                                 CODE OF VIRGINIA

WARRANTY OBLIGATIONS (§ 46.2-1573.20)

A. Each trailer manufacturer, factory branch, distributor, or distributor branch
shall (i) specify in writing to each of its trailer dealers licensed in the
Commonwealth the dealer&#8217;s obligations for preparation, delivery, and
warranty service on its products and (ii) compensate the dealer for warranty
parts, service, and diagnostic work required of the dealer by the manufacturer
or distributor as follows:

   1. Compensation of a dealer for warranty parts, service, and diagnostic work
   shall not be less than the amounts charged by the dealer for the
   manufacturer&#8217;s or distributor&#8217;s original parts, service, and
   diagnostic work to retail customers for nonwarranty service, parts, and
   diagnostic work installed or performed in the dealer&#8217;s service
   department unless the amounts are not reasonable;

   2. For purposes of determining warranty parts and service compensation,
   menu-priced parts or services, group discounts, special event discounts, and
   special event promotions shall not be considered in determining amounts
   charged by the dealer to retail customers;

   3. Increases in dealer warranty parts and service compensation and diagnostic
   work compensation, pursuant to this section, shall be requested by the dealer
   in writing, shall be based on 100 consecutive repair orders or all repair
   orders over a 90-day period, whichever occurs first, and, in the case of
   parts, shall be stated as a percentage of markup that shall be uniformly
   applied to all the manufacturer&#8217;s or distributor&#8217;s parts;

   4. In the case of warranty parts compensation, the provisions of this
   subsection shall be effective only for model year 1992 and succeeding model
   years;

   5. If a manufacturer or distributor furnishes a part to a dealer at no cost
   for use by the dealer in performing work for which the manufacturer or
   distributor is required to compensate the dealer under this section, the
   manufacturer or distributor shall compensate the dealer for the part in the
   same manner as warranty parts compensation, less the wholesale costs, for such
   part as listed in the manufacturer&#8217;s current price schedules; or

   6. In the case of service work, manufacturer original parts or parts otherwise
   specified by the manufacturer or distributor, and parts provided by a dealer
   either pursuant to an adjustment program as defined in &#xA7; 59.1-207.34 or
   as otherwise requested by the manufacturer or distributor, the dealer shall be
   compensated in the same manner as for warranty service or parts.
   				This section does not apply to compensation for parts such as components,
   systems, fixtures, appliances, furnishings, accessories, and features that are
   designed, used, and maintained primarily for nonvehicular, residential
   purposes. Warranty audits of dealer records may be conducted by the
   manufacturer, factory branch, distributor, or distributor branch on a
   reasonable basis, and dealer claims for warranty compensation shall not be
   denied except for good cause, such as performance of nonwarranty repairs, lack
   of material documentation, fraud, or misrepresentation. Claims for dealer
   compensation shall be paid within 30 days of dealer submission or within 30
   days of the end of an incentive program or rejected in writing for stated
   reasons. The manufacturer, factory branch, distributor, or distributor branch
   shall reserve the right to reasonable periodic audits to determine the
   validity of all such paid claims for dealer compensation. Any chargebacks for
   warranty parts or service compensation and service incentives shall only be
   for the 12-month period immediately following the date of the claim and, in
   the case of chargebacks for sales compensation only, for the 18-month period
   immediately following the date of claim. However, such limitations shall not
   be effective in the case of intentionally false or fraudulent claims.

B. It shall be unlawful for any trailer manufacturer, factory branch,
distributor, or distributor branch to:

   1. Fail to perform any of its warranty obligations, including tires, with
   respect to a trailer;

   2. Fail to assume all responsibility for any liability resulting from
   structural or production defects;

   3. Fail to include in written notices of factory recalls to trailer owners and
   dealers the expected date by which necessary parts and equipment will be
   available to dealers for the correction of defects;

   4. Fail to compensate any of the trailer dealers licensed in the Commonwealth
   for repairs effected by the dealer of merchandise damaged in manufacture or
   transit to the dealer where the carrier is designated by the manufacturer,
   factory branch, distributor, or distributor branch;

   5. Fail to compensate its trailer dealers licensed in the Commonwealth for
   warranty parts, work, and service pursuant to subsection A or for legal costs
   and expenses incurred by such dealers in connection with warranty obligations
   for which the manufacturer, factory branch, distributor, or distributor branch
   is legally responsible or that the manufacturer, factory branch, distributor,
   or distributor branch imposes upon the dealer;

   6. Misrepresent in any way to purchasers of trailers that warranties with
   respect to the manufacture, performance, or design of the trailer are made by
   the dealer, either as warrantor or co-warrantor;

   7. Require the dealer to make warranties to customers in any manner related to
   the manufacture, performance, or design of the trailer; or

   8. Shift or attempt to shift to the trailer dealer, directly or indirectly,
   any liabilities of the manufacturer, factory branch, distributor, or
   distributor branch under the Virginia Motor Vehicle Warranty Enforcement Act
   (&#xA7; 59.1-207.9 et seq.), unless such liability results from the act or
   omission by the dealer.

