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) As used in this section: 4
(a) "Qualifying repair" means a repair to a vehicle included within the 5
manufacturer, distributor, wholesaler, factory branch, or distributor branch 6
original new motor vehicle warranty, except when the vehicle on which the 7
repair was performed exceeds the chronological or mileage limit of the 8
warranty, and the repair does not otherwise constitute warranty work and 9
does not include any of the work described in subsec tion (4)(b) of this 10
section; 11
(b) "Qualifying repair order" means a repair order that encompasses, in whole 12
or in part, a qualifying repair; 13
(c) "Repair order" means an invoice paid by a retail customer and closed at the 14
time of submission, which encompasses one (1) or more repairs to or other 15
work on a vehicle, and reflects, in the case of a: 16
1. Parts markup submission, the dealer's cost and sale price for each 17
part; and 18
2. Labor rate submission, the amount charged for labor, and the number 19
of hours that generated those charges; 20
(d) "Warranty" means and includes a new motor vehicle warranty, a recall, or 21
a certified pre -owned warranty of a manufact urer, distributor, wholesaler, 22
factory branch, or distributor branch to repair or replace a vehicle or part, 23
including manufacturers of all -terrain vehicles as defined in KRS 189.010; 24
and 25
(e) "Warranty work": 26
1. Means work, including necessary diagnostic l abor, performed by a 27
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dealer in order to fulfill the obligations of a manufacturer, distributor, 1
wholesaler, factory branch, or distributor branch: 2
a. Warranty; 3
b. Recall; or 4
c. Service contract that the manufacturer required in writing the 5
dealer to provide the customer at the time of sale at no additional 6
cost; and 7
2. Includes work a dealer arranges to be performed if the work is 8
authorized by a manufacturer, distributor, wholesaler, factory branch, 9
or distributor branch in order to fulfill the warranty o r recall 10
obligations of the manufacturer, distributor, wholesaler, factory 11
branch, or distributor branch warranty. 12
(2) Notwithstanding the terms of any franchise agreement, each motor vehicle 13
manufacturer or distributor [,] doing business within this Commo nwealth[,] shall, 14
except for claims involving negligence by the dealer, including its employees and 15
subcontractors, assume all responsibility for and shall defend, indemnify, and hold 16
harmless its motor vehicle dealers against any loss, damages, and expens es, 17
including legal costs, arising out of: 18
(a) Complaints, claims, warranty repairs, recall repairs or modifications , or 19
factory authorized or directed repairs; 20
(b) [, or ]Lawsuits resulting from warranty defects, which shall include structural 21
or production defects; or 22
(c) Defects in the assembly[;] or design of motor vehicles, parts, accessories,[;] or 23
other functions beyond the control of the dealer, including without limitation, 24
the selection of parts or components for the vehicle. Each manufacturer or 25
distributor shall pay [ reasonable] compensation to any authorized dealer who 26
performs work to repair defects, or to repair any damage to the manufacturer's 27
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or distributor's product sustained while the product is in transit to the dealer, 1
when the carrier o r the means of transportation is designated by the 2
manufacturer or distributor. 3
(3) (a) 1. Each manufacturer or distributor shall provide to its dealers with each 4
model year a schedule of time allowances for the performance of 5
warranty repair work and serv ices, which shall include time allowances 6
for the diagnosis and performance of warranty work and service time [, 7
and shall be reasonable and adequate for the work to be performed]. 8
2. A manufacturer or distributor shall not deny a written request 9
submitted by a franchised dealer for modification of a manufacturer 10
or distributor's uniform time allowance for a specific warranty repair, 11
or a request submitted by a franchised dealer for an additional time 12
allowance for either diagnostic or repair work on a speci fic vehicle 13
covered under warranty, unless: 14
a. The request fails to include all information and documentation 15
reasonably required by the manufacturer or distributor to assess 16
the merits of the franchised dealer's request; 17
b. Information submitted with th e request fails to substantiate the 18
merits of the request which, if the request is for a modification of 19
a time allowance, must include a substantiation that the 20
manufacturer or distributor's time allowance is insufficient for a 21
qualified technician to com plete the repair under ordinary 22
circumstances; 23
c. The manufacturer or distributor rebuts the time allowance 24
claimed by the dealer for a modification of the manufacturer or 25
distributor's uniform time allowance or request for additional 26
time allowance for di agnostic or repair work on a specific 27
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vehicle; 1
d. For purposes of modification of a uniform time allowance, the 2
manufacturer or distributor provides an explanation for why a 3
