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From Products Liability Law Daily, January 8, 2015

Reporting failures cost Honda $70 million in fines

By Susan Lasser, J.D.

The National Highway Traffic Safety Administration (NHTSA) announced today that Honda will pay $70 million for failing to report deaths, injuries, and certain warranty claims as required by the Transportation Recall Enhancement, Accountability and Documentation (TREAD) Act. The total penalty, made up of two $35 million civil penalties, is based on Honda’s failure to submit early warning reports (EWR reports) identifying potential or actual safety issues as required under the law. The first civil penalty is a result of Honda’s failure to report 1,729 death and injury claims to NHTSA between 2003 and 2014. The second civil penalty stems from the manufacturer’s failure to report certain warranty claims and claims under customer satisfaction campaigns throughout the same time period. The automaker also agreed to increased government oversight and third-party audits to ensure proper current and future reporting. The consent order, based on the agreement between Honda and NHTSA, was finalized just before the new year.

According to NHTSA’s press release on the Honda penalties, federal law requires that manufacturers submit to the agency comprehensive quarterly EWR reports of potential safety concerns. The reports include production information; incidents involving a death or injury; aggregate data on property damage claims, consumer complaints, warranty claims, and field reports; and, copies of field reports involving specified vehicle components, a fire, or a rollover. NHTSA then uses the data to investigate whether safety defects or defect trends exist and warrant further action, including possible recalls.

third-party audit of Honda’s TREAD Act reporting was completed in late November 2014, and found that the automaker did not report to NHTSA the 1,729 claims or notices of injuries or deaths, including eight related to Takada airbags. The report concluded that the reporting failures, which occurred between July 1, 2003, and June 30, 2014, were inadvertent data entry and computer programming errors. The eight unreported claims related to Takata airbags were, according to Honda, a “separate and distinct matter from NHTSA’s current Takata airbag inflator rupture investigation” (see Products Liability Law Daily’s November 25, 2014 analysis). On November 3, NHTSA issued a Special Order to Honda requesting information relating to Honda’s EWRs. Honda provided a response to the Special Order on November 24.

Recently confirmed as NHTSA Administrator, Dr. Mark Rosekind, commenting on the fine, said, “Today’s announcement sends a very clear message to the entire industry that manufacturers have responsibility for the complete and timely reporting of this critical safety information.” He further said that the actions required of Honda will “raise the bar” on the effectiveness of the manufacturer’s EWR reporting program, and that the agency’s “ongoing oversight will ensure compliance and determine if there is cause for additional actions.”

In addition to the civil penalties, Honda must comply with NHTSA oversight requirements under the consent order, which requires the company to develop written procedures for compliance with EWR requirements, train appropriate personnel on at least an annual basis, and complete two third-party audits of its compliance with its reporting obligations. Further, Honda must provide NHTSA’s Early Warning Division with information regarding the 1,729 unreported death and injury incidents and the warranty claims, so that the agency can analyze the incidents for potential safety concerns and take any safety-related actions if necessary.

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