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No Cap on GM Fund for Families of Victims of Defective Switch

Jun 30, 2014

Families of those who died in crashes tied to a defective ignition switch in General Motors (GM) cars will be entitled to at least $1 million each.

The figure is considered a starting point for each death and is part of a formula created to pay the families of those people who were killed in the crashes, according to a compensation expert GM has hired, wrote The New York Times. The plan was announced by the expert, Kenneth R. Feinberg, and has been described as “broad and inclusive,” by the news outlet. The plan appears to take into consideration deaths beyond the 13 that have been publicly tied to the defect by the automaker.

In February and March, GM globally recalled 2.6 million GM small cars, model years 2003-2011; 2.19 million were in the United States. The recall involved replacing defective ignition switches that GM tied to 13 deaths in 54 crashes. The switch may rotate from the "run" to the "accessory" position while the car is in operation. This disables the engine, power steering, brake assist, and airbags, according to USA Today.

No cap has been placed on the amount of money the automaker has agreed to spend on payments to victims, according to Mr. Feinberg. Also, GM will not invoke its protection from liabilities involving any incidents prior to its July 10, 2009 bankruptcy restructuring agreement, The New York Times reported. In an interview with USA Today, Mr. Feinberg, discussed how the program will work, who will be eligible, and what sort of payouts may be expected. "Money is a poor substitute for loss ... it's the best we can do," he said. Under the formula constructed by Mr. Feinberg, the families of those who died are entitled to no less than $1 million. A calculation of lifetime earnings that were lost along with $300,000 for a spouse and for each dependent will also be added to the calculation, according to The New York Times. Mr. Feinberg will be administering the fund, wrote USA Today.

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