{"data":{"id":"us-ky/krs-190.046","jurisdiction":"us-ky","citation":"KRS 190.046","heading":"Compensation to dealer for work performed under warranty --","body":"\"Reasonable compensation\" -- Submission, determination, and payment of\ndealer's claims -- Compensation to dealer for sponsored sales or service\npromotion events -- Audits -- Fraud.\n(1) Notwithstanding the terms of any franchise agreement, each motor vehicle\nmanufacturer or distributor, doing business within this Commonwealth, shall\nassume all responsibility for and shall defend, indemnify, and hold harmless its\nmotor vehicle d ealers against any loss, damages, and expenses, including legal\ncosts, arising out of complaints, claims, recall repairs or modifications or factory\nauthorized or directed repairs, or lawsuits resulting from warranty defects, which\nshall include structural or production defects; defects in the assembly; or design of\nmotor vehicles, parts, accessories; or other functions beyond the control of the\ndealer, including without limitation, the selection of parts or components for the\nvehicle. Each manufacturer or distributor shall pay reasonable compensation to any\nauthorized dealer who performs work to repair defects, or to repair any damage to\nthe manufacturer's or distributor's product sustained while the product is in transit to\nthe dealer, when the carrier or the means of transportation is designated by the\nmanufacturer or distributor. Each manufacturer or distributor shall provide to its\ndealers with each model year a schedule of time allowances for the performance of\nwarranty repair work and services, which s hall include time allowances for the\ndiagnosis and performance of warranty work and service time, and shall be\nreasonable and adequate for the work to be performed.\n(2) (a) In the determination of what constitutes \"reasonable compensation\" under this\nsection, the principal factor to be considered shall be the amount of money\nthat the dealer is charging its other customers for the same type service or\nrepair work. Other factors may be considered, including:\n1. The compensation being paid by other manufacture rs or distributors to\ntheir dealers for work; and\n2. The prevailing amount of money being paid or charged by the dealers in\nthe city or community in which the authorized dealer is doing business.\n(b) Except as provided in paragraph (d) of this subsection , \"reasonable\ncompensation\" shall include:\n1. Diagnosing the defect as needed;\n2. Repair service;\n3. Labor;\n4. Parts; and\n5. Administrative and clerical costs.\n(c) Except as provided in paragraph (d) of this subsection, the compensation of a\ndealer shall not be less than:\n1. The amount charged by the dealer for like services and parts, which\nminimum compensation for parts shall be dealer cost plus thirty percent\n(30%) gross profit, to retail customers for nonwarranty service and\nrepairs; or\n2. The amounts indicated for work on the schedule of warranty\ncompensation required to be filed by the manufacturer with the\ncommission as a part of the manufacturer's license appl ication by KRS\n190.030.\n(d) The compensation of a dealer for vehicles with a classification of seven (7) or\nhigher as established in 49 C.F.R. sec. 565.15 by a manufacturer, component\nmanufacturer, or distributor shall be subject to the following conditions:\n1. The dealer shall be entitled to receive, as to reimbursement for parts, not\nless than its actual acquisition cost of the parts including freight,\nhandling, taxes, and any other related out -of-pocket expenses, plus a\ngross profit margin of thirty percent (30%);\n2. In addition to paragraph (b) of this subsection, \"reasonable\ncompensation\" shall also include:\na. All dealer costs incurred for training and certifying technicians and\nwarranty administration personnel;\nb. Dealer costs to acquire, use, and m aintain computer hardware and\nsoftware systems utilized for warranty and recall repairs, including\ndiagnostic computers, mobile devices, and software for tracking\nand reporting warranty and recall time and expenses; and\nc. Dealer costs for specialized tool s and hardware required for\nwarranty and recall repairs;\n3. A dealer may submit reimbursement requests for its costs described in\nsubparagraph 2. of this paragraph, and the manufacturer, component\nmanufacturer, or distributor shall pay for those costs, at the dealer's\nelection either on a:\na. Per repair basis, as may be mutually agreeable between the dealer\nand manufacturer, component manufacturer, or distributor;\nb. Per repair basis, based upon the amounts customarily charged by\nthe dealer to retail