Hitch Install problem

Where'd you see that? In the 2022 Prius Prime Owner's Manual:

 

My 2022 Prius XLE Nightshade manual says the same thing as Mendel showed.
So not much of an “illegal move” by Toyota that I can see.

 

Find an independent mechanic or even a body shop to do the job for you.

 

That's one reason why I would never buy an extended warranty. I'd invest my $2,000 and keep it all with seven years in proceeds. $2,000 will cover most all repairs and there would be no exclusions or escape clauses on covered repairs.

That insurance policy called an extended warranty covers all their ad costs, their celebrity endorsements, if any, all their administrative fees, ther commissions and still makes them a tidy profit.

And, most policy holders don't make a claim.

 

1598lbs converts to 725kg, which is Toyota's rated towing weight for many Prius hybrid models - possibly including the 2022 Prius hybrid:
Towing the line with the new Toyota Prius - Toyota UK Magazine (dated 2016)
Toyota Hybrid towing: your questions answered - Toyota UK Magazine (dated 2020)

And the 2024 Prius Prime appears to have a similar rating:
2024 Toyota Prius Prime: A Comprehensive Guide On Features, Specs, And Pricing
However, I don't know if this includes the 2022 Prius Prime, which the OP originally asked about. His dealership may be nervous because that particular model i.e. 2022 Prius Prime, is not recommended for towing by Toyota.

So, I imagine insurance companies should be able to cover any Prius and Prius Prime models, which do have a towing rating of 725 kg (or 1,598 lbs).

I do wonder though, what the situation is for a Prius (or Prius Prime) using a Trailer Hitch (Stainless Steel) by EcoHitch, which is rated at 2,000lbs (907kg)? For example, the manufacturer of the towbar clearly has a rating of 2,000lbs for a 2018 Prius Prime, which seems to be more than Toyota's rating for the vehicle e.g. possibly as mentioned above for many models. Would insurance companies cover vehicles fitted with these towbars? Perhaps insurance cover would only extend to towing up to 1,598lbs (725kg)(if Toyota has recommended a towing weight for model concerned) but not when towing loads above this e.g. 2,000lbs?
Torklift Central | Toyota Prius trailer hitch by EcoHitch®
2018 Toyota Prius Prime Trailer Hitch | etrailer.com

 

A few day ago I asked a local manufacturer/installer of towbars if they would install an eTrailer hitch to our 2018 Prius PHV, which was imported from Japan. After looking at the hitch via 2018 Toyota Prius Prime Trailer Hitch | etrailer.com he said he'd be happy to install it as long as the manufacturer was reputable and provide a sticker with the design rating. When asked about legailty/insurance/etc he replied it is dependent on the jurisdiction. In his area (and presumably mine) the law would allow it as long as braking distances were within certain limits. He also said that insurance companies would provide cover if the vehicle passes the regular vehicle inspection e.g. annual certification check. I'd suggest you contact a local towbar manufacturer/installer regarding legal and insurance requirements in your locality.