With both the Chrysler and General Motors bankruptcies now approved, the companies were able to shed billions of dollars in debt and other liabilities. Included in this debt were the rightful legal claims of consumers who were injured by the automakers’ products. Those individuals hurt by GM and Chrysler vehicles before the companies entered bankruptcy will likely be able to recover only a small fraction of the compensation owed to them — a result that is both unfair and insulting to those who put their trust and money into these companies. To compound the injury, billions of taxpayer dollars were given to GM and Chrysler to make the bankruptcies possible.
Chrysler: Only “New Chrysler” Customers Need Apply
When the “new Chrysler” emerged from bankruptcy on June 10, 2009, the company received a very important gift from the bankruptcy court: no liability for any product liability claims stemming from vehicles manufactured by the automaker pre-bankruptcy.
This means that if a consumer bought a vehicle manufactured by the “old Chrysler” but was not injured until after the company completed the bankruptcy, the person will be unable to recover anything for their injuries from Chrysler.
Under the terms of the automaker’s bankruptcy, the new company only can be held liable for injuries stemming from vehicles manufactured by the new company. Any harm that is caused by vehicles manufactured by the old company, regardless of when the injury occurs, is not “new Chrysler’s” problem. The company was given a free pass to walk away from these claims because the bankruptcy court felt it was “unfair” to make the new company responsible for any injuries — no matter how severe — caused by products built and sold by the old company.
GM: Timing is Everything
After the news came out about the deal Chrysler was able to negotiate in its bankruptcy, the focus quickly turned to General Motors as concern grew that the auto giant would be granted similar limits on liability. Several State Attorneys General, consumer advocacy groups, tort lawyers and victims injured by defective GM vehicles spent three days explaining why allowing the company to limit its liability was unacceptable and unfair to the injured.
Partly due to increased public scrutiny, GM eventually agreed to fewer limits on liability than those granted to Chrysler. According to the terms of its bankruptcy, GM will accept liability for any injuries caused by GM products, so long as the injury occurs after the company emerged from bankruptcy, regardless of when the vehicle was purchased. A victim of a defective GM product now has a claim if he or she were injured on or after July 10, 2009, the closing date for the new GM, and if the claim arose from the motor vehicle’s operation or performance. However, just like the Chrysler bankruptcy, the new GM was relieved of its financial and legal obligation for any products liability claims existing against the company at the time it entered bankruptcy or before July 10. GM claims arising between June 1 and July 10, 2009 are in a middle ground and those claims may be handled by the bankruptcy court and possibly may receive some compensation but only to the extent that there are any assets left in old GM.
An Unjust Result for the Injured
Americans harmed by GM and Chrysler vehicles prior to each company filing for bankruptcy have been abandoned by the car manufacturers. These Americans have been left on their own to cover all of the expenses — including life-long medical treatment or death in some cases — for injuries they didn’t cause.
The results of these bankruptcies are absurd. Even though GM accepted more liability than Chrysler, the fact that an arbitrary date is the deciding factor of whether or not someone can bring a valid products liability claim is ridiculous. Consumers placed their trust in these companies and the products they sold. It is completely unfair and unjust to allow GM and Chrysler to turn their backs on those injured by their defective products.
Better Options than Limited Liability
The decision to give the car companies limited liability makes even less sense when the bankruptcy court had other options available to ensure a better result for consumers, including creating a victim’s compensation fund and requiring the companies to buy liability insurance policies to cover the claims.
Chrysler and GM were not the first companies to file for bankruptcy that also happened to have outstanding products liability claims against them. When asbestos manufacturers went bankrupt, the bankruptcy court created a victim’s compensation fund to help provide some compensation to those who were injured by the companies’ products. A similar fund could have been created for those harmed by defective vehicles, but this option was never seriously considered. Both GM and Chrysler argued that they simply did not have the funds at the time they entered bankruptcy to pay for the outstanding legal claims against them.
Requiring certain automakers to carry liability insurance is another option being debated on Capitol Hill. The Jeremy Warriner Consumer Protection Act of 2009 was introduced into the House of Representatives at the end of June. The Act would require any car manufacturers who are owned by the federal government or who have received loans from the federal government to purchase liability insurance to cover personal injury claims. If the Act is passed, both GM and Chrysler would have to buy liability insurance and injury victims who otherwise would not be able to sue the car companies could seek compensation under the insurance policies.
Attorneys have promised to appeal the bankruptcy court’s decision in the GM case all the way to the US Supreme Court, if necessary. However, it is unknown at this point if any changes will result from this attempt, given that a similar petition made by lawyers on behalf of consumers harmed by Chrysler products was previously denied review. Unfortunately, it seems likely that many who have been injured by defective GM and Chrysler automobiles will be left without assistance from the responsible companies
Reference: Butler, Wooten & Fryhofer, LLP
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