law26179

Chapter 179

2026 -- H 8213 SUBSTITUTE A
Enacted 06/22/2026

A N A C T

RELATING TO MOTOR AND OTHER VEHICLES -- REGULATION OF BUSINESS PRACTICES AMONG MOTOR VEHICLE MANUFACTURERS, DISTRIBUTORS, AND DEALERS

Introduced By: Representatives Serpa, Fellela, and Read

Date Introduced: February 27, 2026

It is enacted by the General Assembly as follows:

SECTION 1. Sections 31-5.1-4.1, 31-5.1-4.2, 31-5.1-5, 31-5.1-6, 31-5.1-6.1, 31-5.1-8, 31-

5.1-11, 31-5.1-18, 31-5.1-19 and 31-5.1-21 of the General Laws in Chapter 31-5.1 entitled

"Regulation of Business Practices Among Motor Vehicle Manufacturers, Distributors, and

Dealers" are hereby amended to read as follows:

31-5.1-4.1. Dealership — Survivorship.

(a)(1) Right of designated family member to succeed in dealership ownership. Any owner

of a new motor vehicle dealership may appoint by will or any other written instrument a designated

family member to succeed in the ownership interest of that owner in the new motor vehicle

dealership.

(2) Unless there exists good cause for refusal to honor that succession on the part of the

manufacturer, or distributor, or factory branch, any designated family member of a deceased or

incapacitated owner of a new motor vehicle dealer may succeed to the ownership of the new motor

vehicle dealer under the existing franchise provided that:

(i) The designated family member gives the manufacturer, or distributor, or factory branch

written notice of his or hertheir intention to succeed to the ownership of the new motor vehicle

dealer within one hundred twenty (120) days of the owner’s death or incapacity;

(ii) The designated family member agrees to be bound by all the terms and conditions of

the franchise; and

(iii) The designated family member shall not operate the dealership unless he or shethey

meetsmeet the then-current criteria generally applied by the manufacturer, or distributor, or factory

branch in qualifying dealer-operators.

(3) The manufacturer, or distributor, or factory branch may request, and the designated

family member shall provide, promptly upon the request, personal and financial data that is

reasonably necessary to determine whether the succession should be honored.

(b) Refusal to honor succession to ownership — Notice required.

(1) If a manufacturer, or distributor, or factory branch believes that good cause exists for

refusing to honor the succession to the ownership of a new motor vehicle dealer by a family member

of a deceased or incapacitated owner of a new motor vehicle dealer under the existing franchise

agreement, the manufacturer, or distributor, or factory branch may, not more than sixty (60) days

following receipt of:

(i) Notice of the designated family member’s intent to succeed to the ownership of the new

motor vehicle dealer; or

(ii) Any personal or financial data which it has requested, serve upon the designated family

member and the department of revenue notice of its refusal to honor the succession and of its intent

to discontinue the existing franchise with the dealer no sooner than ninety (90) days from the date

the notice is served.

(2) The notice must state the specific grounds for the refusal to honor the succession and

of the manufacturer’s, or distributor's, or factory branch's intent to discontinue the existing

franchise with the new motor vehicle dealer no sooner than ninety (90) days from the date the notice

is served.

(3) If notice of refusal and discontinuance is not timely served upon the family member,

the franchise shall continue in effect subject to termination only as otherwise permitted by this

chapter.

of a new motor vehicle dealership from designating any person as the owner’s successor by written

instrument filed with the manufacturer, or distributor, or factory branch and, in the event there is a

conflict between that written instrument and the provisions of this section, the written instrument

shall govern.

31-5.1-4.2. Establishing new dealerships and relocating existing dealerships.