dealer can complete the repair in the time allowed or establishes 4
a new time allo wance and provides an explanation for the new 5
time allowance; or 6
e. For purposes of a request for additional time allowance for 7
diagnostic or repair work on a specific vehicle, the manufacturer 8
determines that the hours claimed were unnecessary, fraudulent , 9
for diagnostic or repair work that did not follow the 10
manufacturer or distributor's diagnostic and repair procedures, 11
or were worked to remedy a mistake by the dealer or its 12
employee. 13
3. A manufacturer or distributor may require requests to be submitted in 14
accordance with a uniform process, which may not be unduly 15
burdensome or time consuming. 16
4. A manufacturer or distributor shall respond to a franchised dealer's 17
accurate and complete request for additional time for diagnostic or 18
repair work on a specific warranty repair within forty-five (45) days or 19
the request shall be deemed approved. A manufacturer or distributor 20
shall respond to a franchised dealer's accurate, complete request to 21
modify a uniform time allowance within two hundred forty (240) days 22
or the request shall be deemed approved. The time periods in this 23
subparagraph shall be tolled if the manufacturer or distributor 24
demonstrates its ability to respond is delayed due to strike, shortage, 25
act of God, or other cause over which the manufacturer o r distributor 26
has no control. 27
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(b) A manufacturer shall not require a term, policy, or procedure different from 1
those described in this section for any motor vehicle dealer to obtain 2
compensation under this section, or pay a motor vehicle dealer or 3
franchised dealer of an all -terrain vehicle, as defined in KRS 189.010, less 4
than the rates due pursuant to this section. 5
(c) 1. Manufacturers shall pay motor vehicle dealers and franchised dealers 6
of all-terrain vehicles the same retail labor rate that the dealer receives 7
for customer -pay repairs, including diagnostic time for all warranty 8
repairs as well as service, labor, and parts. 9
2. A dealer's retail labor rate shall be established by submission by the 10
dealer of their choice of one hundred (100) consecutive qualifying 11
repair orders or all qualifying repair orders in a ninety (90) day 12
period, whichever is less. If a manufacturer or dis tributor believes the 13
dealer's retail labor rate, based on the submitted documentation, is 14
misleading, inaccurate, or fraudulent, the manufacturer or distributor 15
may rebut the dealer's submitted rate or initiate legal proceedings. 16
3. If a qualified technic ian is required to communicate with a technical 17
assistance center, an engineering department, or some external 18
manufacturer source in order to provide a warranty repair on an issue 19
not covered by a manufacturer's service manual or bulletin, the 20
manufacturer shall pay for the time from the start of the 21
communication, including time on hold, until the communication is 22
complete, provided the communication was made in good faith. 23
(d) A motor vehicle dealer or franchised dealer of all -terrain vehicles may 24
submit a request to the manufacturer for a warranty labor rate increase or 25
parts markup increase no more than once in any twelve (12) month period. 26
The request shall be made by the dealer in writing and based on one 27
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hundred (100) consecutive qualifying repair o rders or all qualifying repair 1
orders over a ninety (90) day period, whichever is less. 2
(e) A dealer seeking to establish or modify the warranty labor rate or parts 3
markup shall submit to the manufacturer, distributor, wholesaler, factory 4
branch, or distributor branch a single set of repair orders for the purpose of 5
calculating: 6
1. Both the labor rate and parts markup; or 7
2. Only the labor rate or parts markup, if the dealer has not requested to 8
establish or modify that rate within the previous twelve (12) months. 9
(f) 1. The submitted parts markup or labor rate shall be presumed accurate 10
and shall go into effect thirty (30) days after the manufacturer, 11
distributor, wholesaler, factory branch, or distributor branch approves 12
the submission. If the manufacturer or distributor does not approve or 13
rebut the declared rate within thirty (30) days of receipt, then the rate 14
shall be deemed approved on the thirty-first day following receipt. 15
2. The manufacturer or distributor shall propose an adjustment of the 16
average percentage parts markup or labor rate based on that rebuttal 17
no later than thirty (30) days after receipt of the submission. 18
3. If the dealer does not agree with the proposed average percentage 19
markup, the dealer may file a protest with the commission no t later 20
than sixty (60) days after receipt of that proposal by the manufacturer 21
or distributor. 22
4. If a protest is filed, the commission shall inform the manufacturer or 23
distributor that a timely protest has been filed and that a hearing will 24
be held on the protest. In any hearing held pursuant to this paragraph, 25
the manufacturer or distributor shall have the burden of proving that 26
the rate declared by the dealer was unfair and unreasonable and that 27
