Marketer of Car Warranties Files for Bankruptcy
A one-time major marketer of extended new car warranty programs has filed for protection from creditors under Chapter 11 of the federal bankruptcy code eight months after halting sales, and its president said Monday that the company, Republic Warranty Corp., will soon go out of business.
But neither the bankruptcy filing nor the decision to fold the firm will affect the thousands of extended warranties marketed by Irvine-based Republic to new car dealers across the nation, company President George Jacobs said Monday.
“Those warranties will be honored by the insurance companies that underwrote them,” he said. “Republic was just the marketer for the insurance companies.”
In its filing in federal bankruptcy court in Santa Ana, Republic, which still has several other businesses as Republic Industries Inc., listed assets of $100,000 and liabilities of $10 million.
The largest single debt was $7.5 million, listed as a disputed judgment in favor of Republic Insurance of Dallas. Jacobs said the debt is a court-ordered reserve against a possible award in a suit Republic Insurance has filed against Republic Warrancy. He said his company has countersued.
Both suits involve breach of contract claims.
Until it ceased that line of business in October, Republic Warrancy had marketed extended warranties for nearly two decades, from 1972 through 1982 under a different name.
An extended warranty is an insurance policy bought by new car owners to cover repairs that either are not included in the manufacturers’ warranties or that occur after the factory warranty expires.
The policies are sold to customers by the car dealer, who buys them in bulk from a marketer like Republic. In California last year, state Insurance Department officials said more than 600,000 extended warranties were sold.
Jacobs said he decided to get out of the business last year because “we felt the insurance companies weren’t paying us enough” to sell and administer the policies.
Since then, he said, he has trimmed Republic’s staff to 25 employees from about 150.
Jacobs declined to identify the types of business Republic continues to conduct.