(a) In the event that a manufacturer, distributor or factory branch seeks to enter into a

franchise establishing an additional new motor vehicle dealership, adding an additional location for

an existing new motor vehicle dealership, or relocating an existing new motor vehicle dealership

within or into a relevant market area where the same line or make is then represented, except when

the corporation operating the new motor vehicle dealership contains one or more officers who were

also officers of a dealership operating at the same location as the new motor vehicle dealership

immediately prior to the establishment of the new motor vehicle dealership, the manufacturer,

distributor, or factory branch shall in writing by certified mail first notify the department and each

new motor vehicle dealer in the same line or make in the relevant market area of the intention to

establish an additional dealership to add an additional location for an existing new motor vehicle

dealership, or to relocate an existing dealership within or into that market area. Within thirty (30)

days of receiving notice or within thirty (30) days after the end of any appeal procedure provided

by the manufacturer, distributor, or factory branch, any affected new motor vehicle dealership may

file with the department a protest to the establishing or relocating of the new motor vehicle

dealership or adding an additional location for an existing new motor vehicle dealership. When a

protest is filed, the department shall inform the manufacturer, distributor, or factory branch that a

timely protest has been filed, and that the manufacturer, distributor, or factory branch shall not

establish or relocate the proposed new motor vehicle dealership or add the proposed additional

location for an existing new motor vehicle dealership until the department has held a hearing, nor

until the department has determined that there is good cause for not permitting the new motor

vehicle dealership. For the purposes of this section, the reopening in a relevant market area of a

new motor vehicle dealership shall be deemed the establishment of an additional new motor vehicle

dealership.

(b) In determining whether good cause has been established for entering into or relocating

an additional franchise for the same line or make, or adding an additional location for an existing

new motor vehicle dealership, the department shall take into consideration the existing

circumstances, including, but not limited to:

(1) Permanence of the investment of the existing new motor vehicle dealer(s) in the

community;

(2) Whether the new motor vehicle dealers of the same line or make in that relevant market

area are providing adequate consumer care for the motor vehicles of the line or make in the market

area which shall include the adequacy of motor vehicle sales and service facilities, equipment,

supply of motor vehicle parts, and qualified service personnel;

(3) Whether there is reasonable evidence that after the granting of the new motor vehicle

dealership, that the market would support all of the dealerships of that line or make in the relevant

market area;

(4) Whether it is injurious to the public welfare for an additional new motor vehicle

dealership to be established;

(5) The growth or decline in population and new motor vehicle registrations during the past

five (5) years in the relevant market area;

(6) Whether the manufacturer, distributor, or factory branch is motivated principally by

good faith to establish an additional or new motor vehicle dealer and not by non-economic

considerations;

(7) Whether the manufacturer, distributor, or factory branch has denied its existing new

motor vehicle dealers of the same line or make the opportunity for reasonable growth, market

expansion, or relocation;

(8) The reasonably expected or anticipated vehicle market for the relevant market area,

including demographic factors such as age of population, income, size class preference, product

popularity, retail lease transactions, or other factors affecting sales to consumers in the relevant

market area;

(9) Growth or decline in population, density of population, and new car registrations in the

relevant market area;

(10) Distance, travel time, traffic patterns, and accessibility between the existing new

dealership of the same new line make and the location of the proposed new or relocated dealership;

(11) The amount of business transacted by existing new motor vehicle dealers of the line

or make when compared with the amount of business available to them;

(12) Whether the existing new motor vehicle dealers of the line or make are receiving

vehicles and parts in quantities promised by the manufacturer, factory branch, or distributor and on

which promised quantities existing new motor vehicle dealers based their investment and scope of

operations.

a new motor vehicle dealership or adding an additional location for an existing new motor vehicle

dealership shall have a right to a review of the decision in a court of competent jurisdiction.

(d) At any hearing conducted by the department under this section, the manufacturer or

dealer seeking to establish an additional new motor vehicle dealership, relocate an existing new

motor vehicle dealership, or add an additional location for an existing new motor vehicle dealership

shall bear the burden of proof in establishing that good cause exists for it.

(e) Every person, firm, or corporation who prior to the retail sale of a motor vehicle,

converts or otherwise assembles, installs or affixes a body, cab, or special equipment to a chassis

or who adds to, subtracts from, or modifies a previously assembled or manufactured motor vehicle

shall be required to comply with the requirements of this section.

31-5.1-5. Delivery obligations.

