GM Fund for Families of Victims of Defective Switch Will Not Be Capped

GM_FundThe families of people who died in crashes associated with a defective ignition switch in General Motors (GM) cars are entitled to at least $1 million each.

The $1 million is in place as a starting point for every death and will be part of a formula that has been put in place to pay the families of those who perished in the crashes, according to Kenneth R. Feinberg, a compensation expert GM hired, wrote The New York Times. Mr. Feinberg’s plan has been described as “broad and inclusive,” by The New York Times and appears to take into consideration any deaths beyond the 13 that have been publicly associated with the ignition by GM.

GM implemented global recalls this February and March involving 2.6 million small model years 2003-2011, cars; most—2.19 million—were in the United States. The recalls involved replacing defective ignition switches that GM has linked to 13 deaths in 54 crashes and involve switch rotating from the “run” to the “accessory” position while the car is in operation. When this happes, the engine, power steering, brake assist, and airbags may disable, according to USA Today.

A dollar cap has not been placed on the amount of money the automaker has agreed to spend on victim payments, said Mr. Feinberg. GM will also not be invoking its protection from liabilities involving incidents prior to its July 10, 2009 bankruptcy restructuring agreement, The New York Times reported.

In an interview with USA Today, Mr. Feinberg, talked about how the program will work, who will be eligible for the program, and what types of payouts may be expected. “Money is a poor substitute for loss … it’s the best we can do,” he said. Under the formula developed by Mr. Feinberg, the families of those who died are entitled to no less than $1 million. The calculation will also include lifetime earnings that were lost and $300,000 for a spouse and for each dependent, according to The New York Times. Mr. Feinberg will administer the fund, wrote USA Today.

The fund will start accepting applications on August 1, 2014; the application period will shut down on December 31, 2014 at 11:59 p.m.; and the fund will likely complete issuing payments and will be dissolved by mid-2015. The goal is to issue payments on valid claims within 90 days and, on more complex cases, within 180 days, indicated USA Today.

Although Mr. Feinberg has created a formula to determine compensation amounts, this formula neither limits individual payments nor the total fund, he noted. Payments will also not be limited to deaths and injuries directly associated with the recall issue involving front airbags not deploying. For example, rear seat passengers and occupants of other cars involved in an accident with an involved GM car may be covered, wrote USA Today. “There’s no aggregate cap. It’s not as if General Motors is putting up X dollars and telling me, ‘Spend it wisely because that’s all there is,'” said Mr. Feinberg. Mr. Feinberg also has the final say on claims, “GM delegated to me, at my full and sole discretion, to decide which claims are eligible, and how much money they should get. There are no appeals (by GM or victims). Once I make the decision, that’s it.”

GM expects most—about 90 percent—of the claims to be settled through the fund and, in a statement today announced, “We are pleased that Mr. Feinberg has completed the next step with our ignition switch compensation program to help victims and their families. We are taking responsibility for what has happened by treating them with compassion, decency, and fairness. To that end, we are looking forward to Mr. Feinberg handling claims in a fair and expeditious manner,” USA Today reported.

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