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Recourse For Existing GM Injury Claimants Limited

GM Bankruptcy: New and Potential Liabilities Carry Over--Existing Injured Out of Luck

July 24, 2009 -- In a second lightning fast and government sponsored Chapter 11 bankruptcy proceeding, General Motors (GM) arose from the ashes July 10th as the new General Motors Company (New GM). Unlike Chrysler, New GM will honor liability claims stemming from cars built by the old GM (now Motors Liquidation Company). There is a small catch to this major change over the New Chrysler deal--liability claims would only be honored if the incident occurred after June 1, 2009, the day GM filed for bankruptcy.

Unfortunately, for those injured by a defective GM product before June 1, they are limited in their options. New GM, as part of the bankruptcy, is free and clear of existing personal injury liabilities. This a significant blow to the estimated 1,000 pending lawsuits, lumped together with the rest of GM's unsecured creditors to fight over the remains of Motors Liquidation Company.

Judge Blocks Opposition of Sale

In an effort to avoid a stalling of the GM asset sale in bankruptcy court, like the appeal of the Chrysler Bankruptcy, Judge Gerber ruled on July 7 that asbestos and accident victims couldn't block the sale or take their opposition directly to an appeals court. With the offer of U.S. Government funding for the New GM set to expire on July 10, Gerber said in a written decision that if GM were forced to liquidate because an appeal blocked the sale, creditors could lose $66.6 billion in value. By contrast, the equity of the new entity, if the deal goes through, would be from $63 billion to $73 billion, with 10 percent of that going to unsecured creditors including accident victims.

According to GM's most recent quarterly report, GM estimated its future product liability claims at $934 million and asbestos-related tort claims at $627 million.

Options for Current GM Injury Claimants

Unfortunately, there aren't any promising options for current GM injury claimants. In an interview with Fox Business, Center for Justice and Democracy Executive Director Joanne Doroshow discusses the lack of options for both GM and Chrysler claimants.

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