AN ACT Relating to new motor vehicle warranties; amending RCW 19.118.050 and 19.118.060; adding new sections to chapter 19.118 RCW; creating a new section; repealing RCW 19.118.020, 19.118.030, and 19.118.040; prescribing penalties; and providing effective dates.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION. Sec. 1. The legislature recognizes that a new motor vehicle is a major consumer purchase and that a defective motor vehicle is likely to create hardship for, or may cause injury to, the consumer. The legislature further recognizes that good cooperation and communication between a manufacturer and a new motor vehicle dealer will considerably increase the likelihood that a new motor vehicle will be repaired within a reasonable number of attempts.

It is the intent of the legislature to ensure that the consumer is made aware of his or her rights under this chapter and is not refused information, documents, or service that would otherwise obstruct the exercise of his or her rights.

In enacting these comprehensive measures, it is the intent of the legislature to create the proper blend of private and public remedies necessary to enforce this chapter, such that a manufacturer will be sufficiently induced to take necessary steps to improve quality control at the time of production or provide better warranty service for the new motor vehicles that it sells in this state.

NEW SECTION. Sec. 2. Unless the context clearly requires otherwise, the definitions in this section apply throughout this chapter.

(1) "Board" means new motor vehicle board.

(2) "Collateral charges" means any sales-related charges including but not limited to sales tax, arbitration service fees, license fees, registration fees, title fees, finance charges, insurance costs, transportation charges, dealer preparation charges, or any other charges for service contracts, undercoating, rustproofing, or installed options.

(3) "Condition" means a general problem that can result from a defect or malfunction of one or more parts, or their improper installation.

(4) "Consumer" means any person who has entered into an agreement or contract for the transfer, lease, or purchase of a new motor vehicle, other than for purposes of resale or sublease, during the duration of the warranty period defined under this section.

(5) "Court" means the superior court in the county where the consumer resides, except if the consumer does not reside in this state, then the superior court in the county where an arbitration hearing or determination was conducted or made pursuant to this chapter.

(6) "Design defect" means an engineering, manufacturing, or design flaw in a particular material, feature, component, or performance of a new motor vehicle, common to other models of the same type or make, that substantially impairs the use, value, or safety of the new motor vehicle.

(7) "Incidental costs" means any reasonable expenses incurred by the consumer in connection with the repair of the new motor vehicle, including any towing charges and the costs of obtaining alternative transportation.

(8) "Manufacturer" means any person engaged in the business of constructing or assembling new motor vehicles or engaged in the business of importing new motor vehicles into the United States for the purpose of selling or distributing new motor vehicles to new motor vehicle dealers.

(9) "New motor vehicle" means any new self-propelled vehicle primarily designed for the transportation of persons or property over the public highways that was leased or purchased in this state. If the motor vehicle is a motor home, this chapter shall apply to the self-propelled vehicle and chassis, but does not include those portions of the vehicle designated, used, or maintained primarily as a mobile dwelling, office, or commercial space. The term "new motor vehicle" does not include motorcycles or trucks with nineteen thousand pounds or more gross vehicle weight rating. The term "new motor vehicle" includes a demonstrator or lease-purchase vehicle as long as a manufacturer's warranty was issued as a condition of sale.

(10) "New motor vehicle dealer" means a person who holds a dealer agreement with a manufacturer for the sale of new motor vehicles, who is engaged in the business of purchasing, selling, servicing, exchanging, or dealing in new motor vehicles, and who is licensed as a dealer by the state of Washington.

(11) "Nonconformity" means a defect, design defect, serious safety defect, or condition that substantially impairs the use, value, or safety of a new motor vehicle, but does not include a defect or condition that is the result of abuse, neglect, or unauthorized modification or alteration of the new motor vehicle by the consumer.

(12) "Pecuniary loss" means the purchase price and any collateral charges and incidental costs.

(13) "Purchase price" means the cash price of the new motor vehicle appearing in the sales agreement or contract, including any allowance for a trade-in vehicle.