Every manufacturer, distributor, or factory branch shall specify to the dealer the delivery

and preparation obligations of its motor vehicle dealers prior to delivery of new motor vehicles to

retail buyers. A copy of the delivery and preparation obligations of its motor vehicle dealers, and a

schedule of the compensation to be paid to its motor vehicle dealers for the work and services they

shall be required to perform in connection with the delivery and preparation obligations, shall be

filed with the department by every motor vehicle manufacturer, distributor, or factory branch, and

shall constitute the dealer’s only responsibility for product liability as between the dealer and the

manufacturer. The compensation as set forth on the schedule shall be in accordance with §§ 6A-2-

329 and 31-5.1-6.

31-5.1-6. Warranty agreement.

(a) Every manufacturer, distributor, or factory branch shall properly fulfill any warranty

agreement and adequately and fairly compensate each of its motor vehicle dealers for labor and

parts. In no event shall that compensation fail to include reasonable compensation for diagnostic

work, as well as repair service and labor. All claims made by motor vehicle dealers for labor and

parts shall be paid in accord with the provisions of this section. Every manufacturer, distributor, or

factory branch shall allow not less than ninety (90) days for its new motor vehicle dealers to submit

claims for reimbursement for such service required of the dealers by the manufacturer, distributor,

or factory branch. Any delay in payment after approval or disapproval that is caused by conditions

beyond the reasonable control of the manufacturer, distributor, or factory branch shall not constitute

a violation of this section. Reimbursement for warranty repairs or diagnostic, certified pre-owned

warranty or recall that is issued by the manufacturer, distributor, factory branch, common entity,

or agent of the manufacturer, distributor, or factory branch work shall be at the dealer retail rate in

effect at the time the warranty repair or diagnostic work is performed. Compensation for parts used

in warranty service shall be fair and reasonable, as determined by methods described in subsection

(b). Compensation for labor used in warranty service shall be fair and reasonable, as determined by

methods described in subsection (c).

(b) The retail rate customarily charged by the dealer for parts shall be established by the

dealer submitting to the manufacturer, or distributor, or factory branch one hundred (100)

sequential non-warranty customer-paid service repair orders that contain warranty-like parts, or

sixty (60) consecutive days of non-warranty customer-paid service repair orders that contain

warranty-like parts, whichever is less, covering repairs made no more than one hundred eighty

(180) days before the submission and declaring the average percentage markup. The average of the

markup rates shall be presumed to be fair and reasonable, however, a manufacturer, or distributor,

or factory branch may, not later than thirty (30) days after submission, rebut that presumption by

reasonably substantiating that the rate is unfair and unreasonable in light of the practices of

advertised retail rates charged to retail customers for warranty-like repairs by all other franchised

motor vehicle dealers in the vicinity relevant market area offering the same line-make vehicles. The

retail rate shall go into effect thirty (30) days following the declaration, subject to audit of the

submitted repair orders by the franchisor and a rebuttal of the declared rate as described above. If

the declared rate is rebutted, the manufacturer, or distributor, or factory branch shall propose an

adjustment of the average percentage markup based on that rebuttal not later than thirty (30) days

after submission. If the dealer does not agree with the proposed average percentage markup, the

dealer may file a protest with the department not later than thirty (30) days after receipt of that

proposal by the manufacturer, or distributor, or factory branch. If the protest is filed, the department

shall inform the manufacturer, or distributor, or factory branch that a timely protest has been filed

and that a hearing will be held on the protest. In any hearing held pursuant to this subsection, the

manufacturer, or distributor, or factory branch shall have the burden of proving that the rate

declared by the dealer was unfair and unreasonable as described in this subsection and that the

proposed adjustment of the average percentage markup is fair and reasonable pursuant to the

provisions of this subsection.

established by submitting to the manufacturer, or distributor, or factory branch all non-warranty

customer-paid service repair orders covering repairs made during the month prior to the submission

and dividing the amount of the dealer’s total labor sales by the number of total labor hours that

generated those sales. Compensation for warranty labor shall equal the dealer’s non-warranty labor

rate multiplied by the actual time worked by the dealer's technician performing necessary repairs

in accordance with the manufacturer, distributor, or factory branch's procedures, evidenced by the

dealer's submission of the technician's time punch, inclusive of any diagnostic and manufacturer

technical assistance time, and any relevant electronic data or records for the warranty repair.

