Hawaii Warranty Reimbursement State Law


Cliff Notes:

Timeframes for Approval& Reimbursement of Warranty Claims:

* The declared parts reimbursement markup shall take effect within 90 days after the initial submission

* Warranty work shall be approved or disapproved and if approved, paid within 45 days after receipt by a manufacturer or distributor of a properly completed claim

* If approved, paid within 60 days after receipt by a manufacturer

Reimbursement Rate for Parts&Labor:

* The retail markup charged by the dealer shall be established by submitting to the manufacturer or distributor a sufficient quantity of numerically consecutive repair orders from the most recent months to provide one hundred qualifying customer paid repair orders. For a dealer unable to provide one hundred qualifying customer- paid repair orders out of all numerically consecutive repair orders within the two-month period prior to the submission, the dealer shall submit customer service repair orders of all types, including customer pay, warranty, and internal, for that two month period.

* Parts reimbursement markup more than once every twelve months

2011 Hawaii Code
DIVISION 2. BUSINESS
TITLE25. PROFESSIONS AND OCCUPATIONS
Motor Vehicle Industry Licensing Act
437-56 Reimbursement for parts. §437-57 Warranty and incentive audits.
437-56 Reimbursement for parts.

(a) In no event shall any manufacturer or distributor pay its dealers a markup on parts for warranty work that is less than that charged by the dealer to the retail customers of the dealer; provided that such dealer’s retail parts markup is not unreasonable when compared with that of the same line make authorized franchise dealers of the manufacturer or distributor for identical merchandise or services in the State.

(b) The retail markup charged by the dealer shall be established by submitting to the manufacturer or distributor a sufficient quantity of numerically consecutive repair orders from the most recent months to provide one hundred qualifying customer-paid repair orders. For a dealer unable to provide one hundred qualifying customer- paid repair orders out of all numerically consecutive repair orders within the two-month period prior to the submission, the dealer shall submit customer service repair orders of all types, including customer pay, warranty, and internal, for that two-month period. The repair orders shall contain the price and percentage markup. Dealers shall declare in their submission the average markup the dealer is declaring as its new parts reimbursement rate. The declared parts reimbursement markup shall take effect within ninety days after initial submission to the manufacturer or 32 distributor and shall be presumed to be fair and reasonable. However, the manufacturer or distributor may make reasonable requests for additional information supporting the submission. The ninety-day timeframe in which the manufacturer or distributor shall make the declared parts reimbursement markup effective shall commence following receipt from the dealer of any reasonably requested supporting information. The dealer shall not request a change in the parts reimbursement markup more than once every twelve months.

(c) In determining qualifying repair orders for parts, the following work shall not be included: repairs for manufacturer or distributor special events; repairs covered by any insurance or service contract; federal, state, or local government legislated vehicle emission or safety inspections; parts sold at wholesale or repairs performed at wholesale, which shall include any sale or service to a fleet of vehicles; engine assemblies and transmission assemblies; routine maintenance not covered under any retail customer warranty, such as fluids, filters, and belts not provided in the course of repairs; nuts, bolts, fasteners, and similar items that do not have an individual part number; tires; and vehicle reconditioning.

(d) Dealers shall have at least thirty days after the repair work is completed to submit a claim for approval. All claims made by the dealers for compensation for delivery, preparation, and warranty work shall be approved or disapproved and if approved, paid within forty-five days after receipt by a manufacturer or distributor of a properly completed claim. All sale incentive claims shall be approved or disapproved and if approved, paid within sixty days after receipt by a manufacturer or distributor of a properly completed claim. When any claim is disapproved, the dealer shall be notified in writing of the grounds for disapproval. Failure to disapprove a claim within the required timeframe constitutes approval of the claim.

(e) A manufacturer or distributor may not recover, or attempt to recover, from dealers its cost for reimbursing a dealer for warranty work as required by this section.

(f) For the purposes of this section, the director of commerce and consumer affairs shall: (1) Conduct a review of the costs of the repairs of motor vehicles, including the prices charged by dealers for performing repairs under warranty and repairs not under warranty; and (2) Compare such costs to repairs performed by non-dealers.

437-57 Warranty and incentive audits.

(a) No manufacturer or distributor shall conduct a warranty or incentive audit on previously paid claims or charge back any warranty or incentive payment previously made more than one year after the date the manufacturer or distributor made the payment to the dealer. This section shall not apply to fraudulent claims.

(b) A manufacturer or distributor shall not chargeback a dealer for sales or warranty payments unless the manufacturer or distributor can satisfy its burden of proof that the dealer’s claim was fraudulent or that the dealer did not substantially comply with the reasonable written procedures of the manufacturer or distributor.

