AN ACT relating to motor vehicle dealers.

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AN ACT relating to motor vehicle dealers. 1
Be it enacted by the General Assembly of the Commonwealth of Kentucky: 2
Section 1. KRS 190.046 is amended to read as follows: 3
(1) Notwithstanding the terms of any franchise agreement, each motor vehicle 4
manufacturer or distributor, doing business within this Commonwealth, shall 5
assume all responsibility for and shall defend, indemnify, and hold harmless its 6
motor vehicle dealers against any loss, damages, and expenses, including legal 7
costs, arising out of complaints, claims, recall repairs or modifications or factory 8
authorized or directed repairs, or lawsuits result ing from warranty defects, which 9
shall include structural or production defects; defects in the assembly; or design of 10
motor vehicles, parts, accessories; or other functions beyond the control of the 11
dealer, including without limitation, the selection of p arts or components for the 12
vehicle. Each manufacturer or distributor shall pay reasonable compensation to any 13
authorized dealer who performs work to repair defects, or to repair any damage to 14
the manufacturer's or distributor's product sustained while the product is in transit to 15
the dealer, when the carrier or the means of transportation is designated by the 16
manufacturer or distributor. Each manufacturer or distributor shall provide to its 17
dealers with each model year a schedule of time allowances for the performance of 18
warranty repair work and services, which shall include time allowances for the 19
diagnosis and performance of warranty work and service time, and shall be 20
reasonable and adequate for the work to be performed. 21
(2) (a) In the determination of what constitutes "reasonable compensation" under this 22
section, the principal factor to be considered shall be the amount of money 23
that the dealer is charging its other customers for the same type service or 24
repair work. Other factors may be considered, including: 25
1. The compensation being paid by other manufacturers or distributors to 26
their dealers for work; and 27
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2. The prevailing amount of money being paid or charged by the dealers in 1
the city or community in which the authorized dealer is doing business. 2
(b) Except as provided in paragraph (d) of this subsection, "reasonable 3
compensation" shall include: 4
1. Diagnosing the defect as needed; 5
2. Repair service; 6
3. Labor; 7
4. Parts; and 8
5. Administrative and clerical costs. 9
(c) Except as provided in paragraph (d) of this subsection, the compensation of a 10
dealer shall not be less than: 11
1. The amount charged by the dealer for like services and parts, which 12
minimum compensation for parts shall be dealer cost plus thirty percent 13
(30%) gross profit, to retail customers for nonwarranty service and 14
repairs; or 15
2. The amounts indicated for work on the schedule of warranty 16
compensation required to be filed by the manufacturer with the 17
commission as a part of the manufacturer's license application by KRS 18
190.030. 19
(d) The compensation of a dealer for vehicles with a classification of seven (7) or 20
higher as established in 49 C.F.R. s ec. 565.15 by a manufacturer, component 21
manufacturer, or distributor shall [ not] be subject to the following 22
conditions[less than the greater of]: 23
1. The dealer shall be entitled to receive, as to reimbursement for parts, 24
not less than its actual acquisiti on cost of the parts including freight, 25
handling, taxes, and any other related out -of-pocket expenses, plus a 26
gross profit margin of thirty percent (30%); 27
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2. In addition to paragraph (b) of this subsection, "reasonable 1
compensation" shall also include: 2
a. All dealer costs incurred for training and certifying technicians 3
and warranty administration personnel; 4
b. Dealer costs to acquire, use, and maintain computer hardware 5
and software systems utilized for warranty and recall repairs, 6
including diagnostic computers, mobile devices, and software for 7
tracking and reporting warranty and recall time and expenses; 8
and 9
c. Dealer costs for specialized tools and hardware required for 10
warranty and recall repairs; 11
3. A dealer may submit reimbursement requests for its co sts described in 12
subparagraph 2. of this paragraph, and the manufacturer, component 13
manufacturer, or distributor shall pay for those costs, at the dealer's 14
election either on a: 15
a. Per repair basis, as may be mutually agreeable between the 16
dealer and manuf acturer, component manufacturer, or 17
distributor; 18
b. Per repair basis, based upon the amounts customarily charged 19
