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; and providing an expiration date.

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 also recognizes that a franchised new motor vehicle dealer is an authorized agent of the manufacturer. 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 identify the duties of the dealer and manufacturer that are conducive to monitoring repair efforts and to place the responsibility for the instructions to report and perform warranty repairs in a timely manner on the manufacturer who is liable under this chapter for a refund or replacement of a defective motor vehicle. 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.

It is the intent of the legislature to expand and clarify the application of the concept of "reasonable number of attempts" to a range of circumstances and problems that constitute a defective motor vehicle. It is the intent of the legislature to designate a warranty coverage period by which a new motor vehicle is expected to perform satisfactorily or sustain its surface and structural integrity. It is the intent of the legislature to include the protections of an implied warranty to preclude a manufacturer from denying intended relief under this chapter through its own interpretation or revision of the terms and conditions that it offers under any express warranty.

It is the intent of the legislature to provide the statutory procedures whereby a consumer can conveniently pursue and receive a full refund or replacement motor vehicle when a defective motor vehicle is not repaired within a reasonable number of attempts. It is the intent of the legislature to facilitate compliance with this statute by empowering the attorney general to enforce this chapter, impose penalties for certain violations, and administer arbitration proceedings in various locations throughout the state.

It is the intent of the legislature to create a nominal self-funding scheme whereby enough revenue is generated to cover the costs necessary to ensure that a consumer who purchases a new motor vehicle in this state receives the full benefits of this chapter for a period of approximately two years. It is the intent of the legislature to avoid the creation of a public policy that protects one class of consumers at the expense of another by mandating that defective motor vehicles repurchased by the manufacturer are not to be resold to unsuspecting second purchasers without certain disclosures or restrictions.

In enacting these comprehensive measures, the legislature recognizes that automobile manufacturers have resisted or circumvented the application and objectives of previous state and federal warranty laws and similar refund-or-replacement laws in other states. Accordingly, 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) "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.

(2) "Condition" means a general problem that can result from a defect or malfunction of one or more parts.

(3) "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.

(4) "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.

(5) "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.

(6) "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.

(7) "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.

(8) "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" includes a demonstrator or lease-purchase vehicle as long as a manufacturer's warranty was issued as a condition of sale.

(9) "New motor vehicle dealer" means the authorized agent of a manufacturer 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 has an established place of business in this state.

(10) "Nonconformity" means a 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.

(11) "Pecuniary loss" means any monetary losses suffered by the consumer, including but not limited to collateral charges, incidental costs, and any cash or equivalent payments.

(12) "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.

(13) "Reasonable offset for use" means the number of miles in excess of twelve thousand miles, multiplied by the purchase price of the new motor vehicle, and divided by one hundred thousand.

(14) "Reasonably convenient location" means the site of an arbitration hearing provided under this chapter, that is within a one hundred-mile radius of the consumer's residence in this state. In the event that the new motor vehicle is inoperative or has a serious safety defect, the term "reasonably convenient location" means the site of an arbitration hearing provided under this chapter that is within a ten-mile radius of the consumer's residence in this state.

(15) "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.

(16) "Serious safety defect" means a life-threatening malfunction or nonconformity that impedes the consumer's ability to control or operate the new motor vehicle for ordinary use or reasonable intended purposes or creates a risk of fire or explosion.

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

(18) "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, and fitness of a new motor vehicle for ordinary use or reasonable intended purposes throughout the duration of the warranty period as defined under this section. The term "warranty" also covers design defects, but not tires.

(19) "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. By the first of January of each year, each manufacturer shall forward to the attorney general a copy of the owner's manual and any written warranty for each make of its new motor vehicles sold in this state.

(2) At the time of purchase, the manufacturer, either directly or through its authorized agent, 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 as provided for 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 or its authorized agent during the term of the warranty period, the manufacturer or its authorized agent shall make repairs as are necessary to conform the vehicle to the warranty, irrespective 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 dealer shall provide a copy of any report or computer reading compiled by the manufacturer's field or zone representative regarding the inspection, diagnosis, or test-drive of the consumer's new motor vehicle, or 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 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 and odometer reading when the vehicle was returned to the consumer. It shall be the duty of the new motor vehicle dealer to notify the manufacturer within seven days when the vehicle is submitted for the second repair of the same defect or condition by the sale dealer. Notification shall be made by certified mail, return receipt requested.