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the proposed adjustment of the average percentage markup or labor 1
rate is fair and reasonable pursuant to subsection (4) of this section. 2
(g) Warranty repairs and recall repairs, including voluntary stop -sell repairs 3
required by the manufacturers, shall not be excluded from the requirements 4
of this subsection. I f a manufacturer issues a recall, the dealer shall be 5
compensated for labor time as set forth in this subsection. 6
(h) If a manufacturer or distributor determines from any set of repair orders 7
submitted under this section that the retail labor rate or parts markup 8
percentage is substantially higher or lower than the rate currently on record 9
with the manufacturer or distributor for labor or parts, the manufacturer or 10
distributor may request additional documentation for a period of either sixty 11
(60) days prior to or sixty (60) days subsequent to the time period for which 12
the repair orders were submitted for purposes of an alteration or to rebut 13
the dealer's proposed rate. 14
(i) 1. A manufacturer or distributor may request up to one hundred (100) 15
additional consec utive repair orders that exclude repairs listed in 16
subsection (4)(b) of this section and that are different from those 17
provided under paragraphs (c)2. and (d) of this subsection from a 18
dealer to determine if the dealer's parts markup rate, labor rate, or 19
both are materially different than the rates the dealer has declared 20
with the manufacturer or distributor. 21
2. The manufacturer or distributor may adjust the subsequent rates paid 22
by the manufacturer or distributor to the dealer if the manufacturer or 23
distributor determines that the dealer's rates charged to customers for 24
nonwarranty work are less than the rates currently being paid by the 25
manufacturer or distributor to the dealer for warranty work. The 26
manufacturer or distributor shall have thirty (30) days from receiving 27
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all requested additional repair orders to rebut the new vehicle dealer's 1
retail labor rate, retail parts rate, or both. 2
3. The additional repair orders specified in this paragraph shall be from 3
a ninety (90) day period selected by the manuf acturer or distributor 4
within the most recent previous twelve (12) month period, and the 5
repair orders shall be selected by the dealer. A manufacturer or 6
distributor may not request repair orders under this paragraph within 7
twelve (12) months of any prior request under this paragraph. 8
(4)[(2)] (a) A motor vehicle dealer or franchised dealer of all -terrain vehicles that 9
is entitled to compensation for warranty work shall be compensated for all 10
aggregated aspects of the repair [In the determination of what con stitutes 11
"reasonable compensation" under this section, the principal factor to be 12
considered shall be the amount of money that the dealer is charging its other 13
customers for the same type service or repair work. Other factors may be 14
considered, including: 15
1. The compensation being paid by other manufacturers or distributors to 16
their dealers for work; and 17
2. The prevailing amount of money being paid or charged by the dealers in 18
the city or community in which the authorized dealer is doing business. 19
(b) "Reasonable compensation" shall include: 20
1. Diagnosing the defect as needed; 21
2. Repair service; 22
3. Labor; 23
4. Parts; and 24
5. Administrative and clerical costs]. 25
(b) In calculating the labor rate or parts markup, the following shall not be 26
included: 27
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1. Repairs subject to manufacturer, distributor, wholesaler, factory 1
branch, or distributor branch discounts, such as special events, special 2
promotions, coupons, or service campaigns; 3
2. Parts sold at wholesale; 4
3. Repairs of vehicles owned by the dealer or an employee of the dealer; 5
4. Routine maintenance, including but not limited to the replacement of 6
fluids, filters, batteries, bulbs, belts, nuts, bolts, or fasteners; 7
5. Installations of accessories; 8
6. Replacement of or work on tires or wheels, including alignments 9
unless required during the course of a qualifying repair, wheel or tire 10
rotations, or replacement of brake drums, rotors, shoes, or pads; 11
7. Vehicle reconditioning; 12
8. Safety or emission inspections required by law; 13
9. Repairs for which volume discounts have been negotiated with 14
government agencies or insurers; 15
10. Parts that do not have individual part numbers; 16
11. Manufacturer, distributor, wholesaler, factory branch, or distributor 17
branch approved and reimbursed goodwill repairs or reimbursements; 18
12. Windshield replacements, window etchings, window tints, protective 19
films, or other masking products; 20
13. Vehicle body damage repairs; 21
14. Repairs of nonline make vehicles or repairs with aftermarket parts 22
when calculating the retail parts rate but not the retail labor rate; 23
15. Repairs on aftermarket parts; or 24
16. Parts sold or repairs performed or paid for by insurance carriers. 25
(c)[ Except as provided in paragraph (d) of this subsection, the compensation of a 26
dealer shall not be less than: 27
