Although Rhode Island is geographically small, recent developments in the Ocean State could have an outsized impact in the motor vehicle industry. In the span of just 14 days in late June and early July this year, Rhode Island became the first state to enact an “actual time” warranty reimbursement law, and the U.S. Court of Appeals for the First Circuit issued a landmark decision limiting the scope of the state’s add-point protest statute.

Actual Labor Time for Warranty Repairs

On June 22, 2026, Rhode Island Governor Dan McKee signed S.B. 2347 (the “Act”) into law with an effective date of October 1, 2026. The Act makes several changes to the existing motor vehicle warranty reimbursement statute, the most significant of which makes Rhode Island the first state to require manufacturers to reimburse dealers for warranty service based on the “actual time” technicians spend performing warranty repairs. In relevant part, the Act declares: “Compensation for warranty labor shall equal the dealer’s non-warranty labor rate multiplied by the actual time worked by the dealer’s technician . . . .”

The Act requires that dealers “shall only assign warranty claims to technicians who meet the [OEM’s] reasonable qualifications,” and must submit with warranty claims (1) the technician’s time punch, including any diagnostic and manufacturer technical assistance time; (2) any relevant electronic data or records for the warranty repair; and (3) an attestation from the dealer that the submission is accurate. Under the Act, manufacturers must allow dealers no less than 90 days after a warranty repair has been performed to submit a claim for reimbursement.

On its face, the Act does not include language acknowledging alternative methods for measuring warranty labor time, i.e. flat rate time guides, nor does it address the situation where a dealer continues to submit (and a manufacturer continues to accept) claims using the manufacturer’s time guide. The Act requires manufacturers to provide written notice of disapproval of any warranty claim with a detailed explanation within 45 days, and dealers then have 45 days from receipt to submit a corrected claim. If a manufacturer objects to a corrected claim, it must contest the corrected claim within 30 days of receipt by filing a protest with the Department of Revenue. The burden in any such protest falls on the manufacturer to prove the dealer’s claim was unfair and unreasonable. If the basis for disapproval is the actual time worked by a technician, the manufacturer has the burden to prove the technician did not spend the submitted time working on the repair or the dealer’s submission did not comply with the Act. OEMs also retain the ability under the Act to charge back claims already paid within 12 months if they can show those claims to be “false or unsubstantiated.”

First Circuit Clips Dealer Statute’s Wings

Two weeks after Rhode Island enacted the Act, the First Circuit on July 6, 2026 issued its long-awaited opinion in Rhode Island Truck Center, LLC v. Daimler Trucks North America, LLC. In that case, the Rhode Island Supreme Court last year answered a certified question from the First Circuit and concluded a dealer’s “relevant market area” could extend beyond the Ocean State’s borders under the plain language of the text of that state’s add point protest statute, effectively giving a Rhode Island dealer standing to file an in-state protest to the appointment by a manufacturer of an out-of-state dealer in Massachusetts. In so ruling, the Rhode Island Supreme Court expressly declined to address the constitutionality of this interpretation, leaving that issue to be resolved by the First Circuit.

In its most recent decision, the First Circuit confirmed that the Dormant Commerce Clause prohibits enforcement of the Rhode Island add-point statute beyond the state’s borders. Accordingly, the First Circuit affirmed the District Court’s summary judgment ruling in favor of a manufacturer, holding that a Rhode Island dealer could not use Rhode Island law to challenge the establishment of a motor vehicle dealer in Massachusetts, despite the add-point being within the Rhode Island dealer’s relevant market area radius under Rhode Island law. The First Circuit’s ruling confirms that, for purposes of protest rights, a dealer’s relevant market area must hit the brakes at Rhode Island’s borders.