GM & Chrysler Bankruptcies: What They Mean For Claimants

For automobile makers, General Motors and Chrysler, bankruptcy was the end of the road for many lawsuits which were filed against them. The people in the worst position are those with personal injury claims, and the current claims estimated to be outstanding against the automobile manufacturers’ amount to approximately $2 billion.

The GM and Chrysler companies which emerged from bankruptcy will be responsible for personal injury claims made with respect to those cars manufactured after the bankruptcy date, but neither will be responsible for claims made with respect to accidents which happened before the bankruptcy date.

One difference between the GM and Chrysler claims, is that the new GM has agreed to be liable for future accidents involving cars manufactured before the bankruptcy date, yet the new Chrysler will not be. In fact, Chrysler’s liability will only extend to replacing defective car parts.

Both GM’s and Chrysler’s cases have already been brought before the bankruptcy court, and in each case the court approved the transfer of the car maker’s best-performing assets to a newly formed entity. Any open plaintiff’s personal injury claims fall into the unsecured creditor category, which means that a personal injury plaintiff’s only recourse will be against the assets remaining with the old GM and Chrysler entities. This means such a plaintiff will only have access to limited assets left in the old shell companies, which will not be nearly enough to cover all the plaintiffs’ claims.

A team of lawyers representing the injured plaintiffs with open claims against the car manufacturers tried to argue “successor liability” in front of the bankruptcy court, arguing that the open claims should be carried over to the newly formed entities, but the court was not persuaded by this argument. The court in its opinion approving the deal, stated that as the government was the only entity willing to come forward and bailout the car makers, its’ only other option would have been liquidation of the car makers. That would have meant even more job losses and less money available for creditors.

Spokesmen for the companies have been quoted as saying that this is just one of the side effects of bankruptcy.   Yet bankruptcy is a process which has cost thousands of jobs and wiped out millions in debt.

Chrysler spokesman Mike Palese said, “It was really important for the future viability of the company that we be free from this type of liability.”

Settled plaintiffs, meaning cases in which damages were awarded by a court before the bankruptcy, are the only ones who are ensured compensation for their injuries.

Of course, a counter argument is that not all of the claims filed will prove to be caused by a defect in a GM or Chrysler vehicle, but for the thousands of claims that are found to have been caused by a defective vehicle or vehicle part, there is little hope of much compensation. This means that for accident victims who are injured as a result of a defective GM or Chrysler automobile could be left without recourse, especially in accidents where the fault was caused by another driver who is uninsured or underinsured.

In the case of Chrysler we can ask, is it constitutional to cut off the rights of those people, who today, have no knowledge that they will become involved in an accident caused by a defective Chrysler automobile that was manufactured before the bankruptcy date?