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1. The amount charged by the dealer for like services and parts, which 1
minimum compensation for parts shall be dealer cost plus thirty percent 2
(30%) gross profit, to retail customers for nonwarranty service and 3
repairs; or 4
2. The amounts indicated for work on t he schedule of warranty 5
compensation required to be filed by the manufacturer with the 6
commission as a part of the manufacturer's license application by KRS 7
190.030. 8
(d)] The compensation of a dealer for vehicles with a classification of seven (7) or 9
higher as established in 49 C.F.R. sec. 565.15 by a manufacturer, component 10
manufacturer, or distributor shall not be less than the greater of: 11
1. The amount charged by the dealer to the retail customers of the dealer 12
for nonwarranty work of like kind; or 13
2. The dealer acquisition costs of parts or service. 14
(d)[(e)] Payments shall not be reduced due to preestablished market norms or 15
market averages. Manufacturers shall not establish restrictions or 16
limitations of customer repair frequency due to failure rate in dices or 17
national failure averages. 18
(e) 1. Except as provided in subparagraph 2. of this paragraph, if a 19
manufacturer furnishes parts or components to a motor vehicle dealer 20
at no cost to use in performing repairs subject to a recall or warranty 21
repair, th e manufacturer shall compensate the motor vehicle dealer 22
for the parts or components in an amount equivalent to the motor 23
vehicle dealer's retail average percentage markup on the parts or 24
component as if the parts or components had been sold to the motor 25
vehicle dealer by the manufacturer. 26
2. For work involving a complete engine, transmission, or electric or 27
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hybrid vehicle propulsion battery, the manufacturer or distributor 1
shall provide the dealer with compensation totaling not less than 2
twenty percent (20 %) of the price of the component in the 3
manufacturer or distributor's parts catalog, not to exceed one 4
thousand dollars ($1,000) per component, regardless of whether the 5
part was provided by the manufacturer at no cost, at a discount, or 6
purchased by the d ealer from the manufacturer at full cost. [A 7
manufacturer or distributor shall not require unreasonable proof to 8
establish "reasonable compensation."] 9
(5)[(3)] (a) A manufacturer or distributor shall not require a dealer to submit a claim 10
authorized under t his section sooner than thirty (30) days after the dealer 11
completes the preparation, delivery, or warranty service authorizing the claim 12
for preparation, delivery, 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 maintain 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
(6) If a manufacturer imposes a recall or a stop -sale order on any new vehicle in a 26
dealer's inventory that prevents the sale of the vehicle, the manufacturer shall 27
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compensate the dealer in accordance with 49 U.S.C. sec. 30116. 1
(7) (a) If parts or a remedy a re not reasonably available to perform a recall service 2
or repair on a used vehicle held for sale by a dealer authorized to sell and 3
service new vehicles of the same line make within thirty (30) days of the 4
manufacturer issuing the initial notice of recall , and the manufacturer has 5
issued a stop -sale or do -not-drive order on the vehicle, the manufacturer 6
shall compensate the dealer at a prorated rate of at least one percent (1%) of 7
the value of the vehicle each month beginning on the date that is thirty (30 ) 8
days after the date on which the stop -sale or do -not-drive order was 9
provided to the dealer until the earlier of either the date the: 10
1. Recall or remedy parts are made available; or 11
2. Dealer sells, trades, or otherwise disposes of the affected used mot or 12
vehicle. 13
(b) The value of a used vehicle shall be the average trade -in value for used 14
vehicles as indicated in an independent third-party guide for the year, make, 15
and model of the recalled vehicle. 16
(c) This subsection shall only apply to: 17
1. Used vehic les subject to safety or emissions recalls pursuant to and 18
recalled in accordance with federal law and regulations and where a 19
stop-sale or do -not-drive order has been issued and repair parts or 20
remedy remain unavailable for thirty (30) days or longer; and 21
2. New motor vehicle dealers holding an affected used vehicle for sale: 22
a. In inventory at the time the stop -sale or do -not-drive order was 23
issued; or 24
b. Which was taken in the used vehicle inventory of the dealer as a 25
consumer trade -in incident to the pu rchase of a new vehicle 26
from the dealer after the stop -sale or do -not-drive order was 27
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issued; and 1
c. That is a line make that the dealer is franchised to sell or on 2
which the dealer is authorized to perform recall repairs. 3
(d) A manufacturer or distributor may compensate its dealers under a national 4
recall compensation program, provided the compensation under the 5
program is: 6
1. Equal to or greater than that provided under paragraph (b) of this 7
subsection; or 8
2. Of an amount on which the manufacturer or dist ributor and the 9
dealer agree. 10
