Michigan Warranty Reimbursement State Law


Cliff Notes for MI:

Timeframes for Approval and Reimbursement of Warranty Claims MICH. COMP. LAWS § 445.1577(4):
• 30 days to approve or reject the claim.
• Any claim not specifically disapproved in writing within 30 days after the receipt of the form is deemed approved and payment must be made within 30 days.
• 30 days to pay after approval.
• A dealer shall not declare a retail rate for parts or labor or both more than once in a calendar year.

Reimbursement Rate for Parts & Labor MICH. COMP. LAWS § 445.1577a(2)(a): Surcharge for GM on Parts
• 100 consecutive and sequential non-warranty customer-paid service repair orders (“ROs”) that contain repairs for like services or all non-warranty customer-paid service ROs covering a period of 90 consecutive days, whichever is less. A dealer shall not submit a service RO under this subsection that covers repairs made more than 180 days before the date of the submission.

Section 445.1577

MOTOR VEHICLE FRANCHISE ACT (EXCERPT)
Act 118 of 1981

445.1577 Dealer’s obligations for preparation, delivery, and warranty service; written specifications; compensating dealer for required warranty service; schedule of compensation; prohibited conduct; claims for labor and parts; payment; approval or disapproval; chargeback for false or fraudulent claims; records of warranty repairs; compensation and claims for promotion events, programs, or activities; approval or disapproval of claims; meeting; disclosure of proprietary or confidential information; audit.

Sec. 17.

(1) A manufacturer shall specify in writing to each of its new motor vehicle dealers licensed in this state the dealer’s obligations for preparation, delivery, recall service, and warranty service on its products. A manufacturer shall compensate a new motor vehicle dealer for recall or warranty service required of the dealer by the manufacturer. A manufacturer shall provide a new motor vehicle dealer with the schedule of compensation to be paid to the dealer for parts, work, and service, and the time allowance for the performance of the work and service. A manufacturer shall also include in the schedule of compensation a reasonable time allowance for labor for diagnostic work and repair work, included in the manufacturer’s labor time allowance or listed as a separate compensable item. A dealer may submit a request for an additional time allowance for either diagnostic or repair time, which includes any information and documentation reasonably required by the manufacturer, and a manufacturer shall not unreasonably deny that request. The schedule of compensation shall include reasonable compensation for parts reimbursement and labor rates as determined under section 17a(1).
(2) A manufacturer shall not do any of the following:
(a) Fail to perform any recall or warranty obligation.
(b) Fail to include in written notices of factory recalls to new motor vehicle owners and dealers the expected date by which necessary parts and equipment will be available to dealers for the correction of the defects.
(c) Fail to compensate a new motor vehicle dealer licensed in this state for repairs made in connection with the recall.
(3) A manufacturer shall pay a claim made by a new motor vehicle dealer under this section for labor and parts within 30 days after its approval. A manufacturer shall either approve or disapprove a claim within 30 days after receiving the claim, submitted on the form generally used by the manufacturer, and containing the information usually required in the form. Any claim not specifically disapproved in writing within 30 days after the manufacturer receives the claim form is considered approved, and the manufacturer shall pay the claim within 30 days.

