§ 20-305.1. Automobile dealer warranty obligations.
§ 20‑305.1. Automobiledealer warranty obligations.
(a) Each motor vehiclemanufacturer, factory branch, distributor or distributor branch, shall specifyin writing to each of its motor vehicle dealers licensed in this State thedealer's obligations for preparation, delivery and warranty service on itsproducts, the schedule of compensation to be paid such dealers for parts, work,and service in connection with warranty service, and the time allowances forthe performance of such work and service. In no event shall such schedule ofcompensation fail to include reasonable compensation for diagnostic work andassociated administrative requirements as well as repair service and labor.Time allowances for the performance of warranty work and service shall be reasonableand adequate for the work to be performed. The compensation which must be paidunder this section must be reasonable, provided, however, that under nocircumstances may the reasonable compensation under this section be in anamount less than the dealer's current retail labor rate and the amount chargedto retail customers for the manufacturer's or distributor's original parts fornonwarranty work of like kind, provided such amount is competitive with otherfranchised dealers within the dealer's market.
(b) Notwithstanding theterms of any franchise agreement, it is unlawful for any motor vehiclemanufacturer, factory branch, distributor, or distributor branch to fail toperform any of its warranty obligations with respect to a motor vehicle, tofail to fully compensate its motor vehicle dealers licensed in this State forwarranty parts other than parts used to repair the living facilities ofrecreational vehicles, at the prevailing retail rate according to the factorsin subsection (a) of this section, or, in service in accordance with theschedule of compensation provided the dealer pursuant to subsection (a) above,or to otherwise recover all or any portion of its costs for compensating itsmotor vehicle dealers licensed in this State for warranty parts and serviceeither by reduction in the amount due to the dealer, or by separate charge,surcharge, or other imposition, and to fail to indemnify and hold harmless itsfranchised dealers licensed in this State against any judgment for damages orsettlements agreed to by the manufacturer, including, but not limited to, courtcosts and reasonable attorneys' fees of the motor vehicle dealer, arising outof complaints, claims or lawsuits including, but not limited to, strictliability, negligence, misrepresentation, express or implied warranty, orrecision or revocation of acceptance of the sale of a motor vehicle as definedin G.S. 25‑2‑608, to the extent that the judgment or settlementrelates to the alleged defective negligent manufacture, assembly or design ofnew motor vehicles, parts or accessories or other functions by themanufacturer, factory branch, distributor or distributor branch, beyond thecontrol of the dealer. Any audit for warranty parts or service compensationshall only be for the 12‑month period immediately following the date ofthe payment of the claim by the manufacturer, factory branch, distributor, ordistributor branch. Any audit for sales incentives, service incentives,rebates, or other forms of incentive compensation shall only be for the 12‑monthperiod immediately following the date of the payment of the claim by themanufacturer, factory branch, distributor, or distributor branch pursuant to asales incentives program, service incentives program, rebate program, or otherform of incentive compensation program. Provided, however, these limitationsshall not be effective in the case of fraudulent claims.
(b1) All claims made bymotor vehicle dealers pursuant to this section for compensation for delivery,preparation, warranty and recall work including labor, parts, and otherexpenses, shall be paid by the manufacturer within 30 days after receipt ofclaim from the dealer. When any claim is disapproved, the dealer shall benotified in writing of the grounds for disapproval. Any claim not specificallydisapproved in writing within 30 days after receipt shall be consideredapproved and payment is due immediately. No claim which has been approved andpaid may be charged back to the dealer unless it can be shown that the claimwas false or fraudulent, that the repairs were not properly made or wereunnecessary to correct the defective condition, or the dealer failed toreasonably substantiate the claim either in accordance with the manufacturer'sreasonable written procedures or by other reasonable means. A manufacturer ordistributor shall not deny a claim or reduce the amount to be reimbursed to thedealer as long as the dealer has provided reasonably sufficient documentationthat the dealer:
(1) Made a good faithattempt to perform the work in compliance with the written policies andprocedures of the manufacturer; and
(2) Actually performedthe work.
