KRS § 190.046 — KY Code / Title XVI / Chapter 190 / Section 190.046
190.046 Compensation to dealer for work performed under warranty -- "Reasonable compensation" -- Submission, determination, and payment of dealer's claims -- Compensation to dealer for sponsored sales or service promotion events -- Audits -- Fraud
Status: in_force

190.046 Compensation to dealer for work performed under warranty --

"Reasonable compensation" -- Submission, determination, and payment of

dealer's claims -- Compensation to dealer for sponsored sales or service

promotion events -- Audits -- Fraud.

(1) Notwithstanding the terms of any franchise agreement, each motor vehicle

manufacturer or distributor, doing business within this Commonwealth, shall

assume all responsibility for and shall defend, indemnify, and hold harmless its

motor vehicle dealers against any loss, damages, and expenses, including legal

costs, arising out of complaints, claims, recall repairs or modifications or factory

authorized or directed repairs, or lawsuits resulting from warranty defects, which

shall include structural or production defects; defects in the assembly; or design of

motor vehicles, parts, accessories; or other functions beyond the control of the

dealer, including without limitation, the selection of parts or components for the

vehicle. Each manufacturer or distributor shall pay reasonable compensation to any

authorized dealer who performs work to repair defects, or to repair any damage to

the manufacturer's or distributor's product sustained while the product is in transit to

the dealer, when the carrier or the means of transportation is designated by the

manufacturer or distributor. Each manufacturer or distributor shall provide to its

dealers with each model year a schedule of time allowances for the performance of

warranty repair work and services, which shall include time allowances for the

diagnosis and performance of warranty work and service time, and shall be

reasonable and adequate for the work to be performed.

(2) (a) In the determination of what constitutes "reasonable compensation" under this

section, the principal factor to be considered shall be the amount of money

that the dealer is charging its other customers for the same type service or

repair work. Other factors may be considered, including:

1. The compensation being paid by other manufacturers or distributors to

their dealers for work; and

2. The prevailing amount of money being paid or charged by the dealers in

the city or community in which the authorized dealer is doing business.

(b) "Reasonable compensation" shall include:

1. Diagnosing the defect as needed;

2. Repair service;

3. Labor;

4. Parts; and

5. Administrative and clerical costs.

(c) Except as provided in paragraph (d) of this subsection, the compensation of a

dealer shall not be less than:

1. The amount charged by the dealer for like services and parts, which

minimum compensation for parts shall be dealer cost plus thirty percent

(30%) gross profit, to retail customers for nonwarranty service and

repairs; or

2. The amounts indicated for work on the schedule of warranty

compensation required to be filed by the manufacturer with the

commission as a part of the manufacturer's license application by KRS

190.030.

(d) The compensation of a dealer for vehicles with a classification of seven (7) or

higher as established in 49 C.F.R. sec. 565.15 by a manufacturer, component

manufacturer, or distributor shall not be less than the greater of:

1. The amount charged by the dealer to the retail customers of the dealer

for nonwarranty work of like kind; or

2. The dealer acquisition costs of parts or service.

(e) A manufacturer or distributor shall not require unreasonable proof to establish

"reasonable compensation."

(3) (a) A manufacturer or distributor shall not require a dealer to submit a claim

authorized under this section sooner than thirty (30) days after the dealer

completes the preparation, delivery, or warranty service authorizing the claim

for preparation, delivery, or warranty service.

(b) All claims made by a dealer under this section shall be paid within thirty (30)

days after their approval.

(c) All claims shall be either approved or disapproved by the manufacturer or

distributor within thirty (30) days after their receipt on a completed form

supplied or approved by the manufacturer or distributor.

(d) Any claims not specifically disapproved in writing within thirty (30) days

after the receipt of the form shall be considered to be approved and payment

shall be made within thirty (30) days thereafter.

(e) A dealer shall not be required to maintain defective parts for more than thirty

(30) days after payment of a claim.

(f) Any dispute between the dealer and the manufacturer or distributor shall be

subject to the provisions of KRS 190.057.

(4) A manufacturer or distributor shall compensate the dealer for manufacturer-

sponsored or distributor-sponsored sales or service promotion events, including but

not limited to rebates, programs, or activities in accordance with established written

guidelines for such events, programs, or activities, which the manufacturer or

distributor shall provide to each dealer.

(5) (a) A manufacturer or distributor shall not require a dealer to submit a claim

authorized under subsection (4) of this section sooner than thirty (30) days

after the dealer becomes eligible to submit the claim.

(b) All claims made by a dealer pursuant to subsection (4) of this section for

promotion events, including but not limited to rebates, programs, or activities,

shall be paid within thirty (30) days after their approval.

(c) All claims shall be either approved or disapproved by the manufacturer or

distributor within thirty (30) days after their receipt on a completed form

supplied or approved by the manufacturer or distributor.

(d) Any claim not specifically disapproved in writing within thirty (30) days after

the receipt of this form shall be considered to be approved and payment shall

be made within thirty (30) days.

(6) If a dealer submits any claim under this section to a manufacturer or distributor that

is incomplete, inaccurate, or lacking any information usually required by the

manufacturer or distributor, or if incomplete, inaccurate, or missing information is

discovered during an audit, then the manufacturer or distributor shall promptly

notify the dealer, and the time limit to submit the claim shall be extended for a

reasonable length of time, not less than five (5) business days following notice by

the manufacturer or distributor to the dealer, for the dealer to provide the complete,

accurate, or lacking information to the manufacturer or distributor. A dealer's

failure to comply with the specific requirements of the manufacturer or distributor

for processing a claim may not constitute grounds for denial of the claim or

reduction of the amount of compensation paid to the dealer if the dealer presents

reasonable documentation or other evidence to substantiate the claim.

(7) (a) A manufacturer or distributor may only audit warranty, recall, sales, or

incentive claims for a period of twelve (12) months following payment, or the

end of a program which does not exceed one (1) year in length, whichever is

later, subject to all of the provisions of this section.

(b) A manufacturer or distributor shall not require documentation for warranty,

recall, sales, or incentive claims more than twelve (12) months after the claim

was paid or the end of a program which does not exceed one (1) year in

length, whichever is later.

(c) Prior to requiring any charge-back, reimbursement, or credit against a future

transaction arising out of an audit, the manufacturer or distributor shall submit

written notice to the dealer along with a copy of its audit and the detailed

reason for each intended charge-back, reimbursement, or credit.

(d) Notwithstanding the limitations of this subsection, a manufacturer that

possesses evidence which would cause a person of ordinary caution,

prudence, and judgment to believe that a dealer submitted a claim that was

fraudulent, false, or misleading may audit the dealer for the claims during any

period in which an action for fraud or for the submission of false or

misleading claims may be commenced under applicable state law.