                                 CODE OF VIRGINIA

WARRANTY OBLIGATIONS (§ 46.2-1573.33)

A. Each motorcycle manufacturer, factory branch, distributor, or distributor
branch shall (i) specify in writing to each of its motorcycle 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. A
   manufacturer or distributor may pay the dealer a reasonable handling fee
   instead of the compensation otherwise required by this subsection for special
   high-performance complete engine assemblies in limited production motorcycles
   that constitute less than five percent of model production furnished to the
   dealer at no cost, if the manufacturer or distributor excludes such special
   high-performance complete engine assemblies in determining whether the amounts
   requested by the dealer for warranty compensation are consistent with the
   amounts that the dealer charges its other retail service customers for parts
   used by the dealer to perform similar work; 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.
   				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 motorcycle manufacturer, factory branch,
distributor, or distributor branch to:

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

   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 motorcycle 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 motorcycle 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 motorcycle 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 motorcycles that warranties with
   respect to the manufacture, performance, or design of the motorcycle 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 motorcycle; or

   8. Shift or attempt to shift to the motorcycle 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
motorcycle manufacturer, factory branch, distributor, or distributor branch to
fail to indemnify and hold harmless its motorcycle dealers against any losses or
damages arising out of complaints, claims, or suits relating to the manufacture,
assembly, or design of motorcycles, 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 motorcycle 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 motorcycle
dealer franchise issued to, amended, or renewed for motorcycle dealers in the
Commonwealth shall be construed to incorporate provisions consistent with the
requirements of this subsection.

D. On any new motorcycle, 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 tires 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 motorcycle is
damaged in transit, when the carrier or means of transportation is determined by
the manufacturer or distributor, or whenever a motorcycle is otherwise damaged
prior to delivery to the new motorcycle dealer, the new motorcycle dealer shall:

   1. Notify the manufacturer or distributor of the damage within three business
   days from the date of delivery of the new motorcycle to the new motorcycle
   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 motorcycle exceeds the three percent rule, in which
   case the dealer may reject the motorcycle 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 motorcycle because damage exceeds the three percent rule, ownership
of the new motorcycle shall revert to the manufacturer or distributor, and the
new motorcycle dealer shall have no obligation, financial or otherwise, with
respect to such motorcycle. 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 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 motorcycle in excess of the three percent rule shall constitute grounds for
revocation of the buyer order, provided that, within 30 days of purchase, the
motorcycle 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 motorcycle 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 motorcycle 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, § 46.2-1993.70; 2015, c. 615.