Apple attempted to silence a father and daughter with a gagging order after the child's iPod music player exploded and the family sought a refund from the company, The Times reported on Monday.
According to The Times, an 11-year-old girl's iPod exploded last month. Her father contacted Apple executives after twists and turns to learn that Apple denied liability but offered a refund on the condition that were willing to sign a settlement form.
The case echoes previous circumstances in which Apple attempted to hush up incidents when its devices overheated.
The proposed agreement, however, would leave them open to legal action if they ever disclosed the terms of the settlement.
Ken Stanborough, 47, from Liverpool, dropped his daughter Ellie's iPod Touch last month.
It made a hissing noise, The Times cited Stanborough as saying. I could feel it getting hotter in my hand, and I thought I could see vapour.
Stanborough said he threw the device out of his back door, where within 30 seconds there was a pop, a big puff of smoke and it went 10ft in the air.
Stanborough contacted Apple and Argos, where he had bought the device for £162. After being passed around several departments, he spoke to an Apple executive on the telephone. As a result of the conversation, Apple sent a letter to Mr Stanborough denying liability but offering a refund.
The letter also stated that, in accepting the money, Stanborough was to agree that you will keep the terms and existence of this settlement agreement completely confidential, The Times said, and that any breach of confidentiality may result in Apple seeking injunctive relief, damages and legal costs against the defaulting persons or parties.
Stanborough, who is self-employed and works in electronic security, thought it was a very disturbing letter and refused to sign it, according to The Times.
They're putting a life sentence on myself, my daughter and Ellie's mum, not to say anything to anyone, Stanborough said. If we inadvertently did say anything, no matter what, they would take litigation against us. I thought that was absolutely appalling.
We didn't ask for compensation, we just asked for our money back, he added.
There were the same cases in other places that iPod digital music players had started to smoke, burst into flames and even burned their owners.
Last year the Japanese Government warned that iPod Nanos presented a potential fire risk, saying there had been 14 cases in the country where the players had caught alight, with two people suffering minor burns.
In March, a mother in Ohio began court proceedings against Apple, after her son's iPod Touch allegedly exploded in his pocket, burning his leg.
An American reporter obtained 800 pages of documentation on the cases from the Consumer Product Safety Commission (CPSC) following a Freedom of Information Act request in that country. However, she was unable to get hold of the documents for months after Apple's lawyers filed exemption after exemption.
In those cases, CPSC investigators suggested that the iPods' lithium ion batteries could be the source of the problem.
In 2006 Apple and Dell recalled millions of lithium ion batteries because of overheating problems in laptop computers causing fires - some of the biggest consumer electronics recalls in history.
The Times cited Apple spokesman as saying that as the company had not looked at the Stanboroughs' damaged iPod, it could not comment. Argos also refused to comment.
The Trading Standards Institute said that it could not comment on whether such letters were standard across the industry, but that it could understand that Apple would want to protect its reputation by trying to reach a confidential settlement.
As of September last year, 173,000,000 iPods have been sold worldwide.