(14) "Reasonable offset for use" means an amount directly attributable to use by the consumer before repurchase or replacement by the manufacturer. The reasonable offset for use shall be computed by the number of miles that the vehicle traveled before the manufacturer's acceptance of the vehicle upon repurchase or replacement multiplied by the purchase price, and divided by one hundred thousand.

(15) "Reasonable number of attempts" means the definition provided in section 4 of this act.

(16) "Replacement motor vehicle" means a new motor vehicle that is identical or reasonably equivalent to the motor vehicle to be replaced, as the motor vehicle to be replaced existed at the time of purchase.

(17) "Serious safety defect" means a life-threatening nonconformity.

(18) "Substantially impair" means to render the new motor vehicle inconvenient, unreliable, or unsafe for ordinary use or reasonably intended purposes, or to diminish the resale value of the new motor vehicle below the average resale value for comparable motor vehicles.

(19) "Warranty" means any implied warranty, any written warranty of the manufacturer, or any affirmation of fact or promise made by the manufacturer in connection with the sale of a new motor vehicle that becomes part of the basis of the bargain. The term "warranty" pertains to the obligations of the manufacturer in relation to materials, workmanship, design defects, and fitness of a new motor vehicle for ordinary use or reasonably intended purposes throughout the duration of the warranty period as defined under this section.

(20) "Warranty period" means the period ending two years after the date of the original delivery to the consumer of a new motor vehicle, or the first twenty-four thousand miles of operation, whichever occurs first.

NEW SECTION. Sec. 3. (1) Each manufacturer shall provide a list of the addresses and phone numbers for its zone or regional offices for this state in the owner's manual.

(2) At the time of purchase, the new motor vehicle dealer shall provide the consumer with a written statement that explains the consumer's rights under this chapter. The written statement shall be prepared by the attorney general and shall contain a toll-free number that the consumer can contact if he or she elects to proceed through arbitration under this chapter.

(3) For the purposes of this chapter, if a new motor vehicle does not conform to the warranty and the consumer reports the nonconformity to the manufacturer, its agent, or the new motor vehicle dealer who sold the new motor vehicle during the term of the warranty period, the manufacturer, its agent, or the new motor vehicle dealer shall make repairs as are necessary to conform the vehicle to the warranty, regardless of whether such repairs are made after the expiration of the warranty period. Any corrections or attempted repairs undertaken by a new motor vehicle dealer under this chapter shall be treated as warranty work and billed by the dealer to the manufacturer in the same manner as other work under the manufacturer's written warranty is billed.

(4) Upon request from the consumer, the manufacturer or new motor vehicle dealer shall provide a copy of any report or computer reading on the year and model of the consumer's new motor vehicle compiled by the manufacturer's field or zone representative regarding inspection, diagnosis, or test-drive, or shall provide a copy of any technical service bulletin issued by the manufacturer regarding the year and model of the consumer's new motor vehicle as it pertains to any material, feature, component, or the performance thereof.

(5) The manufacturer or new motor vehicle dealer shall provide to the consumer each time the consumer's vehicle is returned from being examined or repaired under the warranty, a fully itemized, legible statement or repair order indicating any diagnosis made, and all work performed on the vehicle including but not limited to, a general description of the problem reported by the consumer or an identification of the defect or condition, parts and labor, the date and the odometer reading when the vehicle was submitted for repair, and the date when the vehicle was returned to the consumer.

(6) No manufacturer, its agent, or the new motor vehicle dealer may refuse to examine or repair any nonconformity covered by the warranty for the purpose of avoiding liability under this chapter.

(7) The manufacturer shall be a party to the sales contract for a new motor vehicle.

(8) The warranty period and thirty-day out-of-service period shall be extended by any time that repair services are not available to the consumer as a direct result of a strike, war, invasion, fire, flood, or other natural disaster.

NEW SECTION. Sec. 4. (1) If the manufacturer, its agent, or the new motor vehicle dealer is unable to conform the new motor vehicle to the warranty by repairing or correcting any nonconformity after a reasonable number of attempts, the manufacturer, within forty calendar days of a consumer's written request shall, at the option of the consumer, replace or repurchase the new motor vehicle.

The replacement motor vehicle shall be acceptable to the consumer. Compensation for a reasonable offset for use shall be paid by the consumer to the manufacturer in the event that the consumer accepts a replacement motor vehicle.