Notwithstanding the foregoing, amanufacturer shall not fail to fully compensate a dealer for warranty or recallwork or make any chargeback to the dealer's account based on the dealer'sfailure to comply with the manufacturer's claim documentation procedure orprocedures unless both of the following requirements have been met:
(1) The dealer has,within the previous 12 months, failed to comply with the same specific claimdocumentation procedure or procedures; and
(2) The manufacturerhas, within the previous 12 months, provided a written warning to the dealer bycertified United States mail, return receipt requested, identifying thespecific claim documentation procedure or procedures violated by the dealer.
Nothing contained in thissubdivision shall be deemed to prevent or prohibit a manufacturer from adoptingor implementing a policy or procedure which provides or allows for the self‑auditof dealers, provided, however, that if any such self‑audit procedurecontains provisions relating to claim documentation, such claim documentationpolicies or procedures shall be subject to the prohibitions and requirementscontained in this subdivision. Notices sent by a manufacturer under a bona fideself‑audit procedure shall be deemed sufficient notice to meet therequirements of this subsection provided that the dealer is given reasonableopportunity through self‑audit to identify and correct any out‑of‑lineprocedures for a period of at least 60 days before the manufacturer conductsits own audit of the dealer warranty operations and procedures. A manufacturermay further not charge a dealer back subsequent to the payment of the claimunless a representative of the manufacturer has met in person at thedealership, or by telephone, with an officer or employee of the dealerdesignated by the dealer and explained in detail the basis for each of theproposed charge‑backs and thereafter given the dealer's representative areasonable opportunity at the meeting, or during the telephone call, to explainthe dealer's position relating to each of the proposed charge‑backs. Inthe event the dealer was selected for audit or review on the basis that some orall of the dealer's claims were viewed as excessive in comparison to average,mean, or aggregate data accumulated by the manufacturer, or in relation toclaims submitted by a group of other franchisees of the manufacturer, themanufacturer shall, at or prior to the meeting or telephone call with thedealer's representative, provide the dealer with a written statement containingthe basis or methodology upon which the dealer was selected for audit orreview.
(b2) A manufacturer maynot deny a motor vehicle dealer's claim for sales incentives, serviceincentives, rebates, or other forms of incentive compensation, reduce theamount to be paid to the dealer, or charge a dealer back subsequent to thepayment of the claim unless it can be shown that the claim was false or fraudulentor that the dealer failed to reasonably substantiate the claim either inaccordance with the manufacturer's reasonable written procedures or by otherreasonable means.
(b3) Notwithstanding theterms of any franchise or other agreement, or the terms of any program, policy,or procedure of any manufacturer, it shall be unlawful for a manufacturer totake or threaten to take any adverse action against a dealer located in thisState, or to otherwise discriminate against any dealer located in this State,on the basis that the dealer sold or leased a motor vehicle to a customer whoeither exported the vehicle to a foreign country or who resold the vehicle to athird party, unless the dealer knew or reasonably should have known that thecustomer intended to export or resell the motor vehicle prior to the customer'spurchase of the vehicle from the dealer. The conduct prohibited under thissubsection includes, but is not limited to, a manufacturer's actual orthreatened: (i) failure or refusal to allocate, sell, or deliver motor vehiclesto the dealer; or (ii) discrimination against any dealer in the allocation ofvehicles; or (iii) charging back or withholding payments or other compensationor consideration for which a dealer is otherwise eligible for warrantyreimbursement or under a sales promotion, incentive program, or contest; or(iv) disqualification of a dealer from participating in or discriminationagainst any dealer relating to any sales promotion, incentive program, orcontest; or (v) termination of a franchise. In any proceeding brought pursuantto this subsection, there shall be a rebuttable presumption that the dealer,prior to the customer's purchase of the vehicle, did not know nor should havereasonably known that the customer intended to export or resell the motorvehicle, if (i) following the sale, the vehicle is titled, registered, and,where applicable, taxes paid in any state or territory within the United Statesin the name of a customer who was physically present at the dealership at orprior to the time of sale, and (ii) the dealer did not know, prior to theconsummation of the sale, that the vehicle would be shipped to a foreigncountry.
