What Hyundai, Kia Drivers Need to Know About the $758 Million Engine Fire Settlement [UPDATE]

Hyundai and Kia have agreed to pay as much as $758 million to end multidistrict litigation centered on an apparent defect that can cause the engines in several models of the automakers’ vehicles to fail and, in some cases, catch fire.

According to the plaintiffs’ motion for preliminary settlement approval submitted October 10, eligible individuals may be able to file claims for benefits that include reimbursement for certain out-of-pocket repairs and costs, a lifetime warranty extension, “goodwill” payments, rebates, and reimbursement for sold or traded-in cars. The settlement reportedly covers 4.17 million Hyundai and Kia vehicles equipped with allegedly faulty Theta II gasoline direct injection (GDI) engines.

A hearing for preliminary approval of the proposed settlement is tentatively scheduled for December 13, 2019 at the Ronald Reagan Federal Building and United States Courthouse in Santa Ana, California. Read on for more on who’s covered, what each settlement benefit entails, and what to do next.

Who’s covered by the settlement?

If you bought or leased any vehicle model listed below in the United States, including while on active U.S. military duty, you’re covered as the settlement stands now.

Please note that this is only a proposed settlement. The details may change as it moves through the approval process.

Which Hyundai and Kia vehicles are covered?

Cars covered by the settlement were all originally equipped or replaced with a genuine Theta II 2.0- or 2.4-liter GDI engine within original equipment manufacturer (OEM) specifications. These include:

What can I get from the settlement?

The motion for preliminary approval of the settlement states that the deal provides “virtually everything” the plaintiffs sought through their lawsuits. As you’ll see below, the settlement robustly offers a number of possible benefits. It’s worth noting that claims related to death, personal injury, property damage outside of what’s considered a covered repair, and subrogation are excluded from settlement coverage.

Lifetime Warranty

Owners and lessees of affected vehicles will receive a lifetime warranty, effective as of the date on which class action notices are sent out. The settlement documents state that this lifetime warranty will cover all costs associated with defect-related inspections and repairs, including costs for replacement parts, labor, diagnoses, and mechanical or cosmetic damage to a vehicle. Essentially, the lifetime warranty covers all major damage sustained as the result of an engine malfunction that occurred upon the completion of the Knock Sensor Detection System (KSDS) software update, which coincided with January’s recall of roughly 4 million vehicles.

For the 90 days immediately following the date notices are sent out, all vehicles that have not undergone a recall inspection will be eligible to receive a free inspection and any short block assembly repairs deemed necessary by the inspection, irrespective of mileage, duration of ownership, or any prior repairs.

Court documents stipulate that any disputes that arise with regard to lifetime warranty coverage will be resolved through the Better Business Bureau’s alternative dispute resolution process. Class counsel will have the right to participate in all BBB proceedings, the costs of which will be paid for by Hyundai and Kia.

Loaner Cars

As part of the settlement, Hyundai and Kia have also agreed to provide drivers with a comparable loaner vehicle while their car is being repaired under the lifetime warranty. If no loaner vehicle is reasonably available through the defendants’ authorized dealerships, documents say, consumers can receive reimbursement of up to $40 per day for “reasonable rental car expenses” until the repairs are complete.

Recalls and Product Improvements

The settlement document further cites all recalls and product improvements affecting 2011-2012 Hyundai Sonatas (NHTSA campaign number 15V-568) and 2013-2014 Hyundai Sonata and Santa Fe Sport vehicles (NHTSA campaign number 17V-226), as well as subsequent recalls for those same vehicles under NHTSA campaign numbers 18V93400 and 18V907000, as part of the benefits provided for drivers. This includes free knock sensor technology software updates rolled out by Hyundai and Kia in January 2019.

Reimbursements for Repairs

Those who had a repair done to their vehicle as the result of the engine defect before receiving a settlement notice will be eligible for full reimbursement from Hyundai and Kia regardless of whether they were an original owner, lessee or subsequent purchaser—or whether the repair was completed before or after the recall campaigns discussed above.

To receive repair reimbursement, you must submit a completed claim form within 90 days of receiving notice of the settlement with proof of the repair expense that shows the work done to address the specific repair.