(c) The manufacturer or distributor shall provide the dealer a written notice thirty days before imposing a proposed chargeback. The dealer may protest the imposition of a proposed chargeback prior to the imposition of a proposed chargeback. The dealer, manufacturer, or distributor shall conduct any internal dispute resolution process in accordance with the franchise agreement. After the internal dispute resolution process is concluded, the 33 dealer may file a petition in the manner prescribed in section 437-A protesting the proposed chargeback amount. If a petition is filed, the proposed chargeback shall be stayed during the entirety of the action and until a final judgment has been rendered. §437-58 Cancellation or failure to renew the franchise agreement. (a) A manufacturer or distributor shall give written notice to the dealer and the board of the manufacturer’s intent to terminate, discontinue, cancel, or fail to renew a franchise agreement at least sixty days before the effective date thereof, and state with specificity the grounds being relied upon for such discontinuation, cancellation, termination, or failure to renew; provided that the manufacturer or distributor may provide the notice fifteen days before the effective date of termination, discontinuation, cancellation, or non-renewal in the following circumstances:

(1) The dealer has filed a voluntary petition in bankruptcy or has had an involuntary petition in bankruptcy filed against it which has not been discharged within thirty days after the filing, there has been a closeout or sale of a substantial part of the dealer’s assets related to the business, or there has been a commencement of dissolution or liquidation of the dealer;

(2) The dealer has failed to operate in the normal course of business for seven consecutive days or has otherwise abandoned the business;

(3) The dealer has pleaded guilty to or has been convicted of a felony affecting the relationship between the dealer and the manufacturer or distributor;

(4) The dealer has engaged in conduct that is injurious or detrimental to the dealer’s customers or to the public welfare;

(5) There has been a change, without the prior written approval of the manufacturer or distributor, in the location of the dealer’s principal place of business under the dealership agreement;

or
(6) Misrepresentation or fraud upon the manufacturer by the dealer. (b) A dealer who receives notice of intent to terminate, discontinue, cancel, or fail to renew may, within the sixty-day notice period, file a petition in the manner prescribed in section 437-A for a determination of whether such action is taken in good faith and supported by good cause. The manufacturer or distributor shall have the burden of proof that such action is taken in good faith and supported by good cause. (c) If the manufacturer’s or distributor’s notice of intent to terminate, discontinue, cancel, or fail to renew is based upon the dealer’s alleged failure to comply with sales or service performance obligations, the dealer shall first be provided with notice of the alleged sales or service deficiencies and afforded at least one hundred eighty days to correct any alleged failure before the manufacturer or distributor may send its notice of intent to terminate, discontinue, cancel, or fail to renew. Good cause shall not be deemed to exist if a dealer substantially complies with the manufacturer’s or distributor’s reasonable performance provisions within the one hundred eighty-day cure period, or if the failure to demonstrate substantial compliance was due to factors that were beyond the control of the dealer. (d) Good cause shall not exist absent a breach of a material and substantial term of the franchise agreement. The existence of one or more circumstances enumerated in subsection (a)(1) through (6) above shall be presumed to be a good cause, and the dealer shall 34 have the burden of proof to show that the action was not taken in good faith and supported by good cause. (e) Except in the circumstances enumerated in subsection (a)(1) through (6) above, the franchise agreement shall remain in effect until a final judgment is entered after all appeals are exhausted, and during that time the dealer shall retain all rights and remedies pursuant to the franchise agreement, including the right to sell or transfer the franchise. (f) Upon the termination, discontinuation, cancellation, or failure to renew the franchise agreement by the manufacturer or distributor, the manufacturer or distributor shall compensate the dealer for all new, unused, and undamaged parts listed in the current parts catalog and still in the original, resalable merchandising packages and in unbroken lots; provided that for sheet metal, a comparable substitute may be used. Prices shall be those in effect at the time the manufacturer or distributor receives the parts, less applicable allowances; the fair market value of all undamaged, unmodified special tools, equipment, and signage required by the manufacturer or distributor and acquired by the dealer within the three years prior to the termination; all-new, undamaged, and unsold vehicle inventory of the current model year and one model year prior acquired from the manufacturer or distributor or from another same line make dealer in the ordinary course of business prior to the effective date of termination or non-renewal; provided that the vehicle has less than five hundred miles registered on the odometer. The purchase price shall be the dealer’s net acquisition cost. The compensation shall be paid to the dealer no later than ninety days from the date of the franchise termination, discontinuation, cancellation, or failure to renew. (g) In addition to the other compensation set forth in this section, upon the termination, discontinuation, cancellation, or failure to renew the franchise agreement by a manufacturer or distributor without good cause and good faith; or as a result of the discontinuation of a line make, the manufacturer or distributor shall compensate the dealer at the fair market value for the dealer’s capital investment, which shall include the going business value of the business, goodwill, property, and improvement owned or leased by the dealer for the purpose of the franchise as of the effective date of the termination or one day prior to the date of the notice, whichever is greater. The compensation shall be paid to the dealer no later than ninety days from the date of the franchise termination, discontinuation, cancellation, or failure to renew. (h) As used in this section, “good faith” means the duty of each party to any franchise agreement to fully comply with that agreement, and to act in a fair and equitable manner towards each other.