Compensation for warranty labor shall be supported by an attestation from the dealer that

submission is accurate to the best of the dealer's knowledge. The average labor rate shall be

presumed to be fair and reasonable, provided a manufacturer, or distributor, or factory branch may,

not later than thirty (30) days after submission, rebut the presumption by reasonably substantiating

that the rate is unfair and unreasonable in light of the practices of all other franchised motor vehicle

dealers in the vicinity offering the same line-make vehicles. The average labor rate shall go into

effect thirty (30) days following the declaration, subject to audit of the submitted repair orders by

the franchisor and a rebuttal of the declared rate. If the declared rate is rebutted, the manufacturer,

or distributor, or factory branch shall propose an adjustment of the average labor rate based on the

rebuttal not later than thirty (30) days after submission. If the dealer does not agree with the

proposed average labor rate, the dealer may file a protest with the department not later than thirty

(30) days after receipt of that proposal by the manufacturer, or distributor, or factory branch. If a

protest is filed, the department shall inform the manufacturer, or distributor, or factory branch that

a timely protest has been filed and that a hearing will be held on the protest. In any hearing held

pursuant to this subsection, the manufacturer, or distributor, or factory branch shall have the burden

of proving that the rate declared by the dealer was unfair and unreasonable as described in this

subsection and that the proposed adjustment of the average labor rate is fair and reasonable pursuant

to the provisions of this subsection.

(d) In calculating the retail rate customarily charged by the dealer for parts and labor, the

following work shall not be included in the calculation:

(1) Repairs for manufacturer, or distributor, or factory branch special events, specials, or

promotional discounts for retail customer repairs;

(2) Parts sold at wholesale;

(3) Engine assemblies and transmission assemblies;

(4) Routine maintenance not covered under any retail customer warranty, such as fluids,

filters, and belts not provided in the course of repairs;

(5) Nuts, bolts, fasteners, and similar items that do not have an individual part number;

(6) Tires; and

(7) Vehicle reconditioning.

(e) If a manufacturer, or distributor, or factory branch furnishes a part or component to a

dealer at no cost, to use in performing repairs under a recall, campaign service action, or warranty

repair, the manufacturer, or distributor, or factory branch shall compensate the dealer for the part

or component in the same manner as warranty parts compensation under this section by

compensating the dealer the average markup on the cost for the part or component as listed in the

manufacturer’s, or distributor's, or factory branch's price schedule less the cost for the part or

component.

(f) A manufacturer, or distributor, or factory branch may not require a 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 may not declare an average percentage markup or average labor rate more than twice in one

calendar year.

(g) A manufacturer, or distributor, or factory branch may not otherwise recover its costs

from dealers within this state, including an increase in the wholesale price of a vehicle or surcharge

imposed on a dealer solely intended to recover the cost of reimbursing a dealer for parts and labor

pursuant to this section, provided a manufacturer, or distributor, or factory branch shall not be

prohibited from increasing prices for vehicles or parts in the normal course of business.

(h) Each manufacturer or distributor shall perform all warranty obligations, include in

written notices of factory recalls to owners and dealers the expected date by which necessary parts

and equipment will be available to dealers for the correction of the defects, and compensate dealers

for repairs necessitated by such recall. A manufacturer, distributor, or factory branch shall not

unreasonably subject a dealer to a warranty audit or chargeback. A dealer shall only assign warranty

claims to technicians that meet the manufacturing distributor, factory branch, or department's

reasonable qualifications. Either party may appeal provisions of this subsection to the department.

(i) A claim filed under this section or § 31-5.1-6.1 by a dealer with a manufacturer, or

distributor, or factory branch shall be:

(1) In the manner and form prescribed by the manufacturer, or distributor, or factory

branch; and

(2)(i) Approved or disapproved within (30) days of receipt.

(ii) A claim not approved or disapproved within thirty (30) days of receipt shall be deemed

approved.

(iii) Payment of, or credit issued on, a claim filed under this section shall be made within

thirty (30) days of approval.

