Arizona Court of Appeals Division One holds that a breach of a home warranty contract does not entitle a homeowner to recover from the Residential Contractors’ Recovery Fund.

A homeowner purchased a home warranty policy from a company licensed by both the Department of Insurance (“DOI”) and the Registrar of Contractors (“ROC”).  When the company stopped responding to his calls, the homeowner filed a complaint with the ROC.

After obtaining a favorable ruling, the homeowner sought an award from the Residential Contractors’ Recovery Fund (“Fund”).  The ROC denied his request, reasoning that the homeowner was not eligible for a Fund recovery because the claimed damages did not result from incomplete or defective workmanship.  See A.R.S. § 32-1132.  An administrative law judge and the superior court affirmed the ROC’s decision, and the homeowner appealed.

The Court of Appeals affirmed.  First, the Court agreed that the company’s breach of the home warranty contract was not a breach of a “construction contract,” as required for recovery from the Fund under A.R.S. § 32-1154.  Second, the Court concluded that the homeowner did not meet the definition of “person injured” by a residential contractor under A.R.S. § 32-1131.  And finally, the Court found that the homeowner failed to allege that he suffered any actual damages that would entitle him to compensation from the Fund. 

Judge Campbell wrote for the Court, joined by Judges McMurdie and Thumma.