(4) Subject to subsections (5) and (10), if a manufacturer has approved and paid a new motor vehicle dealer for a claim, the manufacturer may only charge the claim back to the dealer if 1 of the following is met:
(a) The manufacturer shows that the claim is fraudulent. However, the manufacturer may not charge back the amount paid if the claim is found to be fraudulent more than 6 years after payment.
(b) The manufacturer shows that the claim is false, unsubstantiated, lacks proper documentation, or shows an improper diagnosis process or improper repair procedures. However, the manufacturer may not charge back the amount paid if the claim is found to be false, unsubstantiated, to lack proper documentation, or show an improper diagnosis process or repair procedures more than 12 months after payment.
(5) If a manufacturer seeks to chargeback a claim under subsection (4) on the basis that the claim is false, unsubstantiated, or lacks proper documentation, or shows an improper diagnosis process or improper repair procedures, a new motor vehicle dealer has 14 days after the date the new motor vehicle dealer receives notice of the chargeback to supply documentation that meets the manufacturer’s requirements to support the validity of the claim, and if the claim is valid, the manufacturer shall not chargeback the claim to the new motor vehicle dealer.
(6) A manufacturer may not deny a claim made under this section because of a new motor vehicle dealer’s incidental failure to comply with a specific claim processing requirement, such as a clerical error, that does not call into question the legitimacy of the claim.
(7) A new motor vehicle dealer shall maintain all records of warranty repairs, including the related time records of its employees, for at least 2 years following payment of any warranty claim.
(8) A manufacturer shall compensate a new motor vehicle dealer for any sales or service promotion events, incentives, programs, or activities sponsored by the manufacturer, in accordance with established guidelines for those events, incentives, programs, or activities.
(9) A manufacturer shall pay a claim for compensation owed to a new motor vehicle dealer under subsection (8) for a promotion event, incentive, program, or activity within 15 days after its approval. A manufacturer shall either approve or disapprove a claim for compensation described in this subsection within 30 days after receiving the claim, submitted on the form generally used by the manufacturer and containing the information usually required in the form. Any claim for compensation the manufacturer does not specifically disapprove in writing within 30 days after receiving the claim form is considered approved, and the manufacturer shall pay the amount of the claim within 30 days. A manufacturer may only chargeback a claim for compensation described in this subsection under subsection (4).
(10) A manufacturer may not charge a claim back to a new motor vehicle dealer after the claim is paid unless a representative of the manufacturer first meets in person or by video teleconference or telephone with an officer or employee of the dealer designated by the new motor vehicle dealer, or responds in writing to any dealer written request for information. All of the following apply if a meeting is held under this subsection:
(a) At the meeting, the manufacturer shall provide a detailed explanation, with supporting documentation, of the basis for each proposed chargeback of a claim to the dealer and a written statement containing the basis on which the claim or claims of the dealer were selected for audit or review by the manufacturer. However, the manufacturer is not required to disclose proprietary or confidential information about a customer or other dealer under this subdivision and is not required to disclose any information if the disclosure is prohibited by law.

(b) After the meeting, the manufacturer shall provide the motor vehicle dealer’s representative a reasonable period of time of at least 45 days to respond to the proposed chargebacks. The manufacturer shall provide a longer period of time for the dealer to respond if warranted by the volume of proposed chargebacks.
(c) An unexcused failure or refusal of the dealer or designated officer or employee of the dealer to schedule, attend, or participate in the meeting with the manufacturer relieves the manufacturer from any further obligation under this subsection.
(11) A manufacturer may conduct an audit of the records of a new motor vehicle dealer relating to a warranty or promotion claim submitted by a new motor vehicle dealer under this section, but the manufacturer may only conduct that audit in the time periods allowed for warranty or promotional claim chargebacks under this section.

History: 1981, Act 118, Imd. Eff. July 19, 1981 ;– Am. 1983, Act 188, Imd. Eff. Nov. 1, 1983 ;– Am. 2010, Act
138, Imd. Eff. Aug. 4, 2010 ;– Am. 2018, Act 668, Eff. Mar. 28, 2019

