Letting Customers Down Is Just The Beginning
Since the beginning of 2014, GM has recalled over 28 million vehicles through more than 50 recall campaigns, representing more cars recalled during the first six months of this year than all GM vehicles sold between 2007 and 2013.
Mary Barra, who took over as GM’s CEO just as the crisis was breaking, has blamed the extensive and long-delayed recalls on a pervasive pattern of “incompetence and neglect”, compounded by a work culture in which people operated in silos, impeding the free flow of communication.
“Let customers down” is a gross understatement given that defective ignition switches have been linked to at least 16 deaths and 8 injuries now…and that may only be the tip of the iceberg. On Friday just as GM was announcing its latest recall, Orange County (CA) District Attorney Tony Rackauckas announced that he was filing a suit against GM alleging that the company had concealed dozens of dangerous defects resulting in 2,004 deaths and injuries while consistently placing sales ahead of safety. “This case is about having safe cars on the road because cars carry our most precious cargo…Each driver…should be able to expect that the other cars on the road are safe and will not cause a harmful, preventable accident,” Rackauckas said.
Special Victims Compensation Fund
On July 1, 2014, Kenneth Feinberg, the attorney hired by GM to evaluate how to handle liability issues arising from crashes involving the faulty ignition switch, announced the establishment of a special fund to compensate anyone harmed in a related crash. Feinberg, hired by GM earlier this year, is an expert on the mathematics and distribution of such funds, having overseen the payouts of the U.S. government’s September 11th Victim Compensation Fund as well as trusts established for victims of last year’s Boston Marathon bombing and the 2010 BP oil spill in the Gulf of Mexico. In announcing the fund, he remarked, “Money is a pretty poor substitute for loss. You could give 20, 30, 50 million dollars, it’s a pretty poor substitute. We can’t bring people back. We can’t restore limbs. It’s all we can do.” This comment exemplifies GM’s unwillingness to accept responsibility and continued attempt to minimize their loss.
The full cost of the compensation program remains unknown at this time because it will depend on how many claims are paid out. News of the compensation fund undoubtedly is worrisome for GM shareholders after the company chalked up $1.3 billion in recall-related charges during the first quarter. The cost of charges related to this newest recall is estimated to add another $1.2 billion on top of the first quarter’s bill.
Conditions of Eligibility and Terms of Settlement Amounts
The fund will compensate victims in amounts ranging from $20,000 to several million dollars depending on the extent of injury incurred or whether there was loss of life involved. Feinberg provided some examples of what GM would be willing to pay victims:
- a 17-year-old student who died — $2.2 million
- a 25-year-old with two kids and a spouse, earning around $46,000 a year — $4 million
- a 25-year-old with two kids and a spouse, and a $75,000 salary — $5.1 million
- a 10-year-old paraplegic — $7.8 million
- a 40-year-old paraplegic with a spouse and no children — $6.6 million
Feinberg emphasized that GM wants to resolve claims as quickly as possible so that it can get back to the business of rebuilding its company. As such, most claims would be paid within 90 days unless a claimant believes there are special circumstances in which case a claim would be paid in approximately 120 days.
Those eligible for payouts would include:
- Drivers who died or were injured in one of the millions of recalled vehicles affected by a defective ignition switch and airbag non-deployment. The company will ignore if the driver was partially to blame for the crash, even if they were drunk, speeding or texting at the time. Feinberg said, “This program is about General Motors and ignition switches,” said Feinberg. “We have no interest in investigating any contributory negligence of the driver.”
- Passengers, pedestrians and those riding in other cars that were affected by the GM vehicles.
- Those who have already accepted an out-of-court settlement with GM before it recalled vehicles can also apply for a bigger payout.
Feinberg has said that relatives of those who died would be compensated the same as those with “catastrophic” injuries, defined as a quadriplegic or paraplegic injury, permanent brain damage requiring full-time care, double amputation, or pervasive burns over most of one’s body. Those who suffered lesser injuries — but required some medical attention within 48 hours of the crash — would receive at least $20,000 but no more than $500,000 for pain and suffering.
Those who accept compensation from GM will be required to waive their right to sue the company. Anybody who opts out of the fund can still go to court and sue in hopes of winning of a bigger payout. “This program is about compensating victims. It is not to punish GM,” said Feinberg. “If they want to use litigation to go after General Motors, they should not submit a claim.”
Investigations Will Prove To Be A Challange
Feinberg admits that the biggest challenge the company faces in relation to payouts is determining exactly who is eligible. Many of the accidents occurred years ago, and a good number of the cars are gone, leaving only circumstantial evidence to determine the cause. Camille Biros, the fund’s deputy administrator, has said that investigations will look into the vehicle’s electronic data recorder, or “black box”, as well as police, hospital, and witness reports, vehicle maintenance records, and legal depositions where they exist.
Feinberg has made it clear that the fund applies ONLY to those cases where the airbag did not deploy. “If the airbag deployed, you’re ineligible because that proves that the vehicle still had power. In that case, it’s a horrible accident, but it’s not the ignition switch [to blame].”
Despite Feinberg’s assertion that the compensation fund will apply only to those GM vehicles recalled due to crashes involving the faulty ignition switch, it’s a good bet that the compensation fund eventually will have to be expanded to accommodate personal injury claims related to numerous other GM vehicle defects resulting in one of the company’s numerous recalls since the beginning of this year.
GM Vehicles Under Recall and Legal Recall Assistance
If you or a loved one has been injured or killed as a result of a defective GM vehicle, call us today for a FREE legal consultation. GM is clearly attempting to intimidate victims into a fast settlement with the hopes that these product liability claims can be swept under the carpet for less reimbursement than what is necessary.