Thursday, June 25, 2009

Big Automaker Bankruptcies Leave Injured Without Recourse

TT Note: Now isn't this just a kick of the old tires. It would appear that the bankruptcy of Chrysler got a big bonus in protecting itself from any future claims of personal injury from their manufacturing process. Gee whiz. They couldn't run their company properly. Did they make their cars correctly? And now GM is looking for the same protection?

The fall of some of the great American automakers has had a profound impact on many communities, as plant and dealership closings and lay-offs force many families into long unemployment lines. But the impact of the Chrysler and GM bankruptcies does not stop there. If the current Chrysler bankruptcy plan is upheld and GM receives a similar plan, these companies' bankruptcies could hurt many more Americans for years to come.

Chrysler Insulated from Pre-Bankruptcy Injury Claims

Chrysler's Chapter 11 bankruptcy included a protection never included in a bankruptcy before: protection from future personal injury claims by consumers who bought Chrysler vehicles before the company entered bankruptcy. This means that anyone who purchased a car from the company prior to the bankruptcy and who later is injured or killed by a defect in the vehicle will not be able to sue the company for damages for the injury or wrongful death.

How did this happen?

During bankruptcy, Chrysler was split into two companies: the "old" Chrysler and the "new" Chrysler.

The old Chrysler keeps all of the company's bad debts and liabilities, including any lawsuits filed against the company prior to the bankruptcy filing. The old company is also responsible for paying out any personal injury judgments or settlements entered against Chrysler before the bankruptcy. Thus, personal injury victims become part of the long list of unsecured creditors who are owed money by the company, but who have little chance of actually receiving it. Unsecured creditors are only paid if there are any funds left over after the secured creditors' debts have been satisfied.

The new Chrysler, on the other hand, emerges from the bankruptcy with the old company's assets, but none of its debt. However, this normally only includes the debt existing at the time of bankruptcy and not any potential future debts or liabilities. In Chrysler's case, the bankruptcy court determined it would be unfair to impose responsibility on the new company (which is owned in large part by Fiat and the US and Canadian governments) for future personal injury claims concerning vehicles purchased before it even existed.

GM Seeking Similar Personal Injury Claim Protection

GM's current Chapter 11 filing is expected to include a similar request for protection from personal injury claims on cars bought before the company entered bankruptcy. If the bankruptcy court allows GM to do this - which it is likely to do - the impact could be devastating for personal injury victims. While Chrysler is one of the smallest car manufacturers in the country, GM is the largest, selling more than 2.9 million vehicles in 2008. Allowing GM to shield itself from personal injury lawsuits could potentially silence thousands of Americans who have been hurt by the company's products.

Re-Victimizing the Victims

It is patently unfair to consumers to give Chrysler and GM a free-pass on lawsuits for injuries caused by vehicles purchased before the companies went into bankruptcy. The court's decision leaves consumers with no means to recover their unpaid medical bills, lost wages and other expenses from the manufacturers, when they are hurt by defective parts or the defective design of their cars.

It is even more unfair when considering the fact that court had other options available to protect consumers. For example, the bankruptcy court could have created a victim compensation fund or another type of fund that could be used to pay out personal injury or wrongful death claims against the automakers. A similar plan was used in the asbestos cases when the liable companies went bankrupt.

The court also could have decided not to allow the companies to skirt their responsibilities and made the new Chrysler and GM companies liable for any claims arising out of vehicles purchased before the bankruptcies. After all, both companies have agreed to uphold the warranties on cars purchased before the bankruptcies, so why not also guarantee the safety and workmanship of these vehicles? It seems counterintuitive that the automakers are willing to replace defective parts, but they will not accept responsibility for any harm caused by these same defective parts.

At this point, it is unclear whether a company can shield itself from liability for a future claim that may or may not happen. Some legal scholars and practicing attorneys are raising questions about whether it is a violation of a consumer's due process rights for the court to take away a person's future right to sue.

Consumer protection groups, including the Center for Auto Safety and Consumers for Auto Reliability and Safety, plan to challenge the Chrysler bankruptcy judge's ruling on appeal. Until then, consumers who thought they were helping out American automakers by buying their cars before they went into bankruptcy will be left with no legal protections, rights or safeguards should they be injured by a defectively built or designed GM or Chrysler vehicle.

Article provided by The McClellan Law Firm

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