City logos used on water pipe insurance letters

Some homeowners wonder if it's ethical

Homeowners in communities across the country are receiving letters that look like mail from their city or village.

It comes with city logo and letterhead, and may seem urgent.

But one Northern Kentucky man feels they are a bit deceptive.

Looks like tax letter

Randy Wright thought the city of Alexandria, Kentucky, where he owns a home, had an important tax message for him.

"They have the city logo on the envelope, and they have the city logo on the letterhead itself, and they are signed by the city," he said after opening the piece of first-class mail.

But inside, a letter offered "underground water line protection" (sometimes called water pipe insurance) for about $8 a month. It promised peace of mind if your underground water pipe ever breaks by covering up to $8,000 in repair costs.

Companies have been offering underground water line protection for years, though until recently many homeowners simply threw the letters away, assuming they were just junk mail.

But the mailings don't look like junk mail anymore.

"It looks very professional," Wright said. "It looks like it is from the city government, and I think as a result, people tend to think they are offering it, and recommend it, and then sign up as a result of that."

But Wright found that it is really from a third-party company, Service Line Warranties of America.

The company now has a deal with 400 cities, from Akron, Ohio to Orlando, Florida, and all the way to California. It pays each city a small commission -- 5 to 9 percent of sales -- in exchange for use of the city logo.

Alexandria Mayor William Rachford told us, "It's a great offer, and we feel it's worth it. The company is endorsed by the National League of Cities," he said, pointing out that it also gets an "A" rating from the Better Business Bureau.

But Randy Wright feels something's not right.

"I have a real ethics issue with it, and I've gone back and forth with the city government on it, and they are holding their ground. But I just think it's wrong," he said.

Company claims it is already helping local homeowners

We contacted Service Line Warranties of America, where spokesman Myles Meehan said the program is legitimate and worthwhile.

"We have already saved Alexandria homeowners $32,000 in repair costs," he said.

Meehan says it has been so successful that the nearby city of Newport, Kentucky has just signed on as well.

However, some communities, such as Mount Dora in central Florida, have dropped their endorsements, after homeowners raised similar questions about the ethics of the company using city letterhead to push a private insurance plan.

If you receive a letter like this, feel free to consider the offer. But read it closely, and realize that your city or town may not really have sent it.

That way you don't waste your money.

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