Importantly, the proposed settlement stipulates that Hyundai and Kia will take all reasonably available steps to identify and approve claims from those who had repairs performed at authorized dealerships. Drivers who fall into this bucket will likely need to provide only proof that they paid the cost for the repair through a receipt, credit card receipt or statement, or any other documentation showing a payment made to an authorized Hyundai or Kia dealer. Note that repair reimbursements will be provided regardless of whether repairs were performed at an authorized Hyundai or Kia dealership or by a third party.

Lastly, the settlement allows for reimbursements for repairs even if warranty coverage was initially denied for “allegedly failing to properly service or maintain” a particular vehicle. Consumers who presented their car to an authorized dealership and were denied in-warranty repairs prior to receiving notice of this settlement may receive a goodwill payment of an additional $140.

Other Repair-Related Reimbursements

The settlement allows for consumers to submit claims for full reimbursement of towing expenses or other out-of-pocket expenses “reasonably related to obtaining a repair.” You may be able to receive reimbursement of up to $40 per day for rental car expenses if a loaner vehicle was not originally provided by the defendants. Claims for lost wages or other “consequential damages,” however, are not permitted under the terms of the proposed settlement.

If you were previously reimbursed, in full or in part, for rental car or towing expenses, you are not entitled to reimbursement for those same expenses through this settlement, the preliminary approval motion states.

Payment for Inconvenience Due to Repair Delays

Adding to the “goodwill” component of the proposed settlement, drivers who are or were inconvenienced by delays of more than 60 days when obtaining a repair from an authorized Hyundai or Kia dealership may submit a claim for payment based on the length of the delay. The terms of the proposed settlement allow for goodwill payments of up to $50 for delays lasting between 61 and 90 days, and $25 for each additional 30-day period or fraction thereof.

Moreover, consumers also have the option to receive their repair delay-related compensation in the form of a dealership service card valued at 150 percent of the amount that would otherwise be paid. This service card can only be used at authorized Hyundai or Kia dealerships toward parts, service or merchandise.

Loss of Value for Sold or Traded-In Vehicles

The proposed settlement also allows for drivers who sold or traded in their cars without first obtaining a recommended repair to submit claims for loss in value. This bucket of consumers must have experienced a “loss event” – that is, an engine seizure, stall, engine noise, engine compartment fire or illumination of the oil lamp diagnosis requiring repair of the engine block – before receiving notice of the settlement, the proposed settlement states.

This type of claim must be submitted within 90 days of the date notices are sent out. Drivers who file claims for loss of value for sold or traded-in vehicles must have proof of the transaction and value received in addition to proof of the “loss event.” Those whose claims are approved will receive reimbursement of “the baseline Black Book value (i.e., wholesale used vehicle value) of the sold or traded-in class vehicle” at the time of loss plus an additional $140 goodwill payment (minus the actual amount received from the sale or trade in). Finally, consumers who were already reimbursed, in full or in part, in connection with a sale or trade-in are not entitled to reimbursement for such through the settlement.

Lastly, should a driver contend that the actual damages they incurred regarding loss in value exceed the reimbursement they receive, the class member can submit to Hyundai or Kia a written notice requesting alternative dispute resolution through the Better Business Bureau.

Loss of Vehicle by Engine Fire

Consumers who suffered a “loss event” (discussed above) due to an engine fire directly caused by the failure of a vehicle stemming from a condition that would have been fixed by a qualifying repair is eligible to file a claim for “the maximum Black Book value (i.e., private party/very good)” of the car at the time of loss, plus an additional $140 goodwill payment (minus any actual value received, if any).

These claims must be submitted within 90 days of notices being sent out, or within 90 days of the engine fire. Claims forms must include proof of the “loss event” and documentation that establishes that the fire originated from the engine compartment and was unrelated to any type of collision.

Rebate Program

Should a driver “lose faith” in their Hyundai or Kia vehicle “as a result of this settlement,” he or she can file a claim for a rebate after selling their vehicle in “an arm’s length transaction” if they experienced an engine failure or engine component fire and purchased a replacement Hyundai or Kia vehicle.

A rebate may also be available to anyone who, after the date notices are sent out, experiences an engine failure or fire in their vehicle, “loses faith” in their vehicle, and completes all other steps to qualify for the rebate, including purchasing a replacement Hyundai or Kia and submitting a claim within 90 days of the engine failure or fire.

