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GM, Chrysler Personal Injury Victims Left Stranded

Bankruptcies exempt automakers from liability

By Jon Hood
ConsumerAffairs.com

August 6, 2009

• Canadian Auto Dealers File Class Action Against GM, Law Firm • GM Introduces Wi-Fi In Cars • GM Offers Money-Back Guarantee • GM's Newest California Showroom: eBay • GM, Chrysler Personal Injury Victims Left Stranded • 'New GM" Exits Bankruptcy • Judge Greenlights GM Bankruptcy Plan • Obama Set to Sign 'Cash for Clunkers' Bill • States Challenge GM Sale • Supreme Court Okays Sale of Chrysler to Fiat • Supreme Court Blocks Chrysler Sale • GM To Scrap Medium-Duty Trucks • Penske Hopes to Drive Saturn Off GM's Lot • New Chrysler Agrees To Honor Old Lemon Law • Consumer Groups Appeal Chrysler's Lemon Law Reprieve • Dumped GM, Chrysler Dealers Not Going Away Quietly • The Hummer Lives to Fight Another Day • GM Files for Bankruptcy; Chrysler Gets Court Approval • Chrysler Sours on Lemon Law Obligations • UAW, GM Agree On New Contract • Consumer Groups Challenge Chrysler Bankruptcy • GM Notifying 1,100 Dealers They're Being Dumped • GM, Chrysler May Close 3,000 Dealers • GM Moves Up Saturn Execution, Plans to Drop 2,600 Dealers • GM Prepares to Scrap Pontiac • U.S. Carmakers Getting More Federal Aid • GM Cuts More Jobs, Eyes China --- • Consumer Complaints about GM • Consumer Complaints about Chrysler

One of the few pieces of good news to come out of the recent bankruptcy filings from GM and Chrysler is that both companies have promised to honor "Lemon Law" claims made before the companies restructured.

Personal injury suits, however, are a different story altogether. Consumers injured in accidents involving Chrysler and GM cars made before the bankruptcies are likely to be left in the lurch as the companies reorganize.

As they emerge from the rubble of their bankruptcy filings, Chrysler and GM are now essentially brand new companies. Going forward, for legal purposes, there will effectively be a "new" and "old" version of each company. Both "new" companies will remain liable for any injuries suffered in the future, but claims for past injuries, while the "old" companies were still active, are less clear-cut.

Under the arrangement, neither GM nor Chrysler will be held accountable for accidents that occurred before the bankruptcy filings. While this might seem like a trivial footnote in the story of two titans' respective financial crises, its effects are surprisingly widespread: consumers with unresolved claims against the companies number in the hundreds.

Attorneys for accident victims were able to win a small concession from GM; the automaker will remain liable for future accidents involving cars built before the company filed for bankruptcy. Chrysler, however, is off the hook for those accidents as well.

Chrysler spokesman Mike Palese told the Los Angeles Times that it is "really important for the future viability of the company that we would be free from this type of liability." That may be true, but it's likely little consolation for the accident victims drowning in medical bills and struggling to keep from filing bankruptcy themselves.

One member of Congress is trying to hold the automakers accountable. Rep. Andre Carson (D-IA) has introduced a bill that would force GM and Chrysler to cover all future claims for vehicles built before the companies' restructuring. The bill is named after accident victim Jeremy Warriner, who blames an accident that took both his legs on a faulty brake fluid container in his 2005 Jeep Wrangler. Jeep vehicles are manufactured by Chrysler.

Initially, even claims under state Lemon Laws were in doubt after a federal bankruptcy court exempted the "New Chrysler" from liability for defects in vehicles manufactured before the restructuring. Both GM and Chrysler relented after a number of state attorneys general poured on the pressure.

The bankruptcies marked a stunning fall from grace for two of Detroit's "Big Three." Chrysler filed for bankruptcy on April 30; GM followed suit on June 1. Under agreements with the federal government, GM CEO Rick Wagoner was shown the door and Chrysler was forced to merge with Italian automaker Fiat. GM's bankruptcy filing was the fourth largest in U.S. history.

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