When repurchasing the new motor vehicle, the manufacturer shall refund to the consumer the purchase price, all collateral charges, and incidental costs, less a reasonable offset for use. Refunds shall be made to the consumer and lienholder of record, if any, as his or her interests may appear.

(2) Reasonable number of attempts shall be deemed to have been undertaken by the manufacturer or its authorized agents to conform the new motor vehicle to the warranty within the warranty period, if: (a) A serious safety defect has been subject to repair two or more times and the defect continues to exist; (b) the same nonconformity has been subject to examination or repair four or more times by the manufacturer, its agents, or the new motor vehicle dealer; or (c) the new motor vehicle is out-of-service by reason of repair of one or more nonconformities for a cumulative total of thirty calendar days.

(3) No new motor vehicle dealer may be held liable by the manufacturer for any incidental costs, purchase price refunds, or vehicle replacements in the absence of evidence indicating that dealership repairs or documentation or notification requirements pursuant to this chapter were carried out in a manner inconsistent with the manufacturer's instructions.

NEW SECTION. Sec. 5. (1) A manufacturer shall be prohibited from reselling any motor vehicle determined or adjudicated as having a serious safety defect.

(2) After the replacement or repurchase of a motor vehicle with a nonconformity uncorrected pursuant to this chapter, the manufacturer shall notify the attorney general, by certified mail, upon receipt of the manufacturer's motor vehicle.

(3) Upon the resale, either at wholesale or retail, or transfer of title of such motor vehicle previously returned after a final determination, adjudication, or settlement under this chapter, the manufacturer, its agent, or the new motor vehicle dealer shall execute and deliver to the buyer before sale an instrument in writing setting forth information identifying the nonconformity in a manner to be specified by the attorney general.

NEW SECTION. Sec. 6. (1) The attorney general shall establish one or more new motor vehicle arbitration boards to settle disputes between consumers and manufacturers, as prescribed under this chapter and shall adopt rules as necessary to implement this chapter. Each board shall consist of three members appointed by the attorney general, only one of whom may be directly involved in the manufacture, distribution, sale or service of any motor vehicle.

Board members shall be reimbursed for travel expenses in accordance with RCW 43.03.050 and RCW 43.03.060 and shall be compensated pursuant to RCW 43.03.240.

Staff support to the boards shall be provided by the office of the attorney general.

(2) At all arbitration proceedings, the parties are entitled to present oral and written testimony, to present witnesses and evidence relevant to the dispute, to cross-examine witnesses, and to be represented by counsel.

The new motor vehicle boards may issue subpoenas to compel the attendance of witnesses and the production of records, documents, and other evidence.

(3) Records of the board proceedings shall be open to the public. The hearings shall be open to the public to the extent practicable.

(4) A consumer shall exhaust the new motor vehicle arbitration board remedy before filing any superior court action.

(5) The attorney general shall maintain records of each dispute submitted to the new motor vehicle arbitration board, including an index of new motor vehicles by year, make, and model.

The attorney general shall compile aggregate annual statistics for all disputes submitted to, and decided by, the new motor vehicle arbitration board, as well as annual statistics for each manufacturer that include, but shall not be limited to, the number and percent of: (a) Replacement motor vehicle requests; (b) purchase price refund requests; (c) replacement motor vehicles obtained in prehearing settlements; (d) purchase price refunds obtained in prehearing settlements; (e) replacement motor vehicles awarded in arbitration; (f) purchase price refunds awarded in arbitration; (g) board decisions neither complied with during the forty calendar day period nor petitioned for appeal within the thirty calendar day period; (h) board decisions appealed categorized by consumer or manufacturer; (i) the nature of the court decisions and who the prevailing party was; (j) appeals that were held by the court to be brought without good cause; and (k) appeals that were held by the court to be brought solely for the purpose of harassment. The statistical compilations shall be public information.

The attorney shall submit biennial reports of the information in this section to the senate and house of representatives committees on commerce and labor, with the first report due January 1, 1990.

