FINAL BILL REPORT

SHB 2430

                                  C 239 L 90

BYHouse Committee on Commerce & Labor (originally sponsored by Representatives P. King, Vekich, Walker, Prentice, Winsley, Jones and Kremen; by request of Attorney General)

Revising provisions for motor vehicle warranties.

House Committe on Commerce & Labor

Senate Committee on Economic Development & Labor

SYNOPSIS AS ENACTED

BACKGROUND:

In 1987, the Legislature made substantial changes in the law governing enforcement of warranties on new motor vehicles (the lemon law).  The lemon law specifically exempts from its coverage motorcycles, larger trucks, and vehicles purchased or leased by a business as part of a fleet of 10 or more vehicles.

The lemon law provides that if a manufacturer or new motor vehicle dealer is unable to conform the vehicle to the warranty by repairing or correcting any nonconformity after a reasonable number of attempts, the consumer may elect to receive a replacement vehicle or to have the manufacturer or dealer repurchase the vehicle.  In the case of a replacement, the consumer must pay the manufacturer an amount as a reasonable offset for use.  In the case of a repurchase, the manufacturer must refund the purchase price, all collateral charges, and incidental costs, less a reasonable offset for use.  The reasonable offset for use is computed by multiplying the number of miles on the vehicle that are attributable to use by the consumer times the purchase price, and dividing the product by 100,000.

Washington motor vehicle warranty law also provides limited regulation of motor vehicle service contracts.  Every motor vehicle service contract must be backed by a reimbursement insurance policy issued by an insurer authorized to do business in Washington.  The policy is intended to cover the obligations of a provider of contracts that promise repair or replacement services for the operational or structural failure of a motor vehicle.  The policy must pay these obligations if the provider is unable to perform under the contract.  Since the enactment of the statute, the Consumers Indemnity Company, a service contract reimbursement insurer, has become insolvent.

Information obtained in the process of resolving the Consumers Indemnity insolvency revealed problems in the management of funds paid by consumers for the services promised under the service contracts.  In that case, very little of the money collected went to pay for the statutorily required reimbursement policy.  The bulk of the funds were distributed to sellers of the contracts and to contract administration.

SUMMARY:

New motorcycles that have an engine displacement of at least 750 cubic centimeters are covered by the new motor vehicle warranty law (the lemon law.)

The reasonable offset for use for a motorcycle is computed by multiplying the number of miles that the vehicle traveled before repurchase or replacement times the purchase price, and dividing the product by 25,000.

The definition of "manufacturer" is amended to exclude any person who is engaged in the business of set-up of motorcycles as an agent of a new motor vehicle dealer and who does not otherwise construct or assemble motorcycles.

The motor vehicle service contract statute is amended to require that the reimbursement insurance policy covering the obligations of the service contract provider insure all liabilities under the contract whether or not the provider is able to meet the contract obligations.

Every motor vehicle service contract must contain a disclosure statement that must be initialed by the contract purchaser at the time of sale.  The contract must contain a disclosure of any material conditions for receiving benefits, of the work and parts covered by the contract, of any time or mileage limitations, of the provider's warranty of merchantability, of coverage exclusions, and of the purchaser's right to return the contract for a refund.

Every motor vehicle service contract provider must allow the purchaser to return the contract within 30 days of purchase for a full refund.  If the contract is returned after 10 days of sale, the provider may charge a cancellation fee of up to $25.  If a refund is not made within 30 days of the return of the contract a penalty of 10 percent of the contract price is imposed.  If the contract is returned, the contract is void from the beginning and the parties are in the same position as they would have been if no contract had been issued.

Contracts sold by manufacturers and import distributors covering vehicles manufactured or imported by the contract seller are exempt from the reimbursement insurance policy provisions.

VOTES ON FINAL PASSAGE:

      House 90   2

      Senate    49     0 (Senate amended)

      House             (House refused to concur)

Free Conference Committee

      Senate    48     0

      House 97   0

EFFECTIVE:June 7, 1990

            January 1, 1990 (Sections 2 - 10)