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SB 56: "An Act relating to product warranties and services for certain products; relating to certain dealers, distributors, and manufacturers; and establishing an unfair trade practice under the Alaska Unfair Trade Practices and Consumer Protection Act."

00                             SENATE BILL NO. 56                                                                          
01 "An Act relating to product warranties and services for certain products; relating to                                   
02 certain dealers, distributors, and manufacturers; and establishing an unfair trade                                      
03 practice under the Alaska Unfair Trade Practices and Consumer Protection Act."                                          
04 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA:                                                                
05    * Section 1. AS 45.45 is amended by adding new sections to read:                                                   
06 Sec. 45.45.772. Warranty provided. (a) A manufacturer shall provide,                                                  
07 through the dealer or distributor, to the covered product's ultimate purchaser, if the                                  
08 ultimate purchaser has obtained the covered product from a dealer or distributor, the                                   
09 manufacturer's standard written warranty, if any, that is in effect at the time of delivery                             
10       of the covered product to the dealer or distributor.                                                              
11            (b)  If a manufacturer contracts with a person to provide the manufacturer's                                 
12       warranty required by (a) of this section on behalf of the manufacturer,                                           
13                 (1)  the manufacturer remains subject to the obligations imposed on the                                 
14       manufacturer under AS 45.45.772 - 45.45.788;                                                                      
01                 (2)  when the contractor provides warranty services under the contract,                                 
02                      (A)  the contractor shall comply with the manufacturer's                                           
03            obligations under AS 45.45.772 - 45.45.788 that apply to the warranty                                        
04            services; and                                                                                                
05                      (B)  the manufacturer is responsible for the contractor's                                          
06            compliance with the manufacturer's obligations under AS 45.45.772 -                                          
07            45.45.788 that apply to the warranty services; and                                                           
08                 (3)  the acts of the contractor that apply to the manufacturer's warranty                               
09       obligations under AS 45.45.772 - 45.45.788 are treated as the acts of the manufacturer.                         
10 Sec. 45.45.773. Dealer or distributor warranty representations; manuals.                                              
11 A dealer or distributor may not make a representation about a warranty that is not                                      
12 made in the warranty. A dealer or distributor shall deliver the manuals on the                                          
13 operation and maintenance of a covered product to the ultimate purchaser and make                                       
14 the warranty known to the ultimate purchaser, including all disclaimers and                                             
15       limitations.                                                                                                    
16 Sec. 45.45.774. Warranty service and claims. A dealer or distributor shall                                            
17 provide warranty service in accordance with the applicable warranty on all of the                                       
18 manufacturer's products sold by the dealer or distributor and shall make all claims for                                 
19       warranty reimbursement in the manner established by the manufacturer.                                             
20 Sec. 45.45.775. Restrictions not allowed. A manufacturer may not, by                                                  
21 distributorship agreement, by restrictions on reimbursement, or by another method,                                      
22 restrict the nature or extent of covered products provided or labor performed by a                                      
23 dealer or distributor if the restriction impairs the dealer's or distributor's ability to                               
24       satisfy a required service in accordance with generally accepted standards.                                       
25 Sec. 45.45.776. Payment for required services. A manufacturer of a covered                                            
26 product shall pay a dealer or distributor to complete a required service under                                          
27 AS 45.45.772 - 45.45.788 using the standard claim procedures and methods of the                                         
28       applicable industry.                                                                                              
29 Sec. 45.45.777. Required service reimbursement. (a) A manufacturer shall                                              
30 use the criteria established in this section to reimburse a dealer or distributor for                                   
31       performing a required service.                                                                                    
01 (b)  If the technicians performing a required service meet the certification                                            
02 standards in the distributorship agreement, the manufacturer shall pay the dealer or                                    
03 distributor providing the required service at a rate that is not less than the highest of                               
04       the following for the labor of the technicians:                                                                   
05                 (1)  the rate the dealer or distributor customarily charges a customer for                              
06       work that is not a required service;                                                                              
07                 (2)  the manufacturer's printed flat rate; or                                                           
08                 (3)  the rate established by a flat rate manual for dealers or distributors,                            
09       if the manual is produced for dealers or distributors by a nationally recognized                                  
10       industry consultant.                                                                                              
11 (c)  The payment under (b) of this section must include payment for clean-up,                                           
12 preparation, diagnosis, disassembly, repair, assembly, testing, and final cleaning as                                   
13       needed to provide a quality result and customer satisfaction.                                                     