NEW SECTION. Sec. 7. (1) Manufacturers shall submit to arbitration if such arbitration is requested by the consumer within thirty months from the date of original delivery of the new motor vehicle to the consumer and if the consumer's dispute is deemed eligible for arbitration by the board.

(2) The new motor vehicle arbitration board may reject for arbitration any dispute that it determines to be frivolous, fraudulent, filed in bad faith, or beyond its authority. Any dispute deemed by the board to be ineligible for arbitration due to insufficient evidence may be reconsidered by the board upon the submission of other information or documents regarding the dispute that would allegedly qualify for relief under this chapter. Following a second review, the board may reject the dispute for arbitration if evidence is still clearly insufficient to qualify the dispute for relief under this chapter.

A decision to reject any dispute for arbitration shall be sent by certified mail to the consumer and the manufacturer, and shall contain a brief explanation as to the reason therefor.

(3) The arbitration board shall award the remedies under section 4 of this act if the nonconformity, defect, or condition substantially impairs the use, value, or safety of the motor vehicle, and a reasonable number of attempts have been undertaken to correct the nonconformity.

(4) It is an affirmative defense to any claim under this chapter that: (a) The alleged nonconformity does not substantially impair the use, value, or safety of the new motor vehicle; or (b) the alleged nonconformity is the result of abuse, neglect, or unauthorized modifications or alterations of the new motor vehicle by the consumer.

(5) The board shall have forty calendar days from the date the board receives the consumer's request for arbitration to hear the dispute. If the board determines that additional information is necessary, the board may continue the arbitration proceeding on a subsequent date within ten calendar days of the initial hearing. The board shall decide the dispute within sixty calendar days from the date the board receives the consumer's request for arbitration.

The decision of the board shall be sent by certified mail to the consumer and the manufacturer, and shall contain a written finding of whether the new motor vehicle meets the standards set forth under this chapter.

(6) The consumer may accept the arbitration board decision or appeal to superior court, pursuant to section 8 of this act. Upon acceptance by the consumer, the arbitration board decision shall become final. The consumer shall send written notification of acceptance to the arbitration board who shall immediately send a copy of the consumer's acceptance to the manufacturer by certified mail, return receipt requested.

(7) Upon receipt of the consumer's acceptance, the manufacturer shall have forty calendar days to comply with the arbitration board decision or thirty calendar days to file a petition of appeal in superior court. At the time the petition of appeal is filed, the manufacturer shall send, by certified mail, a conformed copy of such petition to the arbitration board. If the board receives no notice of petition of appeal after forty calendar days, the board shall contact the consumer to verify compliance.

(8) If, at the end of the forty calendar day period, neither compliance with, nor a petition to appeal the board's decision has occurred, the attorney general shall impose a fine of one thousand dollars per day until compliance occurs or a maximum penalty of one hundred thousand dollars accrues unless the manufacturer can provide clear and convincing evidence that any delay or failure was beyond its control or was acceptable to the consumer as evidenced by a written statement signed by the consumer. If the manufacturer fails to provide such evidence or fails to pay the fine, the attorney general shall initiate proceedings against the manufacturer for failure to pay any fine that accrues until compliance with the board's decision occurs or the maximum penalty of one hundred thousand dollars results.

NEW SECTION. Sec. 8. (1) The consumer or the manufacturer may appeal the arbitration board decision to superior court and not to the office of administrative hearings.

(2) Grounds for the manufacturer to appeal a decision by the arbitration board shall be limited to clear and convincing evidence that: (a) The award was procured by corruption, fraud, or other misconduct; or (b) the board refused to postpone a hearing upon sufficient cause or refused to hear evidence pertinent and material to the dispute; or (c) the board exceeded its powers; or (d) the board conducted the hearing contrary to the provisions of this section or rules adopted under it so as to prejudice substantially the rights of the manufacturer. In a written petition to appeal a decision by the board, the manufacturer shall state the action requested and the grounds relied upon.

(3) A board decision in favor of the consumer may be vacated by superior court on the basis of clear and convincing evidence that the board erred in its decision.

