"Forced arbitration has been devastating to thousands of families across the United States. Arbitration appears in two possible places for an unwary home buyer: 1) The builder's contract; and/or 2) A home warranty policy from a third-party company such as 2-10 HBW or RWC. Warranties are marketed as insurance and are usually presented after closing when the homeowner would have no opportunity to say “No thanks” to the binding mandatory arbitration clause. In fact, this document is deceitful in that it is titled as a "Warranty." The word "Warranty" is illusory due to exclusions in the warranty. The purpose of this document is to protect the builders from liability while forcing the homeowners into giving up their 7th Amendment rights to use our civil justice system.
Forced arbitration serves another purpose for these industries: it hides complaints! When disputes go to a private dispute resolution process, there is no public record, and other consumers cannot find out about the complaint about the builder -- or the outcome of the arbitration. Gag orders can prevent home owners from even talking about their case. A homeowner often goes into arbitration thinking they will win because their evidence supports their case, but arbitration works in favor of the industry. Why? Arbitrators and industry players do repeat business with each other. They do not do repeat business with consumers.
In most cases the builder is a member of a Risk Retention Group (RRG). States' insurance departments have little, if any, authority over this organization. RRG's--captive insurance—is a type of self-insurance owned by the industry it 'insures." So these groups actually protect builders and warranty companies, not so much homeowners. The RRG owns the warranty company. The builders' liability insurance is bundled within the "warranties" purchased for the homeowner. The warranty is based on minimal standards of workmanship that most any builder can attain. In other words,the homeowner hardly ever has a covered claim unless the home is actually falling down. Industry fed arbitration companies seal the deal. The homeowner has little recourse. They are stuck with homes they cannot afford to repair, cannot sell and are often forced into foreclosure."