Settlement Reached With Hyundai, Kia in Class Action Lawsuit Alleging Engine Damage, Fires
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Settlement Reached With Hyundai, Kia in Class Action Lawsuit Alleging Engine Damage, Fires

the $758 million settlement comes while federal authorities are investigating the speed of past recalls, past repairs, scope of past recalls, and whether laws were violated

October 15, 2019

Hyundai and Kia set aside $758 million to settle a class action lawsuit for engine failures and fires. Both companies have been the focus of federal investigations related to the speed and scope of related recalls. The companies will install software to monitor for engine failure, provide lifetime engine warranties, and will include monetary compensation for past engine repairs and loss of value.

Vehicles included in the settlement

About 4.17 million Hyundai and Kia vehicles are included in the settlement, which combines ten separate class action lawsuits against the companies. The affected vehicles were originally equipped with or replaced with a genuine Theta II 2.0 liter or 2.4 liter gasoline direct injection engine within OEM specifications. These engines have been the subject of federal investigations and past recalls for catastrophic failures and fires. Those include:

  • 2011-2018 and certain 2019 Hyundai Sonata
  • 2013-2018 and certain 2019 Hyundai Santa Fe Sport
  • 2014-2015, 2018, and certain 2019 Hyundai Tucson
  • 2011-2018 and certain 2019 Kia Optima
  • 2011-2018 and certain 2019 Kia Sorento
  • 2011-2018 and certain 2019 Kia Sportage
  • 2011-2019 Kia Sorento
  • 2011-2019 Kia Optima

Allegations

The plaintiffs alleged that defects existed in certain Hyundai and Kia vehicles that could lead to sudden engine failure and that the manufacturers knew of but chose to conceal the defects. The plaintiffs further allege that the nature of the defects could pose a risk of crash, vehicle damage, and/or death. According to the lawsuit, affected vehicles may catch fire without warning due to the nature of the defects, even without a vehicle crash. Hyundai and Kia together have recalled more than 2.3 million vehicles since 2015 to address various engine fire risks, including recalls to correct problems caused by improper recall repairs.

What is the problem?

In September 2015, Hyundai recalled 470,000 Sonata vehicles that could suffer an engine failure resulting in a stall. Kia did not recall its vehicles at that time, which share the same engines, stating that the issue was related to a specific manufacturing plant and that a manufacturing change corrected the issue. However, in March 2017, Hyundai expanded that recall to 572,000 Sonata and Santa Fe Sport vehicles for the same issue with manufacturing debris. The same day, Kia also recalled 618,160 Optima, Sorento and Sportage vehicles with the same engines.

Metallic debris may not have been fully removed during manufacturing of the engine crankshaft. If the debris was not completely removed, oil flow may be restricted through the connecting rod bearings, causing connecting rod damage. A worn connecting rod bearing will produce a metallic, cyclic knocking noise from the engine and possible engine failure.

The recall consisted of a noise inspection to determine if an excessive connecting rod bearing wear condition in the engine crankcase may be present. Vehicles that did not pass the noise test received additional inspection with some receiving replacement engine assemblies.

Additionally, warranty coverage for the engine sub-assembly (short block) was increased to 10 years/120,000 miles.

In December 2018, approximately 150,730 vehicles that previously received an engine replacement were recalled to inspect the high pressure fuel pipe that connects to the fuel pump outlet. This followed an August 2018 National Highway Traffic Safety Administration (NHTSA) investigation for non-crash vehicle fires (see below). The fuel pipe may have been damaged or improperly tightened during engine replacement. That investigation is still open.

Federal Investigations

NHTSA investigators have been looking into Hyundai and Kia since 2017 following a South Korean whistleblower's complaint in August 2016. Kim Gwang-ho, then an engineer at Hyundai, flew to Washington to speak with NHTSA regarding the timeliness of three recalls carried out in the United States and whether enough vehicles were included in those recalls, citing an internal company report. He also reported several alleged safety lapses to both the NHTSAS and South Korean authorities. The companies have stated that they have "conducted recalls in compliance with U.S. regulations and procedure" and that they will cooperate with investigations.

Fines could still be imposed on the automakers if the NHTSA makes a determination that they did not conduct recalls appropriately or timely. Working with the NHTSA, the U.S. Attorney's Office for the Southern District of New York, part of the U.S. Department of Justice, launched a criminal investigation into Hyundai and Kia in November 2018.

The companies are being investigated through a multi-state probe for violation of Unfair and Deceptive Acts or Practices in a variety of states. The company has been accused of violating the Unfair and Deceptive Acts or Practices Act for North Carolina.

New Defect Investigations

The nonprofit Center for Auto Safety requested investigations into these vehicles for engine fires in June 2018 and July 2018. New investigations, PE19003 and PE19004, were opened by NHTSA investigators in August 2018 and currently include approximately 2,982,010 vehicles, including 2011-2014 Kia Optima and Sorento, 2010-2015 Kia Soul, and 2011-2014 Hyundai Sonata and Santa Fe vehicles. During these investigations, Kia and Hyundai each initiated three additional safety recalls related to engine compartment fires.

The investigations, which are still open, cover the adequacy and scope of the recalls as well as compliance with federal reporting requirements.

