Consumers who purchased extended warranties from Sears Canada may be entitled to coverage for repair expenses incurred after the retailer declared bankruptcy.

The national retailer self-financed its extended warranty programs. As a result, consumers who purchased extended warranties were considered creditors when the retailer went bankrupt in 2017. But after a plan approved by creditors November 16, 2020 and by courts November 23, customers holding valid warranties, included extended warranties, may be entitled to compensation for actual costs they have paid for repair on service of appliances and other products.

Creditors agreed to establish a $9-million pool. Compensation will be distributed from that pool to all claims submitted through a warranty claim portal by June 12, 2021. If total submissions exceed $9 million, claimants will receive a proportional share of that total.

Compensation is restricted to those who made purchases prior to June 22, 2017, when Sears Canada first filed for creditor protection. Extended warranty purchases made between June 22, 2017 and October 17, 2017, when the company announced it would no longer honour its warranty obligations, may receive a refund for the unamortized portion of warranty via searscanada@fticonsulting.ca.

Warranties on mattresses and furniture are excluded from this program because those warranties were insured by a third-party, Guardsman (Valspar) Inc., not Sears Canada.

Consumers Council of Canada’s 2018 report Consumers and Product Insurance Purchase Decisions used the Sears Canada story to highlight the differences among extended warranty programs offered to consumers. It found that the vast majority of Canadian consumers did not understand how extended warranties and service programs such as the Sears Protection Plan worked. Most major retailers in Canada and the United States use third-party providers so that protections should continue seamlessly if the retailer or manufacturer declares bankruptcy.