(3)(i) If a claim filed under this section is shown by the manufacturer, or distributor, or

factory branch to be false or unsubstantiated, the manufacturer, or distributor, or factory branch

may charge back the claim within twelve (12) months from the date the claim was paid or credit

issued.

(ii) A manufacturer, or distributor, or factory branch shall not charge back a claim based

solely on a motor vehicle dealer’s incidental failure to comply with a specific claim processing

requirement, such as a clerical error or other administrative technicality that does not put into

question the legitimacy of the claim after the motor vehicle dealer properly resubmits the claim in

accordance with the manufacturer’s, or distributor's, or factory branch's submission guidelines.

(iii) A dealer shall have no less than sixty (60) days from the date of written notification

by a manufacturer, or distributor, or factory branch or distributor of a proposed charge back to the

identifying the specific claim documentation procedure or procedures violated by the dealer to

resubmit a claim for payment or compensation if the claim was denied for a dealer’s incidental

failure as set forth in subsection (i)(3)(ii), whether the chargeback was a direct or an indirect

transaction.

(iv) This subdivision does not limit the right of a manufacturer, or distributor, or factory

branch to charge back for any claim that is proven to be fraudulent.

(4) Any claim disapproved by manufacturer, distributor, or factory branch shall be

provided via written notice to the dealer within forty-five (45) days which shall include a detailed

explanation of the reason(s) for disapproval. A dealer shall have forty-five (45) days from the

receipt of disapproval to resubmit a corrected claim. For any disapproval based on actual time

worked by a technician, the burden shall be on the manufacturer, distributor, or factory branch to

provide evidence that the technician did not spend the submitted time working on the repair or that

the dealer's submission did not comply with this section. A manufacturer, distributor, or factory

branch may protest a corrected claim within thirty (30) days after receipt of the correct claim by

filing a protest with the department and providing a copy to the dealer. The department shall provide

reasonable notice to all parties of any hearing to be held on a protest. The burden in a protest shall

be on the manufacturer, distributor, or factory branch to prove that a claim made by the dealer under

this section was unfair and unreasonable pursuant to the terms of this section.

31-5.1-6.1. Obligations during recalls.

(a) A manufacturer, distributor, or factory branch shall compensate its new motor vehicle

dealers for all labor and parts required by the manufacturer, distributor, or factory branch to perform

recall repairs. Compensation for recall repairs shall be at the dealer retail rate in effect at the time

the recall repair work is performed. The dealer retail rate for parts and labor shall be at the same

rates as those provided for under § 31-5.1-6. If parts or a remedy are not reasonably available to

perform a recall service or repair on a used vehicle held for sale by the dealer authorized to sell

new vehicles of the same line-make within thirty (30) days of the manufacturer, distributor, or

factory branch issuing the initial notice of recall and the manufacturer, distributor, or factory branch

has issued a “Stop-Sale,” or “Do-Not-Drive,” order on the vehicle, the manufacturer, distributor,

or factory branch shall compensate the dealer at a rate of at least one and one-half percent (1.5%)

of the value of the vehicle per month, or portion of a month, while the recall or remedy parts are

unavailable and the “Stop-Sale,” or “Do-Not-Drive,” order remains in effect. A “Stop-Sale” shall

be defined as a notification issued by a vehicle manufacturer, distributor, or factory branch to its

franchised dealerships stating that certain used vehicles in inventory shall not be sold or leased, at

retail and/or wholesale, due to a federal safety recall for a defect or a noncompliance, or a federal

or California emissions recall.

(b) The value of a used vehicle shall be the average trade-in value for used vehicles as

indicated in an independent, third-party guide for the year, make, model, and mileage of the recalled

vehicle on the later of:

(1) The date the “Stop-Sale” or “Do-Not-Drive” order was issued; or

(2) The date the vehicle is taken in the used motor vehicle inventory.

pursuant to and recalled in accordance with federal law and regulations adopted thereunder and

where a “Stop-Sale,” or “Do-Not-Drive,” order has been issued; provided, further, that this section

shall apply only to new motor vehicle dealers holding used vehicles for sale that are a line-make

that the dealer is franchised to sell or on which the dealer is authorized to perform recall repairs.