(4) If the consumer prevails, recovery shall include the monetary value of the award, attorneys' fees incurred in obtaining confirmation of the award together with all costs and continuing damages in the amount of twenty-five dollars per day for all days beyond the forty calendar day period following the manufacturer's receipt of the consumer's acceptance of the board's decision where the manufacturer did not provide the consumer with the free use of a comparable loaner replacement motor vehicle. If it is determined by the court that the manufacturer acted without good cause in bringing the appeal or brought the appeal solely for the purpose of harassment, the court may triple, but at least shall double, the amount of the total award.

NEW SECTION. Sec. 9. A five-dollar arbitration fee shall be collected by the new motor vehicle dealer from the consumer at completion of sale. The fee shall be forwarded to the department of licensing for deposit in the new motor vehicle arbitration account hereby created in the custody of the state treasurer. Moneys in the account shall be used for the purposes of this chapter and are not subject to appropriation.

At the end of each fiscal year, the attorney general shall prepare a report listing the annual revenue generated and the expenses incurred in implementing and operating the arbitration program under this chapter.

NEW SECTION. Sec. 10. A violation of this chapter shall constitute an unfair or deceptive trade practice, as defined under chapter 19.86 RCW. All public and private remedies provided under that chapter shall be available to enforce this chapter.

NEW SECTION. Sec. 11. Any agreement entered into by a consumer for the purchase of a new motor vehicle that waives, limits, or disclaims the rights set forth in sections 2 through 12 of this act shall be void as contrary to public policy. Said rights shall extend to a subsequent transferee of such new motor vehicle.

NEW SECTION. Sec. 12. Nothing in this chapter limits the consumer from pursuing other rights or remedies under any other law.

Sec. 13. Section 5, chapter 240, Laws of 1983 and RCW 19.118.050 are each amended to read as follows:

It shall be presumed that a reasonable number of attempts have been undertaken to conform a motor vehicle to the applicable express warranties if during the term of such express warranties or during the period of one year following the date of original delivery of the motor vehicle to a buyer: (1) The same nonconformity has been subject to examination or repair four or more times by the manufacturer or its agents; ((or)) (2) ((~~the vehicle is out of service by reason of repair for a cumulative total of more than thirty days since the delivery of the vehicle to the buyer~~)) a serious safety defect has been subject to repair two or more times, and the defect continues to exist; or (3) the new motor vehicle is out-of-service by reason of repair of one or more nonconformities for a cumulative total of thirty calendar days. The thirty-day period includes each calendar day or portion thereof during which the service shop is open for business, but does not include periods during which repairs cannot be made due to ((~~conditions beyond the control of the service facility and does not include periods during which the buyer has been provided with a comparable replacement vehicle by the dealer or manufacturer~~)) reasons specified in section 3(8) of this 1987 act.

Sec. 14. Section 6, chapter 240, Laws of 1983 and RCW 19.118.060 are each amended to read as follows:

If a manufacturer has established an informal dispute resolution settlement procedure which substantially complies with the applicable provision of Title 16, Code of Federal Regulations, Part 703, as from time to time amended, the provisions of RCW 19.118.040 concerning reimbursements do not apply unless the buyer has resorted to such procedure. Once the new motor vehicle arbitration board has been established and is operational and until December 31, 1988, consumers who have a pending case in the informal dispute resolution settlement procedure in this section may choose to transfer the case to be heard before the new motor vehicle warranty arbitration board.

(2) This section shall expire December 31, 1988.

NEW SECTION. Sec. 15. Sections 2 through 12 of this act are each added to chapter 19.118 RCW.

NEW SECTION. Sec. 16. The following acts or parts of acts are each repealed:

(1) Section 2, chapter 240, Laws of 1983 and RCW 19.118.020;

(2) Section 3, chapter 240, Laws of 1983, section 1, chapter 148, Laws of 1984 and RCW 19.118.030; and

(3) Section 4, chapter 240, Laws of 1983, section 2, chapter 148, Laws of 1984 and RCW 19.118.040.

NEW SECTION. Sec. 17. (1) Section 9 of this act is necessary for the immediate preservation of the public peace, health, and safety, the support of the state government and its existing public institutions, and shall take effect June 1, 1987.

(2) Sections 2 through 8 and 10 through 12 of this act shall take effect January 1, 1988.