranty company’s problem if they are caught. It is worth your time to be sure that any company you purchase a home service contract from is doing business legally in your state.

If you have been affected by the closure of Colonial Home Warranty or have other experiences with this company you’d like to share please email [email protected] The team at will be happy to receive your stories as well as helping with any requests for information from readers.


Author Bio

Kevin Wallach writes a blog about the home service contract industry in the United States,, and works in a marketing capacity within the home warranty industry. He has followed the industry for five years and has worked just as long to help bring customers and companies together through Internet marketing. He also is the administrator of an industry group on Linkedin called “Home Warranty and Home Service Contract Professionals”.