by the dealer to retail customers for similar nonwarranty work; 20
or 21
c. Periodic basis no less frequent than annually, with reasonable 22
documentation of the costs and a reasonable method of 23
allocating the costs between reimbursable warranty and recall 24
services and nonwarranty services; 25
4. If labor hours on a warranty or recall repair, diagnostics, or service 26
are incurred by a technician trained or c ertified in that service by a 27
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manufacturer, component manufacturer, or distributor, or if such 1
training or certification is not furnished, the actual hours incurred 2
shall be the basis of reasonable compensation unless the 3
manufacturer, component manufacturer, or distributor proves by clear 4
and convincing evidence that the hours incurred were unreasonable 5
for the specific repair. Reference to standard repair times, labor 6
guides, or time allowance guidelines shall not constitute sufficient 7
evidence of that proof; 8
5. If a component manufacturer for any system, subassembly, or other 9
component part of a motor vehicle has assumed, undertaken, or 10
otherwise has legal responsibility for reimbursement and processing of 11
a dealer claim for warranty or recall services by virtue of any pass -12
through or extended warranty arrangement, governmental recall 13
mandate, consent decree, judicial decree, litigation settlement, or other 14
means, the component manufacturer shall be subject to all the 15
requirements of this section as if primarily liable as a manufacturer or 16
distributor. This subparagraph shall not relieve the manufacturer or 17
distributor of the motor vehicle from any primary liability for the 18
indemnification obligations of subsection (1) of this section to its 19
dealers. If a component warranty is made contemporaneously with the 20
sale of a new motor vehicle and extends beyond the original 21
manufacturer or distributor warranty on the entire vehicle, the 22
manufacturer or distributor shall continue to have primary liability to 23
its dea lers for the performance of warranty service on those 24
components during the extended period; 25
6. Compensation to be paid a dealer from a component manufacturer for 26
warranty or recall work on a component part shall be no less than the 27
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amount that would other wise be reimbursable if the manufacturer or 1
distributor of the vehicle had made the component warranty or was 2
otherwise responsible for the component part. This subparagraph 3
shall apply regardless of whether or not the part bears a different part 4
number than the originally manufactured part, or is a remanufactured 5
or rebuilt part that is required or permitted to be utilized in a warranty 6
or recall repair; 7
7. A manufacturer, component manufacturer, or distributor shall not 8
refuse payment for a replacement pa rt installed by a dealer in 9
connection with a warranty or recall repair that the manufacturer, 10
component manufacturer, or distributor claims is not defective based 11
upon laboratory or other testing, or where no fault with the part is 12
found, unless the part is returned to the dealer with a written 13
certification from the manufacturer, component manufacturer, or 14
distributor setting forth the test conditions and results and warranting 15
that the part is not defective, is fully functional, and qualified for 16
reuse in future repairs; 17
8. A manufacturer, component manufacturer, or distributor shall not 18
require unreasonable proof or unduly burdensome processes to 19
establish reasonable compensation; 20
9. A manufacturer, component manufacturer, or distributor shall not 21
require a dealer for vehicles with a classification of seven (7) or 22
higher as established in 49 C.F.R. sec. 565.15 to submit a claim 23
authorized under this section sooner than ninety (90) days after the 24
dealer completes the preparation, delivery, or warranty serv ice 25
authorizing the claim for preparation, delivery, or warranty service; 26
and 27
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10. As used in this paragraph, "component manufacturer" means any 1
person who manufactures, assembles, imports, or distributes new, 2
remanufactured, or rebuilt parts, assemblies, s ubassemblies, or other 3
components for motor vehicles[The amount charged by the dealer to the 4
retail customers of the dealer for nonwarranty work of like kind; or 5
2. The dealer acquisition costs of parts or service]. 6
(e) A manufacturer or distributor shall not require unreasonable proof to establish 7
"reasonable compensation." 8
(3) (a) Except as provided in subsection (2)(d)9. of this section, a manufacturer or 9
