Last week, the US Consumer Product Safety Commission announced that Polaris Industries Inc. of Medina, Minnesota had agreed to pay a $27.25 million civil penalty to settle charges that Polaris failed to report to CPSC that models of RZR and Ranger recreational off-road vehicles (ROVs) contained defects that could create a substantial product hazard or that the ROVs created an unreasonable risk of serious injury or death. The $27.25 million civil penalty represents the largest dollar amount CPSC has ever imposed on one company, and it exceeds CPSC’s statutory maximum for civil penalties by $12 million.
The civil penalty was assessed in connection with two separate recall matters involving the RZR and Ranger vehicles. According to CPSC, Polaris manufactured and distributed approximately 133,000 RZR vehicles consisting of its RZR 900 (model year 2013 to 2016) and RZR 1000 ROVs (model year 2014 to 2016). Based on its investigation, CPSC found that Polaris had received information that the RZRs could catch fire while being driven by consumers, which posed both fire and burn hazards to drivers and passengers. Despite Polaris having received information that reasonably supported the conclusion that the RZRs contained a defect that could create a substantial product hazard or create an unreasonable risk of serious injury of death, Polaris failed to notify CPSC of the defect or risk posed by the ROVs in a timely manner, as required under the Consumer Product Safety Act. By the time Polaris did report the problem to CPSC, it had received reports of 150 fires, including one that resulted in the death of a 15-year old passenger, 11 reports of burn injuries, and a fire that consumed ten acres of land.
With respect to the Ranger vehicles, Polaris manufactured and distributed approximately 93,500 units of the Ranger XP 900, Ranger XP900 EPS, and Ranger CREW 900 vehicles (all of which were model year 2014 to 2015). CPSC concluded that the heat shield on Ranger ROVs could fall off the vehicle, posing fire and burn hazards, and that such a defect that could create a substantial product hazard or create an unreasonable risk of serious injury or death. Indeed, between December 2013 and July 2016, Polaris received 36 reports of fires associated with its model year 2014 Rangers and made two design changes to the Ranger models to prevent the heat shields from becoming loose and falling off. Polaris ultimately reported the fires on model year 2014 Rangers to CPSC in July 2016, and then announced a recall of 42,500 model year 2014 ROVs in September 2016.
After the 2016 recall, however, Polaris received reports of heat shields coming loose or falling off of the model year 2015 Ranger, including reports of fires. Again, Polaris failed to immediately notify CPSC of the defect/risk posed by the model year 2015 ROVs, as required under the Act. By the time Polaris did report to CPSC, it had received ten reports of heat shield incidents, including five reports of fires. As a result, CPSC and Polaris announced a recall of 51,000 2015 Ranger ROVs in April 2017.
Interestingly, in addition to settling the alleged violations relating to the RZRs and Rangers described above, CPSC stated that it agreed to forego seeking civil penalties from Polaris with respect to any potential allegations that the company failed to timely report a hazard or defect in a model year vehicle that Polaris had reported to staff by June 29, 2017. Also, as part of the settlement, Polaris further agreed to maintain an enhanced compliance program to ensure compliance with the Consumer Product Safety Act and to implement a related system of internal controls and procedures designed to ensure timely reporting in the future. The penalty agreement was accepted provisionally by the CPSC Commissioners by a 4 to 0 vote, and CPSC is accepting public comments on the proposed settlement until April 19, 2018.
Arent Fox's Consumer Products group will continue to follow developments at CPSC related to consumer product enforcement activities. If you have any questions, please contact Georgia Ravitz, Scott Cohn, James Ravitz, or the Arent Fox professional who usually handles your matters.