14 (d)  In addition to the payment under (b) of this section, the manufacturer shall                                       
15 pay a dealer or distributor a minimum of one hour at the dealer's or distributor's                                      
16       standard labor rate for the administration of each required service claim.                                        
17 (e)  The manufacturer shall reimburse the dealer or distributor for the                                                 
18 transportation and lodging costs of the employees of the dealer or distributor when it is                               
19 necessary for the employees to travel to the location of a product to perform a required                                
20       service.                                                                                                          
21 Sec. 45.45.778. Reimbursement for products used. A manufacturer shall                                                 
22 reimburse a dealer or distributor at the current manufacturer's full suggested retail                                   
23 price for covered products in the dealer's or distributor's inventory that the dealer or                                
24       distributor uses for a required service.                                                                          
25 Sec. 45.45.779. Transportation of needed covered products. (a) If the                                                 
26 inventory of a dealer or distributor does not contain a new or replacement covered                                      
27 product that is needed to complete a required service, the manufacturer shall pay the                                   
28 cost for transporting the new or replacement covered product to the dealer or                                           
29 distributor who sold the covered product or who is located nearest to the ultimate                                      
30 purchaser, whichever the ultimate purchaser chooses. The manufacturer is not required                                   
31 to pay the cost of transportation from the dealer or distributor to the ultimate purchaser                              
01       or from the ultimate purchaser to the dealer or distributor.                                                      
02 (b)  When transporting a covered product under (a) of this section, the                                                 
03 manufacturer shall use a method of transportation that will deliver the covered product                                 
04       as soon as possible considering the time constraints of the situation.                                            
05 Sec. 45.45.780. Timely reimbursement for claims. A manufacturer shall pay                                             
06 a properly submitted required service claim of a dealer or distributor within 30 days                                   
07 after receiving the claim from a dealer or distributor. Unless a manufacturer issues a                                  
08 written notice of disapproval under AS 45.45.781 within the 30 days, if a                                               
09 manufacturer fails to pay a claim within 30 days after receipt, the failure is considered                               
10 an acceptance of the claim as submitted, and the manufacturer shall pay the dealer or                                   
11       distributor interest at the rate of 1.5 percent a month on the claim.                                           
12 Sec. 45.45.781. Claim disapproval. If a manufacturer does not approve a                                               
13 claim submitted under AS 45.45.780, the manufacturer shall issue a written notice of                                    
14 disapproval to the dealer or distributor within 30 days after the manufacturer receives                                 
15       the claim. The notice must contain the specific reasons for the disapproval.                                      
16 Sec. 45.45.782. Repairs required. If a covered product does not conform to a                                          
17 warranty that is applicable to it and the ultimate purchaser of the covered product                                     
18 reports the defect to the manufacturer of the covered product or to the manufacturer's                                  
19 dealer or distributor during the term of the warranty, the manufacturer, dealer, or                                     
20 distributor shall make the necessary repairs to conform the covered product to the                                      
21       warranty.                                                                                                       
22 Sec. 45.45.783. Replacement or refund. (a) If, during the term of a warranty                                          
23 or within one year after the date of the delivery of the covered product to the ultimate                                
24 purchaser, whichever period ends first, the manufacturer, dealer, or distributor is                                     
25 unable to conform a covered product to an applicable warranty after a reasonable                                        
26 number of attempts, the manufacturer shall accept the return of the covered product,                                    
27 and, at the ultimate purchaser's option, shall replace the covered product with a new                                   
28 comparable covered product or refund the full purchase price to the owner after                                         
29 deducting a reasonable amount of money for the ultimate purchaser's use of the                                          
30 covered product from the date the covered product was delivered to the ultimate                                         
31       purchaser.                                                                                                      
01            (b)  The reasonable amount of money deducted under (a) of this section may                                   
02       not exceed an amount that is equal to the sum of                                                                  
03 (1)  the amount of money that reflects the depreciation in value of the                                                 
04 covered product for the period during which the covered product was available for use                                   
05 by the ultimate purchaser, as calculated by a straight line depreciation method over                                    
06       seven years; and                                                                                                  
07                 (2)  an amount of money that is equal to the depreciation in value of the                               
08       covered product that was caused by                                                                                
09                      (A)  neglect or abuse by the ultimate purchaser; or                                                
10                      (B)  body damage that was not caused by the defect.                                                
11            (c)  The manufacturer shall make the refund required by this section                                         
12 (1)  to the lienholder of record for the covered product, if any, to the                                                
13 extent of the lienholder's interest, and, if there is a balance after satisfying the                                    
