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Chrysler Consumers Hurt Twice - Now What?

Posted by Jane Akre
Monday, June 15, 2009 11:00 AM EST
Category: On The Road, Major Medical, Protecting Your Family
Tags: New Chrysler, Bankruptcy, Product Liability, Defective Automobiles, Rollovers, NHTSA

Amanda Dinnigan is one of several people whose lawsuit will be wiped out if the New Chrysler is allowed to eliminate liability as part of bankruptcy.
Amanda Dinnigan, age 10

The New Chrysler   

LEARN MORE

 

IMAGE SOURCE: Amanda Dinnigan/ Amanda’s Page Web site

 

Under the Chrysler bankruptcy announced last week, the automaker is relieved of all ongoing accident claims due to defects from a roof, seat belts, or any component that breaks and causes injury or death.

Estimates are there are 99 million GM and Chrysler vehicles on the road, and in 2007 alone, Chrysler reportedly sold approximately 1.5 million vehicles to Americans. 

That same year, NHTSA reports that 3,703 occupants of Chrysler vehicles were killed in accidents while nearly 6,000 were killed as a result of crashes involving Chrysler cars.  Injuries have resulted from exploding gas tanks, defective lift gate latches that pop open and eject passengers, and rollovers.

Consumers injured once, now face an additional financial injury that could last a lifetime and it is the public who will ultimately pick up the bill.   

What Happened

In April, Chrysler and 24 subsidiaries filed for bankruptcy protection under Chapter 11 of the Bankruptcy code.  Initially it was assumed New Chrysler would assume Chrysler’s tort liabilities, but the Chrysler motion asked the sale be “free and clear of all liens, claims (as such term is defined by 101(5) of the Bankruptcy Code) encumbrances, rights, remedies, restrictions, interests, liabilities, and contractual commitments of any kind of nature whatsoever, whether arising before or after the Petition date….including all rights or claims based on any successor or transferee liability.”

The U.S. Treasury Department says, in a statement, the decision to shield the automaker was part of restricting and the Obama administration just went along.  

“Treasury was not involved in this decision, which the company made consistent with conventional bankruptcy practice. While unfortunate, the outcome would have been far worse had the government not intervened in the restructuring and Chrysler had liquidated.”

Clarence Ditlow of the Center for Auto Safety tells IB News, “It’s disingenuous at best.  They’re the ones that made the deal go. They gave $2 billion and without that, the bankruptcy proceeding would not go through. They told Fiat if you buy it free and clear, they will put $6 billion into it.  It was done via wire transfer.   They could have put a bill into a New Chrysler to fund claims against it for accidents in the future.”

General Motors reportedly has $1.25 billion in pending product liability claims representing thousands of consumers killed or injured.    

Ten-year-old Amanda Dinnigan is among them. 

Two years ago she was a passenger in a General Motors Envoy when her mother lost control and hit a tree. Amanda was left a quadriplegic after her spine was severed by the seat belt.  Her medical costs run about $500,000 a year, according to her father, whose union coverage of more than a million dollars will run out soon.

The family will have to apply to Medicaid for coverage if the product liability lawsuit is never concluded.

With the Obama administration’s push to complete the sale of GM in 60 to 90 days based on the June 1 bankruptcy filing – what options do injured consumers have before this is a done deal?

Victims’ Fund

Advocates for consumers say there may still be some viable avenues for consumers in the creation of a victims’ fund.

Created by Congress or the Obama administration, the fund could work in much the same way as the compensation fund created in the 1970s for women injured by the contraceptive Dalkon Shield and again in the 1980s to compensate those injured by asbestos.

An insurance policy to cover product liability claims could be purchased with the premium paid by a set-aside amount from the automaker or Congress.

Joanne Doroshow of the Center for Justice & Democracy tells IB News, “Nobody is giving up yet. Once members of Congress start realizing how many will die in their states each year, they’ll have no recourse. They’re going to have to be concerned about it. It’s a constituent issue and a very serious one,” she says.

Doroshow points out that the early reporting system on accidents that the National Highway Traffic Safety Administration (NHTSA) relies on comes from product liability claims.

“So if you wipe them out, the government will lose important safety information and there will be no incentive to fix these cars,” she says.   

Collateral Damage

Clarence Ditlow of the Center for Auto Safety tells IB News that without a fund, auto accident victims become “collateral damage” to the bankruptcy bailout.

“The issue really this – we tried to tell the auto task force you may create a lean corporation and financially viable but there is a big issue whether you can sell cars,” he says.    

Wait and See

“They’ll fix your brakes but if your child is brain dead, you’re out of luck,” says attorney Robert Langdon, of Langdon and Emison, which represents clients injured by defective vehicles around the country.

He is advising clients to wait and see if Congress or the governors react. Langdon predicts that lawsuits will have to be directed instead at component manufacturers or the car dealers.

