Section 8-21A-10

Warranty agreement on new equipment; warranty claims.

(a) Every supplier shall provide a fair and reasonable warranty agreement on any new equipment which it sells and shall fairly compensate each of its dealers for parts and labor used in fulfilling the warranty agreement. All claims for paying under the warranty agreement made by dealers hereunder for parts and labor shall be paid within 30 days following their approval by supplier. All claims shall be either approved or disapproved within 60 days after their receipt by supplier. Upon disapproval of any claim submitted by the dealer, and within the time periods set forth in this section, the dealer shall be notified in writing of disapproval, along with specific reasons for the disapproval and curative steps required.

(b) All warranty work performed by the dealer under this section shall be compensated in accordance with the reasonable and customary amount of time required to complete the work, expressed in hours and fractions thereof multiplied by the dealer's established customer hourly labor rate, which shall have previously been made known to supplier. All parts used by dealer in warranty work shall be paid to dealer in the amount of dealer's net price for the parts, plus 15 percent of that sum or the supplier's current reimbursement program for warranty work, whichever is greater. The payment is to reimburse the dealer for dealer's reasonable costs of doing business and providing such warranty service on the supplier's behalf. The supplier shall have the right to adjust errors discovered during audit and if necessary to adjust claims collected in error.

(c) It shall be unlawful to deny, delay payment for, or restrict a claim by a dealer for warranty service or parts, incentives, hold-backs, or other amounts owed to a dealer unless the denial, delay, or restriction is the direct result of a material defect in the claim that affects its validity.

(d) A manufacturer, distributor, or wholesaler may audit warranty claims submitted by its dealers only for a period of up to one year following payment of the claims and may charge back to its dealers only those amounts based upon paid claims shown by the audit to be invalid except that this limitation shall not apply in any case of fraudulent claims.

(e) Any audit of a dealer by or on behalf of a manufacturer, distributor, or wholesaler for sales incentives, service incentives, rebates, or other forms of incentive compensation shall be completed not later than six months after the date of the termination of the incentive compensation program except that this limitation shall not apply in any case of fraudulent claims.

(Acts 1991, No. 91-721, p. 1401, §10; Act 2003-356, p. 976, §1.)