customers for similar nonwarranty work; or\nc. Periodic basis no less frequent than annually, with reasonable\ndocumentation of the costs and a reasonable method of allocating\nthe costs between reimbursable warranty and recall services and\nnonwarranty services;\n4. If labor hours on a warranty or recall repair, diagnostics, or service are\nincurred by a technician trained or certified in that service by a\nmanufacturer, component manufacturer, or distributor, or if such\ntraining or certification is not furnished, the actual hours incurred shall\nbe the basis of reasonable compensation unless the manufacturer,\ncomponent manufacturer, or distributor proves by clear and convincing\nevidence that the hours incurred were unreasonable for the specific\nrepair. Reference to stan dard repair times, labor guides, or time\nallowance guidelines shall not constitute sufficient evidence of that\nproof;\n5. If a component manufacturer for any system, subassembly, or other\ncomponent part of a motor vehicle has assumed, undertaken, or\notherwise has legal responsibility for reimbursement and processing of a\ndealer claim for warranty or recall services by virtue of any pass -\nthrough or extended warranty arrangement, governmental recall\nmandate, consent decree, judicial decree, litigation settleme nt, or other\nmeans, the component manufacturer shall be subject to all the\nrequirements of this section as if primarily liable as a manufacturer or\ndistributor. This subparagraph shall not relieve the manufacturer or\ndistributor of the motor vehicle from a ny primary liability for the\nindemnification obligations of subsection (1) of this section to its\ndealers. If a component warranty is made contemporaneously with the\nsale of a new motor vehicle and extends beyond the original\nmanufacturer or distributor wa rranty on the entire vehicle, the\nmanufacturer or distributor shall continue to have primary liability to its\ndealers for the performance of warranty service on those components\nduring the extended period;\n6. Compensation to be paid a dealer from a compone nt manufacturer for\nwarranty or recall work on a component part shall be no less than the\namount that would otherwise be reimbursable if the manufacturer or\ndistributor of the vehicle had made the component warranty or was\notherwise responsible for the com ponent part. This subparagraph shall\napply regardless of whether or not the part bears a different part number\nthan the originally manufactured part, or is a remanufactured or rebuilt\npart that is required or permitted to be utilized in a warranty or recal l\nrepair;\n7. A manufacturer, component manufacturer, or distributor shall not refuse\npayment for a replacement part installed by a dealer in connection with a\nwarranty or recall repair that the manufacturer, component\nmanufacturer, or distributor claims is  not defective based upon\nlaboratory or other testing, or where no fault with the part is found,\nunless the part is returned to the dealer with a written certification from\nthe manufacturer, component manufacturer, or distributor setting forth\nthe test con ditions and results and warranting that the part is not\ndefective, is fully functional, and qualified for reuse in future repairs;\n8. A manufacturer, component manufacturer, or distributor shall not\nrequire unreasonable proof or unduly burdensome processes  to establish\nreasonable compensation;\n9. A manufacturer, component manufacturer, or distributor shall not\nrequire a dealer for vehicles with a classification of seven (7) or higher\nas established in 49 C.F.R. sec. 565.15 to submit a claim authorized\nunder this section sooner than ninety (90) days after the dealer\ncompletes the preparation, delivery, or warranty service authorizing the\nclaim for preparation, delivery, or warranty service; and\n10. As used in this paragraph, \"component manufacturer\" means any  person\nwho manufactures, assembles, imports, or distributes new,\nremanufactured, or rebuilt parts, assemblies, subassemblies, or other\ncomponents for motor vehicles.\n(e) A manufacturer or distributor shall not require unreasonable proof to establish\n\"reasonable compensation.\"\n(3) (a) Except as provided in subsection (2)(d)9. of this section, a manufacturer or\ndistributor shall not require a dealer to submit a claim authorized under this\nsection sooner than thirty (30) days after the dealer completes the pr eparation,\ndelivery, or warranty service authorizing the claim for preparation, delivery,\nor warranty service.\n(b) All claims made by a dealer under this section s hall be paid within thirty (30)\ndays after their approval.