Bankruptcy shields carmaker from liability in crashes prior to July 2009
By Tom Krisher and Amy Forliti
Associated Press
DETROIT (AP) - As General Motors begins to compensate the victims of crashes tied to faulty ignition switches, this week more than a dozen families were given a choice: accept a settlement, presumably in the millions of dollars, or fight GM in a potentially lengthy court battle.
Among them were the families of two Wisconsin teenagers killed in an Oct. 24, 2006, crash of a Chevrolet Cobalt. They recently dropped their lawsuit against GM in favor of seeking a settlement.
The crash that killed Natasha Weigel, who was 18, and Amy Rademaker, who was 15, was among the first blamed on the faulty switches. Despite evidence from that crash and others that the switches could cause the engine to stall and cut power to safety features such as the air bags, GM and federal regulators failed to make that connection for years.
GM finally recalled 2.6 million cars equipped with the switches early this year.
The girls' deaths are among 21 that compensation expert Kenneth Feinberg has deemed eligible for payments from GM. On Wednesday, his spokeswoman said he had made cash compensation offers to 15 claimants.
GM hired Feinberg to settle with victims on its behalf, and he began accepting wrongful death and injury claims on Aug. 1. He has received 143 death claims, with the rest still being evaluated.
GM has admitted that people within the company knew for years that the switches were defective yet failed to act to fix the problem. Even so, some victims' families would have a difficult time winning against the automaker in court because of the terms of GM's 2009 bankruptcy.
A bankruptcy judge ruled that GM is shielded from liability in crashes that occurred prior to July 2009. It's unclear how many small-car crash injuries or fatalities occurred prior to then. GM engineers knew of problems with the Cobalt switches as early as 2004. The first fatal crash the company learned of happened in 2005.
Amy Rademaker's mother, Margie Beskau, of Woodville, Wisconsin, saw little chance their lawsuit would succeed. "GM is hiding behind their bankruptcy, so it would make it very difficult for us to sue them, because Amy died before they filed that bankruptcy," she said.
Feinberg informed Robert Hilliard, the attorney for the families, of his offers to them on Wednesday. Hilliard described them as "fairly fair," without disclosing the amounts. Earlier he said that under Feinberg's compensation formula, he expected each family to get at least $3 million. The families can refile the lawsuit if they aren't satisfied with the offers.
The car's driver, Megan Phillips, also a plaintiff in the lawsuit, survived the crash but suffered permanent brain damage.
GM has determined that the switches can unexpectedly slip into the "accessory" position, shutting off the engine and disabling key features such as power-assisted steering, and the car's air bags. The data recorder in Phillips 2005 Cobalt showed that the ignition switch was in "accessory" at the time of the crash.
A Wisconsin state trooper investigating the crash made the connection between the position of the switch and the air bags not deploying. Investigations into the handling of the recall - one commissioned by GM, and one from a Congressional committee - found that both the company and regulators were aware of the trooper's finding but largely ignored it for years.
Families of victims of crashes that happened after July 2009 may be willing to fight in court because GM can be found liable for death or injury. For example, the family of Brooke Melton, a Georgia nurse who died in a 2010 Cobalt crash, settled last year for $5 million. But, citing what they say is new evidence that GM concealed the switch problem, the Meltons want the settlement overturned so they can seek a larger jury verdict. They also want company executives to be questioned under oath.
Carl Tobias, a law professor at the University of Richmond in Virginia, said GM's bankruptcy shield makes going to Feinberg for a pre-bankruptcy crash claim a better option than a potentially costly and lengthy court case.
For GM, Tobias said, it's advantageous to encourage settlements with Feinberg - even for millions of dollars - to avoid bad publicity, legal costs and the risk of huge verdicts. The automaker has set aside $400 million in its compensation fund and may pay out up to $600 million.
Although Beskau wants people within GM to be prosecuted, she had kind words for Feinberg.
When the Rademaker and Weigel families told Feinberg their stories in August, "he wanted to get to know us so he could actually get a sense of who our daughters were," she said. "To him, they are not just numbers, they are people."
Hilliard said Phillips will present her case at a later date.
Feinberg previously handled payments to victims of the 9/11 terrorist attacks and the BP oil spill. The families, Hilliard said, told Feinberg of a circumstance that might warrant compensation above his standard formula.
The night of the crash, the identities of the heavily bruised and swollen girls were somehow mixed up. So Weigel's family was at Rademaker's side when she died while Rademaker's family waited for Weigel to come out of surgery. The mix-up was sorted out quickly, but not until it caused additional heartache for the families.
Published: Fri, Sep 26, 2014
