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GM to Accept Some Product Liability

Posted: Jun 29, 2009 11:01 a.m.

The Wall Street Journal reports, "General Motors Corp., under pressure from state attorneys general, agreed to assume legal responsibility for injuries drivers suffer from vehicle defects after the auto maker emerges from U.S. bankruptcy protection. The concession means consumers who are injured in car accidents after GM emerges from bankruptcy protection will be able to bring product-liability claims against the government-owned auto maker."

However, the Washington Post notes, "those with past claims would have to pursue the GM left behind in bankruptcy with nothing but unwanted assets, debts and other liabilities. That means these consumers are likely to recover little, if anything." Consumers injured in an accident caused by a defect can sue the new company that emerges from bankruptcy even if the car involved in the accident was built by pre-bankruptcy GM, but those who have lawsuits pending against the company that were launched before bankruptcy have effectively lost their cases.

The Journal explains, "Car-accident victims with pending lawsuits, those who won damages against GM before it filed for bankruptcy and those who get in accidents while the auto maker is under bankruptcy protection will still be unable to bring claims against the new GM. They would remain with other unsecured creditors making claims against the old GM. Those victims are likely to recover little or nothing."

Reuters notes, "A group representing about 300 Americans with lawsuits against GM for alleged product defects has objected to the reorganization since those injury and wrongful-death claims would have to be paid out from the sale of GM's mostly worthless assets." The group "said in a bankruptcy court filing earlier this month the automaker's insurance would only cover product liability claims of up to $35 million per claim," which "would not be sufficient to cover the claims of almost any of the lawsuits since many of the cases involved 'devastating injuries' from alleged vehicle defects."

It is common for companies to emerge from bankruptcy with no legal liability for their pre-bankruptcy products. In Chrysler's recent bankruptcy, the court agreed to free Chrysler of all liability for pre-bankruptcy products, and the AP reports, "consumers hurt by fellow automaker Chrysler LLC still have little recourse."

Reuters notes that GM "said it would continue to pay 'lemon law' claims so that consumers would be entitled to a refund or replacement for defective vehicles."

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