GM ignition switch fund offers $594.5M to victims

Melissa Burden
The Detroit News

More than 90 percent of those who received offers from the General Motors Co. ignition switch compensation fund have opted to accept them, including all of the 124 families whose loved ones’ death claims were tied to the defective switches, according to a final report released early Thursday.

Of the 399 claims that were approved out of 4,343 received, a total of $594.5 million in compensation was offered to claimants, according to the report issued by Washington attorney Kenneth Feinberg. Feinberg was tapped by GM last year to serve as an independent administrator for a compensation fund the automaker set up for those injured by the ignition switch issue or for families whose loved ones died as a result of crashes with the defect.

GM ultimately also paid for accidents that occurred before its 2009 bankruptcy. It was not required to offer payments for those accidents because of a legal shield that protects the “new” GM from claims that originated before its 2009 bankruptcy and restructuring.

The fund said it received 856 claims for accidents that happened before July 10, 2009 or pre-bankruptcy; 128 of those claims were accepted. Claims were submitted for 3,105 incidents that occurred after GM became a new company in July 2009 and the fund accepted 271 of those. Another 382 had no data.

The report said 37 people who received offers rejected them — mostly for more minor injuries — and one claim is pending acceptance. That offer expires Jan. 6, 2016.

Camille Biros, the fund’s deputy administrator, said the $594.5 million is the amount offered to all approved claims including the pending offer. But because some rejected claims, the actual payout by GM will be less, she said.

The Detroit automaker through Oct. 16 said it had paid $453 million to about 300 claimants, victims and families who lost loved ones due to the defect. GM had estimated the cost of the compensation program would total $625 million.

Feinberg and his firm said the success of the program was tied to several factors such as GM sending out more than 5 million notices to current and former owners of the eligible vehicles, and the administrators having discretion on eligibility and how much to award each claimant. GM placed no cap on the program and agreed to pay whatever the fund found appropriate in every case.

The program also sought to have a quick response that was consistent and also cost effective. The fund did not require engineering analysis to determine whether the ignition switch defect “manifested itself in a particular accident or whether a particular death or injury was ‘caused’ by an ignition-switch defect. The facility also did not consider legal defenses that might otherwise be available to GM in litigation, such as contributory negligence, statutes of limitations, or the bankruptcy shield.”

In early 2014, GM recalled 2.59 million older Chevrolet Cobalts, Saturn Ions and other small cars for defective ignition switches that could move from the “run” to the “off” or “accessory” position while driving, disabling air bags and power steering. The carmaker knew of the problem for more than a decade before recalling the vehicles.

The automaker said last year that the defect was linked to 13 deaths.

Feinberg ultimately linked the ignition switch defect to 124 deaths and approved 18 claims for severe injuries such as those who are quadriplegic, had pervasive burns or permanent brain damage and 257 other claims for those whose injuries required hospitalization or treatment following a crash. The fund deemed 3,944 claims ineligible.

Just 9.2 percent of all claims received were approved; some were rejected because they were for accidents that involved cars that weren’t part of the recall and others were not approved because there was not evidence air bags failed to deploy. Claims were accepted between Aug. 1, 2014 and Jan. 31 this year, after the automaker extended accepting claims by a month.

“We faced the ignition switch issue with integrity, dignity and a clear determination to do the right thing both in the short and long term,” GM spokesman James Cain said in a statement. “The settlement facility is just one example. It was fair, compassionate, generous and non-adversarial.”

GM is paying at least $1 million related to each death claim and gave Feinberg and his staff the final decision whether to approve or reject claims. The company did not cap the amount Feinberg could award but he was not allowed to assess “punitive damages.”

In exchange for taking the award, the people have agreed not to sue the automaker.

The fund also tracked stats around contributory negligence. It said of the 399 claims it approved, 244 or 61 percent involved accidents in which it had “clear evidence” of one or more examples of contributory negligence such as not wearing a seat belt, excessive speeding, driving under the influence of alcohol or drugs, falling asleep or were driving recklessly. For example, 55 death claims were approved for people not wearing seat belts.

“In such cases, claimants would confront serious legal challenges if litigating in the courtroom,” the report said. “By ignoring any evidence of such contributory negligence, the program proved to be a preferred avenue for individuals seeking compensation.”

GM has paid $900 million to the Justice Department in a settlement reached in September following an investigation over the delayed recall and in spring 2014, GM admitted it broke the law and paid a $35 million civil penalty to the National Highway Traffic Safety Administration.

It also entered into an up to three-year consent agreement with NHTSA and has made significant safety changes at the company. GM also has a new federal monitor as part of its deferred prosecution settlement with the Justice Department.

The company still faces likely additional fines and settlements due to the ignition switch defect. It faces investigations by the U.S. Securities and Exchange Commission, Federal Trade Commission, 50 state attorneys general and Transport Canada. GM also in a regulatory filing in October said it was aware of more than 100 economic loss cases in the U.S. and more than 200 cases alleging injury or deaths tied to recalls, with more cases pending in Canada.

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