14       lienholder's interest, to the ultimate purchaser; or                                                              
15 (2)  entirely to the ultimate purchaser, if there is no lienholder of record                                            
16       for the covered product.                                                                                          
17            (d)  In this section,                                                                                        
18 (1)  "costs" include original registration fees, transportation fees,                                                   
19 dealer's or distributor's preparation fees, and the cost of options installed by the dealer                             
20       or distributor;                                                                                                   
21 (2)  "full purchase price" means the total price paid for a covered                                                     
22       product by the ultimate purchaser, including any costs added to the retail price.                                 
23 Sec. 45.45.784. Notice by ultimate purchaser. (a) To claim a refund or                                                
24 replacement under AS 45.45.783, an ultimate purchaser shall give written notice by                                      
25 certified mail to the manufacturer and its dealer or distributor before 60 days have                                    
26       elapsed after the termination of whichever of the following periods ends first:                                   
27                 (1)  the term of the warranty; or                                                                       
28 (2)  one year after the date of delivery of the covered product to the                                                  
29       ultimate purchaser.                                                                                               
30            (b)  The notice required by (a) of this section must                                                         
31                 (1)  state that the covered product has a defect;                                                       
01                 (2)  provide a reasonable description of the defect;                                                    
02                 (3)  state that the manufacturer, dealer, or distributor has made a                                     
03       reasonable number of attempts to conform the covered product to the warranty; and                                 
04                 (4)  state that the ultimate purchaser demands that a refund or a                                       
05       replacement of the covered product be delivered on or before the 60th day after the                               
06       mailing date of the written notice.                                                                               
07            (c)  Within 30 days after receiving the notice required by this section, the                                 
08       manufacturer may make a final attempt to conform the covered product before the                                   
09       manufacturer is required to make a refund or replacement under AS 45.45.783.                                      
10 Sec. 45.45.785. Exceptions. An ultimate purchaser may not receive a refund                                            
11 for or replacement of a covered product under AS 45.45.772 - 45.45.788 claimed to                                       
12 have a defect if the manufacturer shows that the problem or condition because of                                        
13       which the ultimate purchaser is claiming a refund or a replacement                                              
14                 (1)  is not a defect; or                                                                                
15                 (2)  is a defect that resulted from                                                                     
16 (A)  alteration of the covered product by the ultimate purchaser,                                                       
17 or by a person who is not the dealer or distributor or authorized by the                                                
18            manufacturer or distributor to make the alteration; or                                                       
19 (B)  abuse or neglect by the ultimate purchaser or another                                                              
20            person other than the dealer or distributor.                                                                 
21 Sec. 45.45.786. Presumption. A rebuttable presumption that a reasonable                                               
22 number of attempts have been made to conform a covered product to an applicable                                         
23       warranty is established if                                                                                      
24 (1)  the defect continues to exist even though the same defect has been                                                 
25 subject to repair three or more times by the manufacturer, dealer, or distributor during                                
26 the term of the warranty or the one-year period after the date of delivery of the                                       
27       covered product to the ultimate purchaser, whichever period ends first; or                                        
28 (2)  the covered product is out of service for repair for a total of 30 or                                              
29 more days on which the dealer or distributor is open for business during the term of                                    
30 the warranty or during the one-year period after the date of delivery of the covered                                    
31 product to the ultimate purchaser, whichever period ends first; a period during which                                   
01 repairs are not performed for reasons that are beyond the control of the manufacturer,                                  
02       dealer, or distributor is not included in satisfying the 30-day period.                                           
03 Sec. 45.45.787. Products covered. If the manufacturer has an agreement with                                           
04 a dealer or distributor that requires the dealer or distributor to provide a warranty or                                
05 warranty service for the products, AS 45.45.772 - 45.45.788 apply to the following                                      
06       products:                                                                                                         
07 (1)  equipment, tools, or motor vehicles if the equipment, tools, or                                                    
08 motor vehicles are designed to be used primarily for construction, road building, snow                                  
09 removal, mining, oil projects, gas projects, forestry, resource development, or a similar                               
10 type of project; in this paragraph, "motor vehicle" means a motor vehicle that is not                                   
11       subject to registration under AS 28.10.011; or                                                                    
12                 (2)  parts or accessories for the items identified in (1) of this section.                              