“That’s not going to be adequate. It’s a mess. This is the biggest crisis of corporate responsibility I’ve ever seen. This could be Karl Rove’s dream,” he says to IB News.   

Instead, Langdon says consumers and the states will end up picking up the tab for injured consumers through Medicare and Medicaid, some for the rest of their lives.

“I hate to see the government get in the insurance business, but they need to understand we own GM – 60 percent of it. We need to figure out how we’re going to do it. Most responsible corporations have insurance,” Langdon says, referring to the federal government's ownership share of the new company. 

Henry Didier, an Orlando attorney is telling his clients to file a notice of claims, even though it could produce only pennies on the dollar. He isn’t even sure that this new use of bankruptcy law is legal.   

And looking down the road, with strained dealers trying to sell cars with no product liability coverage Didier asks, “Who will buy these cars?”

Supreme Court Could Intervene

Ditlow and other consumer groups have prepared a writ of certiorari, asking the U.S. Supreme Court to question whether successor liability under state law for product-liability claims can be eliminated by the bankruptcy code.

Also of concern is whether the sale would violate the Fifth Amendment which states “No person shall…be deprived of life, liberty, or property, without due process of law….”

Allowing the Chrysler bankruptcy and wiping the slate clean of product-liability lawsuits also raises the question whether this provides a roadmap for subsequent bankruptcies in this troubled economy.

“It is quite possible that a court could conclude New Chrysler is responsible for their claims, although I think the odds are against the Supreme Court” considering those issues, reports Bloomberg quoting David Skeel, a University of Pennsylvania law professor. 

Sell Your Car

Joanne Doroshow of the Center for Justice & Democracy tells consumers to think very carefully about whether they want to keep that Chrysler and GM vehicle. Instead, she says find another car.

“General Motors is advertising how great they are and they will honor warrantees, and they are misleading the public by not telling them about the defective car injures their child could suffer that the company will not cover.”

Professor Norman Silber, of the Hofstra University School of Law advises consumers get rid of any Chrysler product.

“When it becomes apparent that dumping these cars is the prudent thing to do, anyone who can afford to, will be apt to, do this; and this will leave mainly poor and ignorant persons holding pre-deal Chryslers. This is the most likely outcome, unless a special insurance market develops to protect, for a price, pre-deal Chryslers--which I doubt. But even then, innocent bystanders who are hurt by pre-deal Chryslers will inevitably be left in the cold.  The idea that adequate notice to non-existent, unknown and unknowable future victims of auto-related injuries can be given by placing a "notice" to such people in today's newspapers, furthermore, makes a mockery of consumer disclosure law."   #


6 Comments

Posted by George Fusner
Monday, June 15, 2009 2:24 PM EST

Excellant post Jane. I was about to post but you beat me to the punch. A real American tragedy.

Posted by Jane Akre
Tuesday, June 16, 2009 4:44 PM EST

Clarence Ditlow of the Center for Auto Safety likes to keep us honest.

He brings to our attention that R.L. Polk & Co automotive data:

LINK

reports there are for the 2008 calendar year:

235 million registered and “in use” total Light Duty vehicles (passenger car and light truck)

69 million Light Duty vehicles GM

30 million Light Duty vehicles Chrysler

Total GM & Chrysler Light Duty vehicles = 99 million.

I've corrected the 40 million in the story. Advice to owners of these vehicles stays the same.

Anonymous User
Posted by ed
Wednesday, June 17, 2009 3:39 PM EST

Stupid comes to mind. Fake bankruptcy, loss of billions, lets jump right back on where we lost the most money. Guess the new limos ordered by our goverment will be strech vipers. We gonna loose alot more money before the REAL bankruptcies begin. Great gas millage, so good for per passeneger MPG.

Posted by Todd Slaughter
Thursday, June 18, 2009 1:38 PM EST

Excellent work up on this issue.

As you effectively convey, the public is being propagandized into believing that the bankruptcy of these companies is "normal" and for the good of the country and economy, when, in fact, it is an extrodinary shifting of the burden of corporate irresponsibility to the public, either through individual suffering or public financing of the medical and financial consequences. Congress and the administration should be willing to protect the public from this extreme shift in responsibility, and require these companies to remain accountable for the harms their products cause.

Posted by Mike Bryant
Sunday, June 21, 2009 11:59 PM EST

Important post and a number of very good comments. This needs to be done in a manner that protects the public.

Anonymous User
Posted by Curtis Fortinberry
Tuesday, July 28, 2009 12:00 AM EST

I agree with the concept that this bankruptcy violates the 5th amendment. On July 10, 2009, my client was driving a 2004 Grand Jerokee and was hit from behind rupturing the gas tank and was burned to death, leaving behind a widow and a 1 yr old and 8 yr old sons. Where is the guaranteed right to due process?

Comments for this article are closed.

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