SAFETY CRISIS
GM facing next hurdle: Injury cases
Claims over defect could cost billions
6/23/2014DETROIT — General Motors Co. is approaching the next challenge in a safety crisis that has led the automaker to recall 2.6 million vehicles after years of inaction: how to deal with hundreds of injury claims.
Some experts predict the cost to the company could run into the billions of dollars, exceeding the payouts related to deaths linked to the defect.
Kenneth Feinberg, the victim-compensation expert hired by the company, is nearing the final stages of an elaborate process to determine who is eligible for payments and for how much.
His plan, which is expected to be made public in the next two weeks, is considered critical to the company’s ability to move beyond an issue that has prompted numerous investigations, congressional hearings, a $35 million federal penalty, and withering public criticism.
Getting the payment plan right is crucial.
Too generous and it could slow the automaker’s comeback from bankruptcy; not generous enough and victims will seek justice through lengthy and costly court battles, further dragging out the company’s turmoil.
Though much of the public outcry over the defective switch has focused on the fact that people died, it is catastrophic injuries that have historically resulted in the biggest payments, lawyers note.
“Those very serious life-altering injuries generally bring more money than wrongful death,” said Douglas Laycock, a law professor at the University of Virginia who specializes in damages.
Each case, he said, “can be many, many millions.”
GM has publicly linked 54 accidents and 13 deaths to the ignition defect, but its injury tally remains a mystery.
The company has declined to provide regulators with injury figures, and Mary Barra, the chief executive, would not give a figure when asked at Wednesday’s congressional hearing.
A GM spokesman, Greg Martin, said the company would not comment on specific accidents.
Financial settlements for accident survivors usually are calculated by looking at a mix of medical expenses both for immediate treatment and a lifetime of continuing care, the wages that the victims would have made over their lifetime had they not been injured, and the harder-to-measure factor of pain and suffering.
GM has an interest in seeing as many injury cases as possible handled not by the courts but through the compensation fund, which will begin reviewing claims Aug. 1.
To that end, Ms. Barra has indicated the fund would not employ a distinction that the company has used to battle scores of other lawsuits — a provision in the company’s July 10, 2009, restructuring agreement that essentially created a “new GM” that was insulated from liability claims stemming from events before that date.
GM attorneys signaled they would use that protection aggressively to battle those who shun the fund and proceed with litigation.
In anticipation of the announcement by Mr. Feinberg, the compensation expert hired by GM, lawyers for hundreds of clients are preparing their claims.
Mr. Feinberg has a reputation of setting stark formulas based on the pot of money available overall.
With the $80 million fund for victims of the Boston Marathon bombings last year, for example, he concluded that people who lost both legs were entitled to $2.195 million, the same value as a death. Those with one leg amputated received $1.195 million. A hospital stay of more than a month brought $950,000, regardless of the patient’s health insurance coverage; stays of one or two nights brought $125,000.
The Boston fund had to rely on public donations.
GM’s pockets are considerably deeper.
His past work suggests that Mr. Feinberg is likely to find anyone who has been treated in the hospital for accidents they can prove involved a defective car eligible for compensation.
As a first threshold, according to those familiar with Mr. Feinberg’s deliberations, anyone whose air bags deployed will not be eligible.
But the burden of proof is likely to be less onerous than what is required in a court of law.