(c) In the event thereis a dispute between the manufacturer, factory branch, distributor, or distributorbranch, and the dealer with respect to any matter referred to in subsection(a), (b), (b1), (b2), or (d) of this section, either party may petition theCommissioner in writing, within 30 days after either party has given writtennotice of the dispute to the other, for a hearing on the subject and thedecision of the Commissioner shall be binding on the parties, subject to rightsof judicial review and appeal as provided in Chapter 150B of the GeneralStatutes; provided, however, that nothing contained herein shall give theCommissioner any authority as to the content of any manufacturer's ordistributor's warranty. Upon the filing of a petition before the Commissionerunder this subsection, any chargeback to or any payment required of a dealer bya manufacturer relating to warranty parts or service compensation, or to salesincentives, service incentives, rebates, or other forms of incentivecompensation, shall be stayed during the pendency of the determination by theCommissioner.
(d) Transportation damages.
(1) Notwithstanding theterms, provisions or conditions of any agreement or franchise, the manufactureris liable for all damages to motor vehicles before delivery to a carrier ortransporter.
(2) If a new motorvehicle dealer determines the method of transportation, the risk of loss passesto the dealer upon delivery of the vehicle to the carrier.
(3) In every otherinstance, the risk of loss remains with the manufacturer until such time as thenew motor vehicle dealer or his designee accepts the vehicle from the carrier.
(4) Whenever a motorvehicle is damaged while in transit when the carrier or the means oftransportation is designated by the manufacturer or distributor, or whenever amotor vehicle is otherwise damaged prior to delivery to the dealer, the dealermust:
a. Notify themanufacturer or distributor of such damage within three working days or withinsuch additional time as authorized by the franchise agreement of the occurrenceof the delivery of the motor vehicle as defined in subsection (1) of thissection; and
b. Must request fromthe manufacturer or distributor authorization to repair the damages sustainedor to replace the parts or accessories damaged.
(5) In the event themanufacturer or distributor refuses or fails to authorize repair or replacementof any such damage within ten working days after receipt of notification ofdamage by the dealer, ownership of the motor vehicle shall revert to themanufacturer or distributor, and the dealer shall incur no obligation,financial or otherwise, for such damage to the motor vehicle.
(5a) No manufacturer shallfail to disclose in writing to a new motor vehicle dealer, at the time ofdelivery of a new motor vehicle, the nature and extent of any and all damageand post‑manufacturing repairs made to such motor vehicle while in thepossession or under the control of the manufacturer if the cost of such post‑manufacturingrepairs exceeds three percent (3%) of the manufacturer's suggested retailprice. A manufacturer is not required to disclose to a new motor vehicle dealerthat any glass, tires or bumper of a new motor vehicle was damaged at any timeif the damaged item has been replaced with original or comparable equipment.
(6) Nothing in thissubsection (d) shall relieve the dealer of the obligation to cooperate with themanufacturer as necessary in filing any transportation damage claim with thecarrier.
(e) Damage/RepairDisclosure. Notwithstanding the provisions of subdivision (d)(4) of thissection and in supplementation thereof, a new motor vehicle dealer shalldisclose in writing to a purchaser of the new motor vehicle prior to enteringinto a sales contract any damage and repair to the new motor vehicle if thedamage exceeds five percent (5%) of the manufacturer's suggested retail priceas calculated at the rate of the dealer's authorized warranty rate for laborand parts.
(1) A new motor vehicledealer is not required to disclose to a purchaser that any damage of any natureoccurred to a new motor vehicle at any time if the total cost of all repairsfails to exceed five percent (5%) of the manufacturer's suggested retail priceas calculated at the time the repairs were made based upon the dealer'sauthorized warranty rate for labor and parts and the damaged item has beenreplaced with original or comparable equipment.
(2) If disclosure is notrequired under this section, a purchaser may not revoke or rescind a salescontract or have or file any cause of action or claim against the dealer ormanufacturer for breach of contract, breach of warranty, fraud, concealment,unfair and deceptive acts or practices, or otherwise due solely to the factthat the new motor vehicle was damaged and repaired prior to completion of thesale.
