Cars Protection Plus Lawsuit: Key Rulings and Contract Terms

C.A.R.S. Protection Plus has faced two significant legal actions over how it handles vehicle service contract claims: a 2004 lawsuit by the Pennsylvania Attorney General alleging the company misrepresented coverage and refused to honor warranties, and a 2007 Wisconsin Court of Appeals decision holding that the company breached its contract and the duty of good faith when it denied an engine repair on a Jaguar. The C.A.R.S. Protection Plus lawsuit history, together with ongoing consumer complaints, points to a recurring dispute over what the company can demand from customers before it will pay a claim.

The 2004 Pennsylvania Attorney General Lawsuit

On January 21, 2004, Pennsylvania Acting Attorney General Jerry Pappert sued C.A.R.S. Protection Plus under the state’s Unfair Trade Practices and Consumer Protection Law. The action followed complaints from 30 consumers across 14 Pennsylvania counties.¹

The state alleged the company failed to disclose or actively misrepresented several key contract terms. According to the filing, consumers were not told they could be responsible for labor costs, that the company could require the use of used or rebuilt parts even when a repair shop advised against them, and that customers could face additional charges if the repair facility did not use parts the company supplied. The state also accused the company of failing to honor warranties and refusing to deliver full refunds.¹

The Attorney General asked the court to order the company to stop operating and to pay more than $25,000 in restitution and fines. The company’s then-owner, Fred Kohl, declined to comment at the time and said he did not yet have legal representation.¹

Tang v. C.A.R.S. Protection Plus (Wisconsin, 2007)

The most detailed judicial ruling against the company came in Wisconsin. Thomas Tang sued C.A.R.S. Protection Plus after it denied coverage for a $13,733 engine replacement on his 1999 Jaguar XJR. Three separate repair facilities had confirmed that covered components, specifically piston rings and cylinders, had failed. Rather than authorize the repair, the company demanded that Tang pay out of pocket for an engine tear-down so it could investigate why the parts failed.²

Tang alleged breach of contract, breach of the implied covenant of good faith, and violations of the federal Magnuson-Moss Warranty Act. The dispute turned on one word in the contract: “diagnosis.” The company’s contract stated that the warranty holder was responsible for “charges relating to the tear down and diagnosis of the vehicle,” and C.A.R.S. argued this let it require Tang to fund an open-ended investigation into the root cause of the failure.³

What the Court Held

In an opinion released July 11, 2007 (Case No. 2006AP1540), the Wisconsin Court of Appeals sided with Tang. The court found the term “diagnosis” ambiguous and applied the rule that ambiguities are construed against the party that wrote the contract.³ The contract, the court held, required the vehicle owner to pay for a diagnosis to determine whether a covered part had failed, not to fund an investigation into why it failed. The trial court observed that the company’s reading had “no logical stopping point” and would allow it to demand investigations “as far as it could be taken to possibly undermine coverage.” The trial court called that interpretation “simply absurd.”²

The appeals court also affirmed that C.A.R.S. breached the implied covenant of good faith by refusing to authorize repairs or perform its own inspection at its own expense, even after multiple shops had already confirmed the failure of covered components.²

Damages Awarded

Tang was awarded $13,481.26 in breach-of-contract damages and $11,250 in attorney’s fees under the Magnuson-Moss Warranty Act. The court noted that although the “Value Plus Limited Warranty” was legally a service contract rather than a warranty under Magnuson-Moss, Tang was still entitled to fees under the statute. The case was sent back to the trial court to decide whether Tang could also recover fees for the appeal.²

Complaints That Echo the Same Issues

The patterns behind the Pennsylvania suit and the Tang ruling continue to appear in consumer complaints. The company has received 120 complaints with the Better Business Bureau over a three-year period, 97 of them classified as service or repair issues. Of those 120, only 16 are listed as resolved to the consumer’s satisfaction; 104 are marked “Answered,” meaning the company responded but the consumer did not confirm resolution.⁴

The recurring themes track the Tang facts closely:

Claim denials based on contract exclusions such as “previous improper repair,” which consumers say they could not have known about when buying a used vehicle.⁴
Costly diagnostic demands with no assurance of coverage, including one consumer reportedly asked to spend $2,000 on tear-down work before the company would consider the claim.⁴
Disputes over pro-rated refund calculations, particularly in total-loss situations.⁵
Disagreements over third-party inspection reports the company uses to verify coverage.⁵

What Current Contracts Say About Your Legal Options

If you hold a C.A.R.S. Protection Plus contract, several provisions shape what you can do about a denied claim. All repairs must be authorized before work begins; unauthorized repairs are denied outright. Diagnostic and tear-down charges are generally the consumer’s responsibility, except under the company’s highest-tier plan, which covers up to one hour of diagnostic labor.⁶

Cancellation within the first 30 days entitles the consumer to a full refund if no claim has been made. After that, refunds are limited to circumstances such as total loss or repossession and are calculated pro-rata, minus any claims paid and a $50 administrative fee.⁶

The contracts also require binding arbitration through the American Arbitration Association and waive the consumer’s right to participate in a class action or class arbitration. That waiver matters: it means the kind of individual actions seen in Tang, not a class case, are the realistic route for a disputed claim. If the company fails to pay a covered claim or refund within 60 days, the contract lets the consumer file directly against the backing insurer, Dealers Assurance Company of Addison, Texas.⁶

1
Pittsburgh Post-Gazette. State Sues CARS Protection Plus Inc
2
FindLaw. Tang v. CARS Protection Plus Inc
3
Wisconsin Law Journal. Tang v. CARS Protection Plus Inc
4
BBB. CARS Protection Plus Inc Complaints
5
BBB. CARS Protection Plus Inc Complaints
6
CARS Protection Plus. Service Contract Terms