GM Compensation Plan Could Pay Ignition Defect Victims $20,000 To Several Millions

How can you put a price on price on a life cut short? It’s not exactly an easy question and there really is no right answer. But General Motors’ compensation plan attempts to do so, starting the process at no less than $1 million when it comes to those who died in accidents caused by a defective ignition switch found in thousands of vehicles.

The General Motors’ compensation plan, unveiled on Monday, does not put a cap on the payment amount victims could receive. Instead those affected by the faulty switch could receive anywhere from $20,000 to double-digit millions depending a number of factors including loss of wages, severity of injuries and more, the New York Times reports.

For months the company has promised to divulge details of the plan created by expert Ken Feinberg, who was given “full authority” to establish compensation eligibility criteria. Just two weeks ago, GM CEO Mary Barra announced that the company would begin processing claims August 1.

Under the compensation plan, GM promises to not invoke its protection from liabilities involving incidents that occurred before its July 10, 2009 bankruptcy restructuring agreement.

According to the plan’s formula, families of those who died are entitled to at least $1 million, plus the calculation of lifetime earning lost, and $300,000 for a spouse and for each dependent.

Feinberg provided the hypothetical scenario in which the family of a 25-year-old married woman with two children who was earning $46,400 a year at the time of her accident would receive $4 million, the Times reports.

Consumers who suffered life-altering injuries could receive even more when the cost of lifetime medical care, lost earnings power and other factors are considered.

The plan also addresses consumers who faced less-severe injuries. Those who were treated at a hospital or an outpatient medical facility within 48 hours of the accident are eligible for a claim.

The formula for that claim is $20,000 for one night in the hospital; $70,000 for two to seven overnights, $170,000 for eight to 15 overnights, with a maximum of $500,000 for 32 or more overnights. Those treated on an outpatient basis could receive a maximum of $20,000.

Additionally, the plan provides for payout for accidents that have yet to occur. The protocol will cover crashes that happen through December 31, 2014.

Notably, the plan appears to take a more flexible approach in determining who is eligible for payments than it has when it comes to linking deaths to the defect. So far, the company has publicly stated 13 deaths were a result of the defect, but other, non-company reports have put the death toll much higher.

There are two fixed thresholds for eligibility. The crash mush have involved one of the models of cars that the company recalled for the defective switch and there must be evidence that the airbags did not deploy.

The ignition switch defect caused effective vehicles to lose power while in motion, rendering the airbags and other features like power steering and brakes inoperable.

Feinberg says that if the air bags deployed or the seatbelts locked, “then the power was on” and the faulty switch was not responsible for the accident.

However, the plan will take into consideration other evidence such as police reports, witness statements, photographs and hospital reports when making a decision on eligibility.

Feinberg says the biggest issue with the compensation plan is the fact that many of these accidents happened years ago.

“The car is going to be gone. Many of the records are gone. We’re going to have to reconstruct what happened 10 years ago,” he says. “We will bend over backward to work with people.”

GM previously announced that the compensation program would cover approximately 1.6 million model-year 2003-2007 recalled vehicles manufactured with an ignition switch defect and approximately 1 million model year 2008-2011 recalled vehicles that may have been repaired with a recalled ignition switch.

While GM officials are hopeful the compensation program will deter victims from seeking relief through the courts, they say filing a complaint doesn’t necessarily mean consumers forfeit their right to sue.

Feinberg says that victims only waive their right to sue if they accept the payment from GM. Those affected by the defect can file a claim with the company to preview their eligibility and payment.

Claims will begin processing on August 1 and end on December 31. Officials say checks are likely to start reaching victims in the fall.

Since GM announced the recall in February, it has faced increased scrutiny, including a number of inquests into how long the company knew about the deadly issue before warning drivers. In May, the company was slapped with a $35 million fine for waiting 13 years to acknowledge the defect it knew about before the first recalled vehicles hit the road.

Earlier this month, CEO Barra revealed the findings of an internal investigation during a speech to GM employees, describing the report as “brutally tough” and “troubling” and confessing there was a fundamental failure to meet customers’ needs.

Additionally, certain employees involved with the issue exhibited a “pattern of incompetence and neglect” by failing to disclose relevant information and allowing the defect to go without a recall even after it was fixed in 2007. As a result, 15 employees were fired from the company.

However, the report claims there was no conspiracy or cover-up orchestrated by GM executives related to the delayed recall.

“I told our team as bluntly as I knew how, that the series of questionable actions and inactions uncovered in the investigation were inexcusable,” Barra told the House of Representatives Energy and Commerce’s Oversight and Investigations Committee two weeks ago.

G.M.’s Payout Formula for the Dead: $1 Million and Up [The New York Times]