C. Notwithstanding the terms of any franchise, it shall be unlawful for any
trailer manufacturer, factory branch, distributor, or distributor branch to fail
to indemnify and hold harmless its trailer dealers against any losses or damages
arising out of complaints, claims, or suits relating to the manufacture,
assembly, or design of trailers, parts, or accessories, or other functions by
the manufacturer, factory branch, distributor, or distributor branch beyond the
control of the dealer, including, without limitation, the selection by the
manufacturer, factory branch, distributor, or distributor branch of parts or
components for the trailer or any damages to merchandise occurring in transit to
the dealer where the carrier is designated by the manufacturer, factory branch,
distributor, or distributor branch. The dealer shall notify the manufacturer of
pending suits in which allegations are made that come within this subsection
whenever reasonably practicable to do so. Every trailer dealer franchise issued
to, amended, or renewed for trailer dealers in the Commonwealth shall be
construed to incorporate provisions consistent with the requirements of this
subsection.

D. On any new trailer, any uncorrected damage or any corrected damage exceeding
three percent of the manufacturer&#8217;s or distributor&#8217;s suggested
retail price as defined in 15 U.S.C. §§ 1231-1233, as measured by retail
repair costs, must be disclosed to the dealer in writing prior to delivery.
Factory mechanical repair and damage to glass, tires, and bumpers are excluded
from the three percent rule when properly replaced by identical
manufacturer&#8217;s or distributor&#8217;s original equipment or parts.
Whenever a new trailer is damaged in transit, when the carrier or means of
transportation is determined by the manufacturer or distributor, or whenever a
trailer is otherwise damaged prior to delivery to the new trailer dealer, the
new trailer dealer shall:

   1. Notify the manufacturer or distributor of the damage within three business
   days from the date of delivery of the new trailer to the new trailer
   dealership or within the additional time specified in the franchise; and

   2. Request from the manufacturer or distributor authorization to replace the
   components, parts, and accessories damaged or otherwise correct the damage,
   unless the damage to the trailer exceeds the three percent rule, in which case
   the dealer may reject the trailer within three business days.

E. If the manufacturer or distributor refuses or fails to authorize correction
of such damage within 10 days after receipt of notification, or if the dealer
rejects the trailer because damage exceeds the three percent rule, ownership of
the new trailer shall revert to the manufacturer or distributor, and the new
trailer dealer shall have no obligation, financial or otherwise, with respect to
such trailer. Should either the manufacturer, distributor, or the dealer elect
to correct the damage or any other damage exceeding the three percent rule, full
disclosure shall be made by the dealer in writing to the buyer and an
acknowledgment by the buyer is required. If there is less than three percent
damage, no disclosure is required, provided that the damage has been corrected.
Predelivery mechanical work shall not require a disclosure. Failure to disclose
any corrected damage within the knowledge of the selling dealer to a new trailer
in excess of the three percent rule shall constitute grounds for revocation of
the buyer order, provided that, within 30 days of purchase, the trailer is
returned to the dealer with an accompanying written notice of the grounds for
revocation. In case of revocation pursuant to this section, the dealer shall
accept the trailer and refund any payments made to the dealer in connection with
the transaction, less a reasonable allowance for the consumer&#8217;s use of the
trailer as defined in &#xA7; 59.1-207.11.

F. If there is a dispute between the manufacturer, factory branch, distributor,
or distributor branch and the dealer with respect to any matter referred to in
subsection A, B, or C, either party may petition the Commissioner in writing,
within 30 days after either party has given written notice of the dispute to the
other, for a hearing. The decision of the Commissioner shall be binding on the
parties, subject to rights of judicial review and appeal as provided in the
Administrative Process Act (&#xA7; 2.2-4000 et seq.). However, nothing contained
in this section shall give the Commissioner any authority as to the content or
interpretation of any manufacturer&#8217;s or distributor&#8217;s warranty.

HISTORY: 1996, cc. 1043, 1052, § 46.2-1992.72; 2015, c. 615.