Kia Soul vehicles were not covered by recalls conducted prior to 2019. Approximately 378,967 of these vehicles were recalled in February 2019 after the manufacturer determined that a software glitch could possibly not detect excessive exhaust gas temperatures that could cause the catalytic converter to overheat. These damaged catalytic converters could then throw debris into the engine, resulting in engine damage that could puncture the engine block and possibly cause a fire.

Kia Soul vehicles were added to the investigation after research by the Center for Auto Safety suggested a higher number of complaints to NHTSA regarding non-crash fires on these vehicles compared to other similar vehicles. These vehicles, though some were ultimately recalled for a different mechanical issue, are similar to the vehicles in the original investigation in that they suffer catastrophic engine damage and engine fires.

Settlement Terms

Terms of the settlement include:

  • Cash reimbursement for certain past repairs and related expenses, such as towing and rental cars;
  • Cash compensation for certain past trade-ins, sales, and in lieu of certain repairs;
  • Free inspection and repair or replacement of damaged engines;
  • Lifetime warranty coverage for short block assembly repairs for original and subsequent owners;
  • Free installation of the knock sensor detection system software update; and
  • Various goodwill compensation for customers inconvenienced by previous lengthy engine repair times, denied warranty coverage, and vehicle loss of value, among other provisions.

Knock Sensor Detection System Software Update

As part of the settlement, new software will be installed free of charge for all vehicles in the settlement by Hyundai and Kia dealers. The software uses existing sensors to continuously monitor engine vibrations for unusual dynamic patterns that develop as an engine connecting rod bearing wears abnormally in a way that could later cause engine seizure.

If vibrations caused by bearing wear start to occur, the malfunction indicator lamp will blink continuously and the vehicle will be placed in a temporary engine protection mode with reduced power and acceleration. In this temporary mode, drivers maintain full control of the vehicle. The vehicle can continue to be operated for a limited time in engine protection mode to enable the driver to safely drive it to a dealer for inspection and repair, but acceleration will be slower, with a reduced maximum speed of approximately 60 to 65 mph and a limited engine speed of approximately 1,800 to 2,000 rpm.

In January 2019, the companies agreed to offer software upgrades for 3.7 million vehicles not being recalled.

Lifetime Extended Warranty

Owners of these vehicles will get a lifetime extended warranty on the affected components for damage related to this condition. This warranty will go into effect upon of the Knock Sensor Detection System software update. Loaner vehicles may be available for owners while their vehicles are being repaired under this warranty. If a loaner vehicle is not available, the manufacturer may reimburse up to $40 per day for transportation expenses.

Reimbursement for past repairs

Owners who obtained a repair prior to receiving notice of a settlement will qualify for a full reimbursement of out-of-pocket expenses. Additionally, owners will be reimbursed if they paid for repairs after being denied warranty coverage related to the settlement.

Reimbursement for inconveniences

According to the terms of the settlement, if "a Class member is or was inconvenienced by delays of more than 60 days when obtaining a repair from an authorized Hyundai or Kia dealership, the Class member may submit a claim for a goodwill payment based on the length of delay."

The settlement allows goodwill payments of $50 for delays that last between 61 and 90 days and $25 for each additional 30 days.

Reimbursement for Loss of Value

Owners who suffered an engine defect but opted to sell or trade it without repairs can file a claim for the reimbursement of the wholesale used vehicle value at the time of the incident. Additionally, a goodwill payment of $140 is being offered.

Owners who suffered a vehicle fire due to this condition can file a claim for the maximum Black Book value of the vehicle at the time of the incident. Additionally, a goodwill payment of $140 is being offered.

Owners are eligible for a rebate of $500 to $2,000 if they decide to sell one of these vehicles after notice of the settlement and experiences an engine failure or fire, losses faith in the vehicle, and completes all other steps to qualify for the rebate, including the purchase of a replacement Hyundai or Kia vehicle and submission of a claim within 90 days of the incident.

If you suspect a problem

If you suspect an engine problem with one of the vehicles mentioned in this article, we urge you to exercise caution. Depending upon the nature of the problem you may be experiencing and whether any previous recalls have been performed, a spontaneous fire may develop, which would give you and your passengers little time to react.

If you have any doubts as to the safety of your vehicle, you should consider having it towed to a dealership for inspection, even if the remedies under this settlement are not yet available. Your safety and the safety of others is paramount. Towing costs may not be reimbursable, especially if no problems are found. We suggest contacting your dealer first to see if free towing is available.

Complete Recall Repairs

If you have one of these vehicles, we encourage you to check for and have all recall repairs performed as soon as possible. Your dealer or manufacturer can advise you of any open recalls, product improvement campaigns, or special programs for your vehicle.

Depending upon the results of any open defect investigations, additional recalls may be announced at a later date.

Additionally, you can check for vehicle recalls here on the Hyundai website or here on the Kia website. You can check for open vehicle recalls for any vehicle here on the NHTSA website.

Questions

For questions about your vehicle, please contact your dealer, Hyundai at (800) 633-5151, or Kia at (800) 333-4542.

For questions regarding the settlement, contact one of the law firms involved in this litigation.