© 2017 Legislative Council, State of Michigan

MOTOR VEHICLE FRANCHISE ACT (EXCERPT)
Act 118 of 1981

445.1577a Reasonable compensation for parts reimbursement and labor rates; factors.
Sec. 17a.
(1) The principal factors in determining what constitutes reasonable compensation for parts reimbursement and labor rates for purposes of section 17(1) are as follows:
(a) The retail price charged for parts by other similarly situated new motor vehicle dealers in a comparable geographic area in this state that offers the same line-make of vehicles.
(b) The retail labor rates of other similarly situated new motor vehicle dealers in a comparable geographic area in this state that offer the same line-make of vehicles.
(2) All of the following apply for purposes of subsection (1):
(a) A new motor vehicle dealer that is demanding warranty compensation from a manufacturer at a rate that exceeds the agreed-upon rates shall establish the retail rate it customarily charges for parts by submitting to the manufacturer 100 consecutive and sequential non-warranty customer-paid service repair orders that contain repairs for like services or all non-warranty customer-paid service repair orders covering a period of 90 consecutive days, whichever is less. A dealer shall not submit a service repair order under this subsection that covers repairs made more than 180 days before the date of the submission.
(b) If a manufacturer determines from any set of repair orders submitted under subdivision (a) that the calculated retail markup rate for parts or the retail labor rate is substantially higher or lower than the rate currently on record with the manufacturer, the manufacturer may request additional documentation for a period of either 60 days before or 60 days after the time period for which the repair orders were submitted for purposes of an adjustment.
(c) A new motor vehicle dealer’s retail rate percentage for parts is calculated by determining the dealer’s total parts sales in the submitted repair orders and dividing that amount by the dealer’s total cost for the purchase of those parts, subtracting 1 from that amount, and then multiplying by 100. The manufacturer must approve or disapprove the declared retail rate within 45 days after the date of submission by the dealer. The declared retail rate is effective beginning 30 days after approval by the manufacturer unless the manufacturer disapproves and timely contests the dealer’s declared rate. If a manufacturer fails to disapprove within 45 days following submission by the dealer, the declared retail rate is considered approved. A new motor vehicle dealer’s retail rate for labor is calculated by determining the dealer’s total labor sales from the submitted repair orders and dividing that amount by the total number of hours that generated those sales. The manufacturer must approve or disapprove the declared retail rate within 45 days after the date the dealer submits the repair orders. The declared retail labor rate is effective beginning 30 days after approval by the manufacturer unless the manufacturer disapproves and timely contests the dealer’s declared rate.
(d) A manufacturer may contest a new motor vehicle dealer’s declared retail markup rate for parts or retail labor rate not later than 45 days after submission and declaration of the retail markup rate for parts or retail labor rate by the dealer by reasonably substantiating that the rate is inaccurate, incomplete, or unreasonable in light of the factors described in subsection (1). In contesting a new motor vehicle dealer’s declared rate, a manufacturer shall provide a written explanation of the reasons for disagreement with the declared rate. If the declared retail markup rate for parts or retail labor rate is contested, then the manufacturer shall propose an adjustment of the rate. If the manufacturer contests the dealer’s declared parts or labor rate, the parties shall attempt to resolve the dispute through an internal dispute resolution procedure of the manufacturer, if available, provided that the dispute resolution procedure occurs within a reasonable amount of time that does not exceed 45 days after notification of disagreement with the dealer’s declared rate.
(e) If an internal dispute resolution procedure described in subdivision (d) is unsuccessful or does not occur in a timely manner, a new motor vehicle dealer may file a complaint in the circuit court for the county in which the new motor vehicle dealer is located, within 60 days after it receives the adjustment proposed by the manufacturer or within 30 days after the conclusion of the internal dispute resolution procedure, whichever is later. In an action under this subdivision, the manufacturer has the burden of proof to demonstrate that the retail markup rate for parts or retail labor rate declared by the dealer is inaccurate, incomplete, or unreasonable.
(3) The following work shall not be considered in calculating the retail rate customarily charged by a new motor vehicle dealer for parts and labor under this section:
(a) Repairs for manufacturer special events, specials, or promotional discounts for retail customer repairs.
(b) Parts sold at wholesale.
(c) Routine maintenance not covered under any retail customer warranty, such as oil changes, fluids, filters, or belts not provided in the course of repairs.
(d) Nuts, bolts, or fasteners or similar items that do not have an individual part number.
(e) Tires, tire repair, tire rotation, or other tire services.
(f) Vehicle reconditioning.
(g) Installation or repair of accessories.
(h) Repairs of vehicle body damage caused by a collision, a road hazard, the force of the elements, vandalism, or theft.
(i) Vehicle emission or safety inspections required by law.
(j) Manufacturer approved and reimbursed goodwill or policy repairs or replacements.
(k) Repairs for which volume discounts have been negotiated with government agencies.
(4) If a manufacturer furnishes a part or component to a new motor vehicle dealer to use in performing repairs under a recall, campaign service action, or warranty repair at no cost to the dealer, the manufacturer shall compensate the dealer for the authorized repair part or component in the same manner as warranty parts compensation under section 17 by paying the dealer the retail rate markup on the cost for the part or component as listed in the price schedule of the manufacturer less the cost for the part or component.
(5) A manufacturer shall not require a new motor vehicle dealer to establish the retail rate customarily charged by the dealer for parts and labor by an unduly burdensome or time-consuming method or by requiring information that is unduly burdensome or time-consuming to provide, including, but not limited to, part-by-part or transaction-by-transaction calculations. A dealer shall not declare a retail rate for parts or labor or both more than once in a calendar year.
(6) A manufacturer shall not limit access to sales or service promotion events, incentives, programs, or activities sponsored by the manufacturer or limit al location of vehicles or parts to a new motor vehicle dealer based solely on the new motor vehicle dealer’s exercise of its rights under this section. This subsection does not prohibit a manufacturer from increasing the price of a motor vehicle or part in the normal course of business.

History: Add. 2018, Act 668, Eff. Mar. 28, 2019

© 2017 Legislative Council, State of Michigan