General Motors is offering to pay as much as several million dollars each to the families of people killed and those severely injured in accidents caused by defective ignition switches installed in 2.6 million small cars, under terms of a victims compensation fund announced Monday.
Lawyer Kenneth R. Feinberg, a compensation specialist hired by GM to design and administer the fund, said that for those who were killed or suffered catastrophic injuries such as paralysis, severe burns or amputations because of the defect, the size of the settlement would be based on their age, earning potential, medical expenses and family obligations. For a 10-year-old parapalegic injured in a crash caused by the defect, the fund is offering $7.8 million.
In the case of less severe injuries, Feinberg said, settlements will be determined by the amount of time victims spent in the hospital or receiving medical treatment that began within 48 hours of an accident. Payments for that category of injury will range from $20,000 for those hospitalized for one night to $500,000 for those who were in the hospital for 32 days or more.
“Individuals who have suffered terribly in this whole experience deserve prompt treatment of their claim, and we will do that,” Feinberg said during a news conference at the National Press Club on Monday.
The release of the details of the compensation fund marks the first definitive plan by GM to compensate victims of the ignition switch defect that has consumed the automaker for most of this year. GM has acknowledged that officials in the company knew about troubles with the ignition switch for more than a decade before the company ordered recalls beginning in February. The defect caused cars to inadvertently shut off, stiffening steering and brakes and causing air bags not to deploy.
Victim's families who accept the payments predetermined by Feinberg — which, for example, would result in $2.2 million being paid to the survivors of a 17-year-old student who had no children and was living at home when killed in a crash caused by the defect --could receive payments within 90 days after the fund begins accepting claims Aug. 1. Victims who choose to proceed on a second track that would involve an economic analysis based on a more precise examination of their individual circumstances could expect their claims to be paid in six months, Feinberg said
Feinberg said that he, not GM, would have final say on who gets paid what. He said that GM has placed no cap on potential awards. He added that the automaker’s 2009 bankruptcy, which provides a legal shield against court claims from previous accidents, would not be a factor in his claims process. Also, he said, unlike in a court proceeding, the claims process would not factor in whether drivers contributed to the injuries by, for example, speeding, texting or being intoxicated when the accident occurred.
“One of the critical items in determining the success of a program like this is the speed of payments, as opposed to the American legal system,” Feinberg said in an interview. “This is a non-adversarial process . . .Money going out the door is the No. 1 test for the success of the program.”
Feinberg said during Monday’s news conference that while GM did approve his plan, the company was not happy with all the terms of the compensation fund. GM spokesman Tom Henderson declined to comment directly on Feinberg’s remark, deferring instead to a statement from GM chief executive Mary T. Barra.
“We are taking responsibility for what has happened by treating [victims and their families] with compassion, decency and fairness,” Barra said in the statement.
GM’s handling of the ignition switch recall has ignited a series of investigations, including inquiries by both chambers of Congress and an ongoing criminal probe by federal prosecutors in New York. The company already has paid a $35 million fine — the maximum allowable by law — to federal auto safety regulators, and it is now facing scores of lawsuits, including those from accident victims, shareholders and other GM car owners who say their vehicles have lost value because of the ongoing recall.
The scrutiny brought by the recalls has prompted Barra to revamp the company's internal safety protocols, which has resulted in 54 vehicle recalls this year involving more than 28 million vehicles worldwide this year. These figures include GM’s latest set of recalls for 8.4 million vehicles in North America, announced several hours after Monday’s press conference.
So far this year, the company has set aside $2.5 billion to cover the cost of the repairs.
GM has linked the specific ignition switch problem to 13 deaths and 54 accidents, but the compensation fund is expected to make payments to many more people involved in a broader scope of incidents. Feinberg, however, refused to speculate about the number of people who would end up being compensated by the fund.
“It remains to be seen how many deaths we’ll compensate,” he said. “It remains to be seen how many physical injuries we will compensate.”
