ENTITLED An Act to revise provisions regarding vehicle warranty claims.

Be it enacted by the Legislature of the State of South Dakota:

Section 1. That   32-6B-1 be AMENDED:

32-6B-1. Terms used in this chapter mean:

(1) "Administrator," the administrator of the dealer licensing and inspection program of the Department of Revenue;

(2) "Auctioneer," a person who presides over a public auction where following an initial starting price, bids are taken from two or more people until a final bid or price is established for a motor vehicle;

(3) "Authorized emergency vehicle," any vehicle of a fire department and any ambulance and emergency vehicle of a municipal department or public service corporation that are designated or authorized by the Department of Public Safety or the Department of Health;

(4) "Broker," a person who, for a fee, commission, or other valuable consideration, arranges or offers to arrange a transaction involving the sale or exchange of vehicles, and who is not:

(a) A dealer or a bona fide agent or employee of a dealer;

(b) A representative or a bona fide agent or employee of a manufacturer; or

(c) At any point in the transaction the bona fide owner of the vehicle involved in the transactions;

(5) "Chassis cab," any incomplete motor vehicle, with a completed occupant compartment, that requires only the addition of cargo carrying, work performing, or load bearing components to perform the vehicle's intended function;

(6) "Community," the franchisee's area of responsibility as stipulated in the franchise or a minimum radius of ten miles around an existing dealership;

(7) "Component manufacturer," a person that manufactures or assembles parts, components, complete assemblies, or sub-assemblies for vehicles, which are separately warranted from the vehicles, and does not otherwise manufacture or assemble vehicles;

(8) "Converter," a person who modifies or installs on previously assembled chassis special bodies or equipment that, when completed, form an integral part of the vehicle and that constitutes a major manufacturing alteration and who may issue a supplemental or secondary statement of origin;

(9) "Demonstration," the noncommercial use of a dealer owned vehicle by any employee of the dealership for any purpose in the ordinary course of business relating to the sale of the vehicle within the trade or market area of the dealership or demonstration by any prospective buyer for a period of three days. The term includes vehicles donated by a dealership to a community or organization and used for a one-day parade or event;

(10) "Department," the Department of Revenue;

(11) "Emergency vehicle dealer," any person who converts or manufacturers authorized emergency vehicles and who, for commission or with intent to make a profit or gain, sells, exchanges, rents with option to purchase, offers, or attempts to negotiate a sale or exchange of new, or new and used authorized emergency vehicles, or who is engaged wholly or in part in the business of selling new, or new and used authorized emergency vehicles;

(12) "Event," a fair, exposition, vehicle show, vehicle rally, or fishing tournament that is held once each year and lasts at least three days including any setup time but does not exceed fifteen days;

(13) "Final stage manufacturer dealer," any person who assembles or installs on a previously assembled new motor vehicle chassis cab any special body or equipment that forms an integral part of the motor vehicle, constitutes a major manufacturing alteration, and completes the vehicle;

(14) "Franchise," a written or oral agreement or contract between a franchisor and franchisee that fixes the legal rights and liabilities of the parties to the agreement or contract;

(15) "Franchisee," person who receives vehicles from a franchisor under a franchise and who offers and sells the vehicles to the general public;

(16) "Franchisor," any person engaged in the manufacturing or distribution of vehicles including any person who acts for the franchisor;

(17) "Good faith," honesty in fact and the observance of reasonable, nondiscriminatory commercial standards of fair dealing in the trade;

(18) "In-transit," the noncommercial use of a dealer owned vehicle by any employee of the dealership for travel to and from any service facility, detail shop, repair shop, gas station, car wash, dealer auction, another lot owned by the dealer, a supplemental lot, temporary special events lot, temporary supplemental lot, or any other location to facilitate a dealer trade;

(19) "Manufacturer," a person who manufactures or assembles vehicles, including motor homes, and who issues the original or first manufacturer's statement of origin. The term includes a central or principal sales corporation through which it distributes its products to franchised dealers;

(20) "Off-road vehicle," any self-propelled, two or more wheeled vehicle designed primarily to be operated on land other than a highway and includes any all terrain vehicle, dune buggy, and vehicle whose manufacturer's statement of origin or manufacturer's certificate of origin states that the vehicle is not for highway use;