(e) A manufacturer or distributor may direct the manner and method in which 11
a dealer must demonstrate the inventory status of an affected used motor 12
vehicle to determine eligibility under paragraph (c) of this subsection, 13
provided that the manner and method may not be unduly burdensome and 14
may not require information that is unduly burdensome to provide. 15
(f) This subsection shall not require a manufacturer or distributor to provide 16
total compensation to a dealer which would exc eed the total average trade -17
in value of the affected used motor vehicle as originally determined under 18
paragraph (b) of this subsection. 19
(g) Any remedy provided to a dealer under this subsection shall be exclusive 20
and shall not be combined with any other s tate or federal recall 21
compensation remedy. 22
(8) (a) Subject to paragraph (b) of this subsection, a manufacturer shall not 23
establish an unduly burdensome process for: 24
1. The submission of a repair order; or 25
2. Proving payment for submitted repair orders. 26
(b) Requiring customer signatures or receipts shall not be considered unduly 27
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burdensome under this subsection. 1
(9)[(4)] A manufacturer or distributor shall compensate the dealer for manufacturer -2
sponsored or distributor-sponsored sales or service promotion events, including but 3
not limited to rebates, programs, or activities in accordance with established written 4
guidelines for such events, programs, or activities, which the manufacturer or 5
distributor shall provide to each dealer. 6
(10)[(5)] (a) A manufacturer or distributor shall not require a dealer to submit a claim 7
authorized under subsection (9)[(4)] of this section sooner than thirty (30) 8
days after the dealer becomes eligible to submit the claim. 9
(b) All claims made by a dealer pursuant to subsection (9)[(4)] of this section for 10
promotion events, including but not limited to rebates, programs, or activities, 11
shall be paid within thirty (30) days after their approval. 12
(c) All claims shall be either approved or disapproved by the manufacturer or 13
distributor within thirty (30) days after their receipt on a completed form 14
supplied or approved by the manufacturer or distributor. 15
(d) Any claim not specifically disapproved in writing within thirty (30) days after 16
the receipt of this form shall be considered to be approved and payment shall 17
be made within thirty (30) days. 18
(e) Any claim disapproved in writing within thirty (30) days of submission shall 19
state the reason for the disapproval and permit the motor vehicle dealer to 20
correct and resubmit the disapproved claim within thirty (30) days of receipt 21
of the disapproval. 22
(f) A timely made warranty claim shall not be deemed invalid solely because 23
unavailable parts cause additional use or mileage on the vehicle. 24
(11)[(6)] If a dealer submits any claim under thi s section to a manufacturer or 25
distributor that is incomplete, inaccurate, or lacking any information usually 26
required by the manufacturer or distributor, or if incomplete, inaccurate, or missing 27
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information is discovered during an audit, then the manufact urer or distributor shall 1
promptly notify the dealer, and the time limit to submit the claim shall be extended 2
for a reasonable length of time, not less than five (5) business days following notice 3
by the manufacturer or distributor to the dealer, for the dealer to provide the 4
complete, accurate, or lacking information to the manufacturer or distributor. A 5
dealer's failure to comply with the specific requirements of the manufacturer or 6
distributor for processing a claim may not constitute grounds for denial of the claim 7
or reduction of the amount of compensation paid to the dealer if the dealer presents 8
reasonable documentation or other evidence to substantiate the claim. 9
(12)[(7)] (a) A manufacturer or distributor may only audit warranty, recall, sales, or 10
incentive claims for a period of twelve (12) months following payment, or the 11
end of a program which does not exceed one (1) year in length, whichever is 12
later, subject to all of the provisions of this section. 13
(b) A manufacturer or distributor shall not require documentation for warranty, 14
recall, sales, or incentive claims more than twelve (12) months after the claim 15
was paid or the end of a program which does not exceed one (1) year in 16
length, whichever is later. 17
(c) Prior to requiring any charge -back, reimbursement, or credit against a future 18
transaction arising out of an audit, the manufacturer or distributor shall submit 19
written notice to the dealer along with a copy of its audit and the detailed 20
reason for each intended charge-back, reimbursement, or credit. 21
(d) Notwithstanding the limitations of this subsection, a manufacturer that 22
possesses evidence which would cause a person of ordinary caution, 23
prudence, and judgment to believe that a dealer submitted a cl aim that was 24
fraudulent, false, or misleading may audit the dealer for the claims during any 25
period in which an action for fraud or for the submission of false or 26
misleading claims may be commenced under applicable state law. 27