I would call it an insulated, compression, butt splice. It is a legitimate way to splice wires.
What went wrong? I don't know. I can't tell from the photo. It does look like a bad splice and needs to be fixed and soon.
Warranty? Unless you are upset with whomever did the work I would him first. If he is a stand-up guy and made a goof he will fix it. If the problem is caused by something not related to the work he did then their will be another charge. If you decide to call someone else then find an electrician with good references, get it fixed, write the cheque, and move on.