The preliminary settlement stipulates that the amount of a consumer’s rebate will be calculated as actual loss by comparing sales documentation to the maximum Black Book value (i.e. private party/very good) of the vehicle at the time of the Knock Sensor Detection System (KSDS) software update campaign launch. Individuals may receive up to the following amounts:

What kind of proof will I need for my claims?

If you made your way through the section above, you may have inferred that the benefits you may be able to obtain rely heavily on being able to prove that specific types of damages were incurred to a vehicle. For this particular settlement, it is especially crucial to have available all receipts and other documentation that definitively show your vehicle was affected by the defects exhibited by Hyundai and Kia’s Theta II GDI engine.

How do I file a claim?

We’re not at that stage of the process just yet. Keep in mind, the settlement is still in its preliminary stage. That means that what’s detailed on this page is merely what has been proposed before the judge, who still needs to grant the deal preliminary approval and, later, give his or her final OK.

In arguing for preliminary approval of the settlement, however, court documents state that it will be left up to Hyundai and Kia whether to self-administer the settlement benefits or elect to use a third-party administrator. Claims will be able to be submitted by mail, email, or through dedicated settlement websites yet to be created; hyperlinks to any official settlement website will be posted to Hyundai and Kia’s respective websites.

How will I be notified about the settlement?

According to the proposed settlement terms, notices will be sent to “all reasonably identifiable” Hyundai and Kia drivers via U.S. mail. To help identify who’s covered, Hyundai and Kia will provide the names and addresses, according to their records, of all affected vehicle owners, as well as the cars’ VINs, to R.L. Polk & Company or a similar third party authorized to use that information to obtain the names and most current addresses of drivers nationwide. Moreover, the U.S. Postal Service’s National Change of Address database will be parsed in order to locate those from whom notices were returned as undeliverable.

Will emails be sent?

The tentative settlement provides that Hyundai and Kia will email both a hyperlink directing drivers to official settlement websites, and an electronic version of the settlement’s long form notice and claim form.

What took so long?

Those with any level of familiarity with class action lawsuits know that these things tend to a take a while. As you’ll read below, lawsuits filed over the Hyundai and Kia engine fire defect spent more than two years traversing the legal pipeline. And here we are, on the doorstep of real relief for drivers.

The timeline of the litigation stretches back to May 2017, when a proposed class action was filed by two plaintiffs who alleged Hyundai and Kia knew of a material engine defect in certain cars yet failed to disclose the potentially dangerous issue at the point of sale. Predictably, subsequent lawsuits were filed, in August and December 2017, by other consumers who similarly alleged Hyundai and Kia’s GDI engines were manufactured under negligent processes and oversight, which rendered the Theta II engines “prone to sudden and catastrophic failure.”

What came next was, well, more lawsuits. Additional proposed class actions were filed against Hyundai and Kia in January and April 2018, respectively, before the U.S. District Court for California’s Central District ordered all proposed class actions filed over the engine fire problem be consolidated into multidistrict litigation in August 2018. Following salvos back and forth arguing either for or against the cases’ dismissal (this kind of thing happens all the time, for what it’s worth), the parties involved in the litigation were permitted by the court in October 2018 to explore the opportunity for a settlement.

Enter the United States Government. Roughly a month later, the Senate Commerce Committee planned to meet to discuss Hyundai and Kia engine fires. That hearing was postponed, however, but could potentially be rescheduled for a later date.

With settlement discussions underway, the MDL—In re: Hyundai and Kia Engine Litigation, No. 8:17-cv-00838, to be precise—was expanded to include consumers who filed subsequent cases over similar allegations and who were not currently party to the MDL. Settlement discussions culminated in a December 21, 2018 mediation session, at which a deal was reached in principle. Over the next several months, the parties hashed out the specifics, which included modifications and enhancements to the initial proposed settlement.

The proposed settlement detailed on this page is the result of what the parties say are “more than a year of settlement negotiations and discovery.” In a statement, Hyundai chief legal officer Jerry Flannery expressed the company’s pleasure at resolving the litigation.

“Reflecting our commitment to customer satisfaction, Hyundai is pleased to resolve this class action litigation,” Flannery said. “This settlement acknowledges our sincere willingness to take care of customers impacted by issues with this engine’s performance and recognizes the many actions we are already taking to assist our customers.”

The full motion for preliminary settlement approval can be read below.