This section further shall apply only to new motor vehicle dealers holding an affected used motor

vehicle for sale that was:

(1) In inventory at the time the “Stop-Sale” or “Do-Not-Drive” order was issued;

(2) Taken in the used motor vehicle inventory of the new motor vehicle dealer as a

consumer trade-in incident to the purchase of a new motor vehicle before or after the “Stop-Sale”

or “Do-Not-Drive” order was issued; or

(3) Properly taken in the used motor vehicle inventory of the new motor vehicle dealer as

a lease return vehicle returned to the new motor vehicle dealer before or after the “Stop-Sale” or

“Do-Not-Drive” order was issued in accordance with the terms of the applicable contract.

(d) It shall be a violation of this section for a manufacturer, distributor, or factory branch

to reduce the amount of compensation otherwise owed to a new motor vehicle dealer, whether

through a chargeback; removal from an incentive program; reduction in amount owed under an

incentive program; or any other means, because the new motor vehicle dealer has submitted a claim

for reimbursement under this section, or was otherwise compensated for a vehicle subject to a recall

where a “Stop-Sale,” or “Do-Not-Drive,” order has been issued.

(e) All reimbursement claims made by new motor vehicle dealers pursuant to this section

for recall remedies or repairs, or for compensation where no part or repair is reasonably available

and the vehicle is subject to a “Stop-Sale” or “Do-Not-Drive” order, shall be subject to the same

limitations and requirements as a warranty reimbursement claim made under § 31-5.1-6. Claims

shall be either approved or disapproved within thirty (30) days after they are submitted to the

manufacturer in the manner and on the forms the manufacturer reasonably prescribes. All claims

shall be paid within thirty (30) days of approval of the claim by the manufacturer. Any claim not

specifically disapproved in writing within thirty (30) days after the manufacturer receives a

properly submitted claim shall be deemed to be approved. In the alternative, a A manufacturer may

compensate its franchised dealers under a national recall compensation program provided the

compensation under the program is equal to or greater than that provided under subsection (a) of

this section or the manufacturer and dealer otherwise agree.

(f) Nothing in this section shall require a manufacturer, distributor, or factory branch to

provide total compensation to a new motor vehicle dealer that would exceed the total average trade-

in value of the affected used motor vehicle as determined under subsection (b) of this section.

(g) Any remedy provided to a dealer under this section is exclusive and may not be

combined with any other state recall compensation remedy.

31-5.1-8. Agreements.

The provisions of this chapter shall apply to all written or oral agreements between a

manufacturer, distributor, or factory branch and a motor vehicle dealer including, but not limited

to, the franchise offering; the franchise agreement; sales of goods, services, or advertising; leases

of mortgages of real or personal property; promises to pay; security interests; pledges; insurance

contracts; advertising contracts; construction or installation contracts; servicing contracts; and all

other agreements in which the manufacturer, wholesaler, or distributor, or factory branch has any

direct or indirect interest.

31-5.1-11. Sales to the state.

In connection with a sale of a motor vehicle or vehicles to the state or to any political

subdivision, no manufacturer, distributor, factory branch or wholesaler shall offer any discounts,

refunds, or any other similar type of inducement to any dealer without making the same offer or

offers to all other of its dealers within the relevant market area, and if any inducements are made,

the manufacturer, distributor, factory branch, or wholesaler shall give simultaneous notice to all of

its dealers within the relevant market area.

31-5.1-18. Transportation damages.

(a) Notwithstanding the terms, provisions, or conditions of any agreement or franchise, the

new motor vehicle dealer is solely liable for damages to new motor vehicles after acceptance from

the carrier and before delivery to the ultimate purchaser.

(b) Notwithstanding the terms, provisions, or conditions of any agreement or franchise, the

manufacturer, distributor, or factory branch is liable for all damages to motor vehicles before

delivery to a carrier or transporter.

to the carrier only if the dealer selects the method of transportation, mode of transportation, and the

carrier. In all other instances, the manufacturer, distributor, or factory branch is liable for carrier-