\n(c) All claims shall be either approved or disapproved by the manufacturer or\ndistributor within thirty (30) days after their receipt on a completed form\nsupplied or approved by the manufacturer or distributor.\n(d) Any claims not specifically disapproved in writing within thirty (30) days\nafter the receipt of the form shall be considered to be approved and payment\nshall be made within thirty (30) days thereafter.\n(e) A dealer shall not be required t o maintain defective parts for more than thirty\n(30) days after payment of a claim.\n(f) Any dispute between the dealer and the manufacturer or distributor shall be\nsubject to the provisions of KRS 190.057.\n(4) A manufacturer or distributor shall compensate  the dealer for manufacturer -\nsponsored or distributor-sponsored sales or service promotion events, including but\nnot limited to rebates, programs, or activities in accordance with established written\nguidelines for such events, programs, or activities, whi ch the manufacturer or\ndistributor shall provide to each dealer.\n(5) (a) A manufacturer or distributor shall not require a dealer to submit a claim\nauthorized under subsection (4) of this section sooner than ninety (90) days\nafter the dealer becomes eligible to submit the claim.\n(b) All claims made by a dealer pursuant to subsection (4) of this section for\npromotion events, including but not limited to rebates, programs, or activities,\nshall be paid within thirty (30) days after their approval.\n(c) All clai ms shall be either approved or disapproved by the manufacturer or\ndistributor within thirty (30) days after their receipt on a completed form\nsupplied or approved by the manufacturer or distributor.\n(d) Any claim not specifically disapproved in writing wit hin thirty (30) days after\nthe receipt of this form shall be considered to be approved and payment shall\nbe made within thirty (30) days.\n(6) If a dealer submits any claim under this section to a manufacturer or distributor that\nis incomplete, inaccurate, or lacking any information usually required by the\nmanufacturer or distributor, or if incomplete, inaccurate, or missing information is\ndiscovered during an audit, then the manufacturer or distributor shall promptly\nnotify the dealer, and the time limit to  submit the claim shall be extended for a\nreasonable length of time, not less than five (5) business days following notice by\nthe manufacturer or distributor to the dealer, for the dealer to provide the complete,\naccurate, or lacking information to the man ufacturer or distributor. A dealer's\nfailure to comply with the specific requirements of the manufacturer or distributor\nfor processing a claim may not constitute grounds for denial of the claim or\nreduction of the amount of compensation paid to the dealer  if the dealer presents\nreasonable documentation or other evidence to substantiate the claim.\n(7) (a) A manufacturer or distributor may only audit warranty, recall, sales, or\nincentive claims for a period of twelve (12) months following payment, or the\nend of a program which does not exceed one (1) year in length, whichever is\nlater, subject to all of the provisions of this section.\n(b) A manufacturer or distributor shall not require documentation for warranty,\nrecall, sales, or incentive claims more than t welve (12) months after the claim\nwas paid or the end of a program which does not exceed one (1) year in\nlength, whichever is later.\n(c) Prior to requiring any charge -back, reimbursement, or credit against a future\ntransaction arising out of an audit, the manufacturer or distributor shall submit\nwritten notice to the dealer along with a copy of its audit and the detailed\nreason for each intended charge-back, reimbursement, or credit.\n(d) Notwithstanding the limitations of this subsection, a manufacturer tha t\npossesses evidence which would cause a person of ordinary caution,\nprudence, and judgment to believe that a dealer submitted a claim that was\nfraudulent, false, or misleading may audit the dealer for the claims during any\nperiod in which an action for fr aud or for the submission of false or\nmisleading claims may be commenced under applicable state law.","path":["KRS Chapter 190"],"source_url":"https://apps.legislature.ky.gov/law/statutes/statute.aspx?id=57533","current_through":"Includes enactments through the 2026 Regular Session","vintage":"09/05/2026","retrieved_at":"2026-09-05T20:51:45Z","sha256":"b95e03190ea0c714e5ba4a82ca713a2f4dcebd7e7a1d8858dd5d5688c97606cd","source_id":"us-ky","stale":false,"prev":"us-ky/krs-190.0451","next":"us-ky/krs-190.0461"},"notice":"GroundRules: Original legal text. Not legal advice."}