(3) For purposes of thissection, "manufacturer's suggested retail price" means the retailprice of the new motor vehicle suggested by the manufacturer including theretail delivered price suggested by the manufacturer for each accessory or itemof optional equipment physically attached to the new motor vehicle at the timeof delivery to the new motor vehicle dealer which is not included within theretail price suggested by the manufacturer for the new motor vehicle.
(f) The provisions ofsubsections (a), (b), (b1), (d) and (e) shall not apply to manufacturers anddealers of "motorcycles" as defined in G.S. 20‑4.01(27).
(f1) The provisions ofsubsections (a), (b), (b1), (b2), and (c) of this section applicable to a motorvehicle manufacturer shall also apply to a component parts manufacturer. Forpurposes of this section, a component parts manufacturer means a person,resident, or nonresident of this State who manufactures or assembles new motorvehicle "component parts" and directly warrants the component partsto the consumer. For purposes of this section, component parts means an engine,power train, rear axle, or other part of a motor vehicle that is not warrantedby the final manufacturer of the motor vehicle.
(f2) The provisions ofsubsections (d) and (e) of this section shall not apply to a State agency thatassists the United States Department of Defense with purchasing, transferring,or titling a vehicle to another State agency, a unit of local government, avolunteer fire department, or a volunteer rescue squad.
(g) Truck Dealer CostReimbursement. Every manufacturer, manufacturer branch, distributor, ordistributor branch of new motor vehicles, or any affiliate or subsidiarythereof, which manufactures or distributes new motor vehicles with a grossvehicle weight rating of 16,000 pounds or more shall compensate its new motorvehicle dealers located in this State for the cost of special tools, equipment,and training for which its dealers are liable when the applicable manufacturer,manufacturer branch, distributor, or distributor branch sells a portion of itsvehicle inventory to converters and other nondealer retailers. The purpose ofthis reimbursement is to compensate truck dealers for special additional coststhese dealers are required to pay for servicing these vehicles when the dealersare excluded from compensation for these expenses at the point of sale. Thecompensation which shall be paid pursuant to this subsection shall beapplicable only with respect to new motor vehicles with a gross vehicle weightrating of 16,000 pounds or more which are registered to end users within thisState and that are sold by a manufacturer, manufacturer branch, distributor, ordistributor branch to either:
(1) Persons or entitiesother than new motor vehicle dealers with whom the manufacturer, manufacturerbranch, distributor, or distributor branch has entered into franchises; or
(2) Persons or entitiesthat install custom bodies on truck chassis, including, but not limited to,mounted equipment or specialized bodies for concrete distribution, firefightingequipment, waste disposal, recycling, garbage disposal, buses, utility service,street sweepers, wreckers, and rollback bodies for vehicle recovery; provided,however, that no compensation shall be required to be paid pursuant to thissubdivision with respect to vehicles sold for purposes of manufacturing orassembling school buses.
The amount of compensationwhich shall be payable by the applicable manufacturer, manufacturer branch,distributor, or distributor branch shall be six hundred dollars ($600.00) pernew motor vehicle registered in this State whose chassis has a gross vehicleweight rating of 16,000 pounds or more. The compensation required pursuant tothis subsection shall be paid by the applicable manufacturer, manufacturerbranch, distributor, or distributor branch to its franchised new motor vehicledealer in closest proximity to the registered address of the end user to whomthe motor vehicle has been registered within 30 days after such registration.Upon receiving a request in writing from one of its franchised dealers locatedin this State, a manufacturer, manufacturer branch, distributor, or distributorbranch shall promptly make available to such dealer its records relating to theregistered addresses of its new motor vehicles registered in this State for theprevious 12 months and its payment of compensation to dealers as provided inthis subsection. (1973,c. 88, s. 3; c. 1331, s. 3; 1983, c. 704, ss. 11‑13; 1987, c. 827, s. 1;1989, c. 614, ss. 1, 2; 1991, c. 561, ss. 1‑4; 1993, c. 116, ss. 1, 2;1995, c. 156, s. 1; 1997‑319, s. 4; 1999‑335, ss. 3, 3.1, 4; 2003‑113,s. 5; 2003‑258, s. 4; 2007‑513, ss. 5‑7, 11; 2009‑338,ss. 3, 4; 2009‑550, s. 2(c).)