As the GM ignition switch drama continues to unfold the automaker has disclosed the number of lawsuits and claims to be filed so far. Although GM states that “we cannot currently estimate the potential liability” there are some who believe that it could reach into billions of dollars worth of damage awards. In 2014 GM spent almost $3 billion on repairing recalled vehicles, so it is not hard to imagine class action personal injury awards that would be many times that amount.
Personal Injury and Wrongful Death Suits Begin to Mount
To date, there have been 104 injury and death suit filed for damages stemming from the defective ignition switch. While GM is defending most of the suits, the most controversial is the automakers assertion that it is not responsible for claims that date back to its pre-bankruptcy business form.
This is the ultimate smoke and mirrors claim, as GM attempts to use the restructuring of its debts available under federal bankruptcy laws to shield itself from liability. The automaker was bailed out of bankruptcy using taxpayer dollars, and now wants to use this event as a way of avoiding responsibility for its corporate actions and defective products. If considered in terms of social policy, the company has levied a cost on the public in two ways: by using federal tax dollars to bail out a failing business and then denying payment of claims to victims of injuries from before the bailout.
If allowed, this could set a dangerous precedent for other businesses to simply “reset” the clock on personal injury claims, and assert that their ‘old’ business no longer exists and they cant be responsible for any defects. This is even more disturbing given the fact that GM actually hid the known defect from consumers and regulators for years, and now attempts to avoid responsibility for their negligence.
Early Settlement Claims of $93 Million
In any event, it will be difficult for GM to successfully fight most of the claims since the defect has been clearly linked to at least 51 deaths. GM does have a program to compensate victims through an ‘early settlement’ process, that has paid our $93 million so far. The automaker has set aside $400 million for this fund, and any victims who take the offer would be barred from further personal injury claims in court. This is another attempt by GM to limit its eventual cost of liability, as the company is facing the barrage of claims from 10 years of concealing the defect from consumers.
Even if the entire fund is paid out, it is only a fraction of the profit the company earned in 2014 of $2.8 billion and $3.8 billion in 2013. The GM ignition switch case is sure to establish new ground in how auto defects are handled and claims paid, and should have a dramatic effect on the future of the auto industry.