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

NEW SECTION. Sec. 4. (1) If the manufacturer or its authorized agents are unable to conform the new motor vehicle to the warranty by repairing or correcting any nonconformity, defect, or condition that substantially impairs the use, value, or safety of the new motor vehicle after a reasonable number of attempts, the manufacturer, within forty calendar days shall, at the option of the consumer, replace the new motor vehicle with a replacement motor vehicle acceptable to the consumer or repurchase the motor vehicle from the consumer and refund to the consumer the purchase price, including all collateral charges and incidental costs, less a reasonable offset for use of the motor vehicle in excess of the first twelve thousand miles of operation. Refunds shall be made to the consumer and lienholder of record, if any, as his or her interests may appear. Compensation for a reasonable offset for use of the motor vehicle in excess of the first twelve thousand miles of operation shall be paid by the consumer to the manufacturer in the event that the consumer accepts a replacement motor vehicle. 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.

(2) A 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 or its agents; 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) 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.

(4) No manufacturer may refuse, or direct its authorized agent to refuse, to examine or repair any nonconformity covered by the warranty for the purpose of avoiding liability under this chapter.

(5) 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 nonconformity is the result of abuse, neglect, or unauthorized modifications or alterations of the new motor vehicle by the consumer.

NEW SECTION. Sec. 5. (1) A consumer may bring an action to recover damages caused by a violation of this chapter. The court shall award a consumer who prevails in such an action the amount of any pecuniary loss, together with all litigation costs, reasonable attorneys' fees, and any equitable relief the court deems appropriate. In any action brought because of the manufacturer's failure to comply with a decision rendered at an arbitration proceeding or petition to appeal a decision rendered at an arbitration proceeding, the court may triple, but shall at least double, the pecuniary value of the award stipulated in the arbitration decision as provided for in section 3 of this act.

(2) Any action brought under this chapter shall be commenced within four years of the date of original delivery of the new motor vehicle to the consumer.

(3) Nothing in this chapter limits the consumer from pursuing other rights or remedies under any other law.

NEW SECTION. Sec. 6. (1) A manufacturer that accepts return of the motor vehicle due to nonconformity that was not cured within a reasonable time as provided under this chapter shall notify the attorney general. 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 or under similar statute of any other state, the manufacturer or dealer shall execute and deliver to the buyer an instrument in writing setting forth the following information in ten point type in capital letters: "IMPORTANT: THIS VEHICLE WAS RETURNED TO THE MANUFACTURER OR DEALER DUE TO NONCONFORMITY AND THE DEFECT OR CONDITION WAS NOT FIXED WITHIN A REASONABLE TIME AS PROVIDED UNDER CHAPTER 19.118 OF THE REVISED CODE OF WASHINGTON." The notice shall also be conspicuously printed on the motor vehicle's certificate of title.

(2) A manufacturer or dealer shall be prohibited from reselling any motor vehicle determined or adjudicated as having a serious safety defect.

NEW SECTION. Sec. 7. (1) 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 statute shall be available to enforce this chapter.

(2) The attorney general shall have the power to enforce compliance with this chapter, including but not limited to the authority to investigate complaints and disputes; subpoena records, documents, and other evidence; and compel the attendance of witnesses before a court of appropriate jurisdiction.

NEW SECTION. Sec. 8. (1) There is established within the office of the attorney general a new motor vehicle arbitration board consisting of members appointed by the attorney general for an initial term of one year. Board members may be reappointed by the attorney general for additional terms of two years.

(2) The new motor vehicle arbitration board shall hear cases in various locations throughout the state so any consumer who elects to present his or her dispute orally can attend an arbitration hearing at a reasonably convenient location. Arbitration proceedings under this section shall be open to the public, as accommodations permit, on reasonable and nondiscriminatory terms.

(3) The new motor vehicle arbitration board shall consist of three permanent members and three alternate members. The members of the board shall apply the laws of the state of Washington in making their decisions. An administrator and clerical staff shall be assigned to the board by the attorney general. The administrator shall conduct the proceedings, administer oaths, and take affirmations. One member shall be an automotive technical expert, or be a person knowledgeable in automobile mechanics. One member shall be an attorney, or be a person knowledgeable in warranty law. One member shall have prior experience in dispute mediation or arbitration, or be a person interested in the arbitration of new motor vehicle warranty repair disputes. All board members shall be persons interested in deciding new motor vehicle warranty repair disputes in an impartial manner. Board members shall be trained in the application of this chapter and any rules under it. Board members shall be reimbursed for travel expenses in accordance with RCW 43.03.050 and 43.03.060 and shall be compensated in accordance with RCW 43.03.240.