13 Sec. 45.45.788. Coverage of warranty service. To qualify as warranty                                                  
14 service, the service must be covered by the manufacturer's warranty during the                                          
15       original period of the warranty.                                                                                  
16    * Sec. 2. AS 45.45.790(4) is amended to read:                                                                      
17                 (4)  "merchandise" includes covered products, parts, and accessories;                           
18    * Sec. 3. AS 45.45.790 is amended by adding new paragraphs to read:                                                
19 (6)  "covered product" means a product to which AS 45.45.772 -                                                          
20       45.45.788 apply under AS 45.45.787;                                                                               
21 (7)  "defect" means a condition in a covered product that is caused by a                                                
22       manufacturer, distributor, or authorized dealer and that                                                          
23 (A)  substantially decreases the dollar value of a covered                                                              
24 product to the owner when compared to the dollar value of a similar covered                                             
25            product that does not have the condition; or                                                                 
26 (B)  prevents a covered product from being operated or used or                                                          
27            makes the covered product unsafe;                                                                            
28                 (8)  "manufacturer" means                                                                               
29 (A)  a person who fabricates, manufactures, or assembles                                                                
30 covered products; "manufacturer" does not include a person who converts,                                                
31 modifies, or otherwise alters a covered product fabricated, manufactured, or                                            
01            assembled by another person;                                                                                 
02                      (B)  a manufacturer branch and a manufacturer sales                                                
03            representative; or                                                                                           
04                      (C)  a distribution entity that is                                                                 
05                           (i)  owned or controlled by a person described under (A)                                      
06                 or (B) of this paragraph; and                                                                           
07                           (ii)  separate from a person described under (A) or (B) of                                    
08                 this paragraph;                                                                                         
09                 (9)  "required service" means a service performed by a dealer or                                        
10       distributor on behalf of a manufacturer to complete                                                               
11                      (A)  warranty service as described under AS 45.45.788; or                                          
12 (B)  a modification or safety update required by the                                                                    
13            manufacturer;                                                                                                
14 (10)  "required update" means an update that a manufacturer requires a                                                  
15 dealer or distributor to perform for a covered product transferred to a dealer or                                       
16       distributor under a distributorship agreement;                                                                    
17 (11)  "ultimate purchaser" means a purchaser, other than for resale, of a                                               
18 new covered product; or a person to whom ownership of a new covered product is                                          
19       transferred;                                                                                                      
20 (12)  "warranty" means a warranty provided by the manufacturer of a                                                     
21 covered product or by a person who contracts with the manufacturer to provide the                                       
22       warranty on behalf of the manufacturer.                                                                           
23    * Sec. 4. AS 45.50.471(b) is amended by adding a new paragraph to read:                                            
24 (58)  violating AS 45.45.772 - 45.45.788 (covered product warranties                                                    
25       and services).                                                                                                    
26    * Sec. 5. The uncodified law of the State of Alaska is amended by adding a new section to                          
27 read:                                                                                                                   
28 APPLICABILITY. This Act applies to merchandise transferred under a distributorship                                      
29 agreement entered into on and after the effective date of this Act. In this section,                                    
30 "distributorship agreement" and "merchandise" have the meanings given in AS 45.45.790.