distributor shall not require a dealer to submit a claim authori zed under this 10
section sooner than thirty (30) days after the dealer completes the preparation, 11
delivery, or warranty service authorizing the claim for preparation, delivery, 12
or warranty service. 13
(b) All claims made by a dealer under this section shall be paid within thirty (30) 14
days after their approval. 15
(c) All claims shall be either approved or disapproved by the manufacturer or 16
distributor within thirty (30) days after their receipt on a completed form 17
supplied or approved by the manufacturer or distributor. 18
(d) Any claims not specifically disapproved in writing within thirty (30) days 19
after the receipt of the form shall be considered to be approved and payment 20
shall be made within thirty (30) days thereafter. 21
(e) A dealer shall not be required to mainta in defective parts for more than thirty 22
(30) days after payment of a claim. 23
(f) Any dispute between the dealer and the manufacturer or distributor shall be 24
subject to the provisions of KRS 190.057. 25
(4) A manufacturer or distributor shall compensate the dea ler for manufacturer -26
sponsored or distributor-sponsored sales or service promotion events, including but 27
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not limited to rebates, programs, or activities in accordance with established written 1
guidelines for such events, programs, or activities, which the m anufacturer or 2
distributor shall provide to each dealer. 3
(5) (a) A manufacturer or distributor shall not require a dealer to submit a claim 4
authorized under subsection (4) of this section sooner than ninety (90)[thirty 5
(30)] days after the dealer becomes eligible to submit the claim. 6
(b) All claims made by a dealer pursuant to subsection (4) of this section for 7
promotion events, including but not limited to rebates, programs, or activities, 8
shall be paid within thirty (30) days after their approval. 9
(c) All claims shall be either approved or disapproved by the manufacturer or 10
distributor within thirty (30) days after their receipt on a completed form 11
supplied or approved by the manufacturer or distributor. 12
(d) Any claim not specifically disapproved in writin g within thirty (30) days after 13
the receipt of this form shall be considered to be approved and payment shall 14
be made within thirty (30) days. 15
(6) If a dealer submits any claim under this section to a manufacturer or distributor that 16
is incomplete, inaccur ate, or lacking any information usually required by the 17
manufacturer or distributor, or if incomplete, inaccurate, or missing information is 18
discovered during an audit, then the manufacturer or distributor shall promptly 19
notify the dealer, and the time lim it to submit the claim shall be extended for a 20
reasonable length of time, not less than five (5) business days following notice by 21
the manufacturer or distributor to the dealer, for the dealer to provide the complete, 22
accurate, or lacking information to th e manufacturer or distributor. A dealer's 23
failure to comply with the specific requirements of the manufacturer or distributor 24
for processing a claim may not constitute grounds for denial of the claim or 25
reduction of the amount of compensation paid to the d ealer if the dealer presents 26
reasonable documentation or other evidence to substantiate the claim. 27
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(7) (a) A manufacturer or distributor may only audit warranty, recall, sales, or 1
incentive claims for a period of twelve (12) months following payment, or th e 2
end of a program which does not exceed one (1) year in length, whichever is 3
later, subject to all of the provisions of this section. 4
(b) A manufacturer or distributor shall not require documentation for warranty, 5
recall, sales, or incentive claims more t han twelve (12) months after the claim 6
was paid or the end of a program which does not exceed one (1) year in 7
length, whichever is later. 8
(c) Prior to requiring any charge -back, reimbursement, or credit against a future 9
transaction arising out of an audit, the manufacturer or distributor shall submit 10
written notice to the dealer along with a copy of its audit and the detailed 11
reason for each intended charge-back, reimbursement, or credit. 12
(d) Notwithstanding the limitations of this subsection, a manufacture r that 13
possesses evidence which would cause a person of ordinary caution, 14
prudence, and judgment to believe that a dealer submitted a claim that was 15
fraudulent, false, or misleading may audit the dealer for the claims during any 16
period in which an action f or fraud or for the submission of false or 17
misleading claims may be commenced under applicable state law. 18