Those eligible for claims include the survivors of those killed or those injured in an accident caused by the defective switch. People riding in GM cars in which the defective switch played a role in the accident are eligible, as are those victims who were riding in other vehicles involved in those crashes. In addition, any pedestrians hurt in those accidents would be eligible for compensation from the fund. Anyone who accepts payments from the fund would have to sign a legal document releasing GM from any further liability.
The plan limits eligible victims to those who had accidents while driving Chevrolet Cobalts, Saturn Ions and other small GM cars involved in 2.6 million ignition switch-related recalls that started in February. Subsequent recalls covering ignition switches in other GM cars are not eligible, Feinberg said. Also, people driving GM cars in which air bags were deployed during accidents also would not be eligible to be compensated under the program.
Beyond that, the faulty ignition switch must prove to be the cause of an accident for the fund to pay to compensate any resulting injuries or deaths. One of the thorniest problems confronting Feinberg’s team is that many of the accidents occurred years ago, leaving his examiners working with incomplete evidence to determine what caused them.
In cases where “black box” information is available showing how the last few seconds before an accident unfolded — including a car’s speed, if its brakes or accelerator was engaged, and whether seat belts were fastened — the decisions will prove easier. But, often, that information is lost.
Camille S. Biros, Feinberg’s longtime business manager who has been preparing to vet claims with a team of examiners, estimated that such data is available about half the time. Other times, she said, the team will be forced to rely on police accident reports, insurance company documents, post-accident photos and even warranty claims for a car that may have had stalling problems to help guide their decisions.
“This is going to be tough,” she said. “People would be surprised by how significant the accident has to be before the front air bag deploys regularly. It is just amazing how much damage has to be done.”
Feinberg acknowledged in Monday’s news conference that these difficulties regarding evidence could affect how quickly compensation can be awarded. “Speed is going to be challenged here while people collect information, and we’ll work with them to try and do that as fast as we can,” he said.
Feinberg refused to speculate about what percentage of accident victims he expects to take part in the compensation program in lieu of seeking damages from GM in court. He noted that well over 90 percent of the victims in both the 9/11 terrorist attacks and the BP oil spill in the Gulf of Mexico chose to accept compensation from funds he designed rather than go to court.
It also remains to be seen how families who suffered incalculable loss because of the ignition switch defect will respond to GM’s compensation fund.
At Monday’s news conference, some family members of people who died in accidents in vehicles linked to the faulty ignition switches offered a first assessment of Feinberg’s plan.
Laura Christian — the birth mother of Amber Marie Rose, who died in July 2005 at age 16 while driving such a vehicle — said she was pleased that the fund would not compel her to stay silent. She expressed concern, however, that claims in cases in which air bags did deploy would be ineligible.
“Quite frankly, money is not the focus. And it was, quite frankly, really difficult to hear Amber being reduced to a dollar amount,” said Christian, who has emerged as a vocal advocate for vehicular accident victims. Rose’s adopted parents have reached a settlement agreement with GM, which does not prevent them from participating in GM’s compensation fund.
In another case, not mentioned at Monday’s news conference, Esther Matthews, 73, and her 13-year-old granddaughter Grace Eliot were killed in April 2009, when the Chevrolet Cobalt they were riding in was hit head on by a drunk driver in western Pennsylvania. The car’s air bags never deployed. The only survivor of the accident was 11-month-old Trenton Buzard, who is now 6 and must use a wheelchair.
“All I want is for my son to be taken care of,” said Trenton’s father, Robert Buzard. “GM is the cause of my son being paralyzed the rest of his life.”
A doctor hired by Buzard’s lawyer, Robert C. Hilliard, has determined that a lifetime of accommodations and treatments — widened doorways, ramps, lifts, vans, medicine — for Trenton will cost nearly $32 million.
But even if Buzard eventually collects that money, he said that would still feel inadequate — a point that Feinberg said he understands well.
“Money is a pretty poor substitute for loss,” Feinberg said. “The best you can do under the circumstances is rough justice.”