(21) "Public auction," a business that is open to the public where South Dakota titled motor vehicles are consigned, displayed, and auctioned to the highest bidder by an auctioneer;

(22) "Sell-it-yourself lot," any space provided to a person for a fee to display that person's boat or vehicle for sale;

(23) "Semitrailer," any vehicle of the trailer type, equipped with a kingpin assembly, designed and used in conjunction with a fifth wheel connecting device on a motor vehicle and constructed so that some part of its weight and that of its load rests upon or is carried by another vehicle;

(24) "Supplemental lot," a physically separate location owned and maintained by a licensed dealer within the same county as the principal place of business;

(25) "Trailer," any vehicle without motive power designed to be coupled to or drawn by a motor vehicle and constructed so that no part of its weight or that of its load rests upon the towing vehicle;

(26) "Trailer dealer," any person who, for commission or with intent to make a profit or gain, sells, exchanges, rents with option to purchase, offers or attempts to negotiate a sale or exchange of new or used trailers, semitrailers or travel trailers or who is engaged in the business of selling new or used trailers, semitrailers or travel trailers whether or not the vehicles are owned by the person;

(27) "Travel trailer," any trailer or semitrailer that provides as its primary purpose adequate, comfortable, temporary living quarters while on pleasure excursions or while touring for business, professional, educational or recreational purposes;

(28) "Used vehicle dealer," any person who, for commission or with intent to make a profit or gain sells, exchanges, rents with option to purchase, offers or attempts to negotiate a sale or exchange of used vehicles or who is engaged in the business of selling used vehicles;

(29) "Vehicle," any new or used automobile, truck, truck tractor, motorcycle, off-road vehicle, motor home, trailer, semitrailer or travel trailer of the type and kind required to be titled and registered under chapters 32-3 and 32-5, or required to be titled under chapter 32-20 except any manufactured home, used mobile home, moped, or snowmobile; and

(30) "Vehicle dealer," any person who, for commission or with intent to make a profit or gain, sells, exchanges, rents with option to purchase, offers or attempts to negotiate a sale or exchange of new, or new and used vehicles, or who is engaged wholly or in part in the business of selling new, or new and used vehicles.

Section 2. That chapter 32-6B be amended with a NEW SECTION:

Except as provided in section 3 of this Act, a manufacturer or component manufacturer may not charge back to a vehicle dealer any warranty claim that has been paid and approved for any vehicle or any part, component, complete assembly, or subassembly for a vehicle if:

(1) The repair work was covered under the manufacturer’s or component manufacturer's warranty;

(2) The repair work corrected the defective condition that needed to be repaired;

(3) The vehicle dealer provided documentation of the parts repaired and the process used to make the repairs; and

(4) The vehicle dealer performed the repair in accordance with reasonable written requirements of the manufacturer or component manufacturer, if the vehicle dealer was notified of the requirements before the claim arose and if the requirements were in effect when the claim arose.

Section 3. That chapter 32-6B be amended with a NEW SECTION:

A manufacturer or component manufacturer may charge back a warranty claim if:

(1) The claim was false or fraudulent; or

(2) The repairs were not necessary to correct the defective condition under accepted standards of workmanship.

Section 4. That   32-6B-58 be AMENDED:

32-6B-58. Every franchisor, component manufacturer, or manufacturer shall properly fulfill any warranty agreement and compensate, as set forth in   32-6B-61, each of its vehicle dealers for labor and parts. The franchisor, component manufacturer, or manufacturer shall pay all claims made by a vehicle dealer for the labor and parts within thirty days following their approval. The franchisor, component manufacturer, or manufacturer shall either approve or disapprove the claim within thirty days after its receipt. If a claim is disapproved, the vehicle dealer who submitted the claim shall be notified in writing of the claim's disapproval within the thirty-day period. Any claim rejected for technical reasons may be put into proper form by the vehicle dealer. Any claim resubmitted by the vehicle dealer within thirty days after the receipt of the claim shall be considered to be approved and payment shall be made within thirty days. The franchisor, component manufacturer, or manufacturer has the right to audit any vehicle dealer claim for a period of one year after the claim is paid to the dealer and to charge back to the new vehicle dealer the amount of any unsubstantiated claim. If there is evidence of fraud by the vehicle dealer, the audit period is two years from the act