(4) A two-dollar arbitration fee shall be collected by the dealer from the consumer. The fee shall be forwarded to the department of licensing for deposit in the motor vehicle arbitration account hereby created. Moneys in the account shall be used for the purposes of this chapter.

(5) 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.

(6) The attorney general shall adopt rules as necessary to implement the provisions of this section including, but not limited to: (a) The selection and training of board members; (b) the administration of the arbitration proceedings; (c) the rendering, drafting, and recording of arbitration decisions; (d) the promotion of fairness and expediency at all arbitration proceedings; and (e) the procedures to be followed and forms to be used in determining eligibility for arbitration under this chapter, in arranging prehearing conferences and recording prehearing settlements, in gathering and circulating information and evidence relevant to the dispute, and in notifying the parties to the dispute of the time and location of the arbitration proceeding.

(7) 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 arbitration board may issue subpoenas for the attendance of witnesses and for the production of records, documents, and other evidence.

(8) Before bringing a civil action on a matter subject to this chapter, the consumer must first submit his or her dispute to the new motor vehicle arbitration board. No consumer may be required by any manufacturer or its authorized agent to give notice directly to the manufacturer of the existence of any nonconformity before submitting his or her dispute to the new motor vehicle arbitration board.

(9) All manufacturers shall submit to arbitration conducted by the new motor vehicle arbitration board 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.

(10) The new motor vehicle arbitration board shall award the remedies under this chapter, 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, defect, or condition.

(11) The new motor vehicle arbitration board may reject for arbitration any dispute that it determines to be frivolous, fraudulent, or beyond its authority. Any dispute deemed by the board to be ineligible for arbitration due to insufficient evidence under the requirements of this chapter 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. Any dispute rejected for arbitration by the board shall be sent by certified mail to the consumer and the manufacturer, and shall contain a brief explanation as to the reason therefor.

(12) If the new motor vehicle arbitration board rejects the dispute for arbitration or if the dispute is arbitrated and the consumer rejects the arbitration decision, the consumer may bring an action in court to seek the remedies provided under this chapter. In any civil action arising under this chapter and relating to a matter considered by the new motor vehicle arbitration board, any determination made to reject a dispute for arbitration or any decision rendered by the new motor vehicle arbitration board shall be admissible in evidence.

(13) The new motor vehicle arbitration board shall have forty calendar days 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 on a form prescribed by the attorney general. 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. A copy of the consumer's acceptance of the decision shall immediately be sent by the board to the manufacturer by certified mail, return receipt requested. The manufacturer shall have forty calendar days from its receipt of the consumer's acceptance of the decision to comply with the terms of the decision. Compliance shall be deemed to have occurred on the date the consumer either receives delivery of an acceptable replacement motor vehicle or the refund stipulated in the arbitration award.

(14) A decision accepted by the consumer shall be final unless the manufacturer can show good cause why the decision should be appealed. A petition to superior court to appeal a decision shall be made within thirty calendar days from the manufacturer's receipt of the consumer's acceptance of the decision. At the time the petition to appeal is filed, the manufacturer shall send by certified mail, a copy of such petition to the new motor vehicle arbitration board. If the board receives no notice of such petition after forty calendar days, the board shall contact the consumer to determine if compliance has occurred. If compliance has not occurred, the board shall contact the court to determine if a petition to appeal has been filed. 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.

(15) Grounds to appeal a decision by the new motor vehicle 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.

(16) In the event the decision of the new motor vehicle arbitration board is upheld by the court, recovery by the prevailing consumer shall include the pecuniary 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.

(17) When a judgment of the court affirms a decision by the new motor vehicle arbitration board, a review may be conditioned upon the manufacturer paying the consumer's attorneys' fees and giving security for costs, expenses, and financial loss resulting from the passage of time for review.

(18) 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; (i) appeals affirmed by the court; (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.

NEW SECTION. Sec. 9. (1) Sections 2 through 8 of this act shall apply to new motor vehicles purchased in this state on or after January 1, 1988.

(2) 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 8 of this act shall be void as contrary to public policy. Said rights shall extend to a subsequent transferee of such new motor vehicle.

Sec. 10. 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.

Sec. 11. Section 6, chapter 240, Laws of 1983 and RCW 19.118.060 are each amended to read as follows:

(1) 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. 12. Sections 2 through 9 of this act are each added to chapter 19.118 RCW.