Deconstructing GM's Ignition Compensation Protocol

Please welcome Jim Yu to TTAC. Jim is an attorney, a contributor to Hooniverse and the author of the highly recommended “ Tamerlane’s Thoughts“. Jim is also the owner of a manual wagon.

In the face of GM’s ignition debacle, the General hired noted mass torts expert Kenneth Feinberg to set up and execute a compensation scheme for injury victims and families who have lost loved ones. So, is it fair?

First, a little bit of background on Feinberg. I do not know him personally, but I took a semester-long course with him in the late ‘90s. He is extremely sharp and engaging. Moreover, his compassion for victims is always tempered by his calculated pragmatism.

In virtually every case we studied in class, a company is responsible for injuring hundreds, if not thousands, of people. And in every instance, the same issues arise:

Solvency: A company will declare bankruptcy or simply go under if it compensates every victim the “full” value of their claim, given the sheer number of victims.

Expediency: Large disasters also tend to clog the courts and drag on for years through expensive and unpredictable litigation and appeals. As the old legal maxim goes, justice delayed is justice denied.

Burden of Proof: Finally, it is unfair to victims who were injured by a bad actor when they cannot muster the requisite burden of proving fault and causation in court, whether it’s because of lost or destroyed evidence or because the victim does not have the financial resources to hire the experts to build up their case.

Given these challenges and the competing interests of the parties, Feinberg customizes compensation protocols in a manner that is as fair as possible. Given his experience and credibility, Feinberg is often the go-to guy for gigantic, catastrophic, disasters. He set up and managed the September 11 Victim Compensation Fund and the BP Oil Spill Fund– no easy tasks.

Now, let’s look at the GM compensation scheme:

Administrator Independence: GM hired Feinberg and gave him free reign on compensating victims. This is a net positive for GM, from a public relations perspective, as it gives the impression that GM accepts responsibility and is giving Feinberg a blank check. But keep in mind that GM hired him, is compensating him, and he wants to be hired again in the future by other companies in GM’s position. I have every confidence that Feinberg will be fair and do his best, but GM is also confident that Feinberg is not going to go rogue and write six- to eight-figure checks to every Tom, Dick, and Harry who makes a claim.

Who Is Covered: Media coverage gives the impression that the fund will compensate anyone who has been physically injured by the defect. Not so. First, compensation is not available if an airbag or seatbelt pretensioner deployed during the crash sequence.

After jumping over the first hurdle, the injured are divided into three categories. There is the fatality category, a no brainer. There is the catastrophic injury category (quadriplegia, amputation, severe brain injury, burns). Then, there is the third, more subjective, moderate injury category. Feinberg and his staff will have some leeway with respect to this last category, which will probably constitute the vast majority of the claims. It will be interesting to see how much these claims are compensated.

Driver Negligence: The protocol states that in determining whether the defect directly caused the claimant’s injuries, the claimant’s contributory negligence, if any, will not be taken into account. This is definitely a net positive for claimants, as evidence of impaired driving, speeding, or unsafe driving will not come into the picture.

Fatality Compensation: As a baseline, for each fatality, $1,000,000 will be awarded and $300,000 will be awarded to the widow(er) and each surviving dependent. More money on top of the above figures can be awarded based on the victim’s earnings history and age. This scheme on its face penalizes stay-at-home moms, children, and the disabled, as they often do not have incomes. For the victims’ families, the silver lining is that compensation will come within 90 to 180 days, rather than years. Furthermore, there is certainty and finality to the compensation. A family that chooses to go to court instead may receive millions more down the road, but could also easily lose and receive nothing.

Injury Compensation: There are many variables in determining the compensation amount for the injured. If a seriously injured person is relatively young and needs a long term life-care plan, compensation will be in the millions. For the moderately injured, compensation is based strictly on how many days they were hospitalized. For those who were not hospitalized, $20,000 may be the limit.

Documentation: The types of documentation required, such as medical records and wage history, are fairly standard in personal injury claims and are not particularly onerous.

The biggest advantage in terms of proof is that GM is already admitting fault. The victim simply has to prove eligibility and damages.

“Due Process”: Serious injury victims and families who have lost loved ones are entitled to a face-to-face meeting with the administrator before the compensation is awarded. But the protocol is silent on what takes place at the meeting and whether the administrator even has to take into account any information provided at the meeting.

Is this process fair? It depends on whom you ask. The scheme helps victims by getting them compensation relatively quickly. There is value in certainty and finality. But by accepting the scheme and foregoing litigation, the victim waives their right to a potentially larger jury award.

*Disclaimer: All of the above, of course, is simply a mental exercise, written by a car enthusiast for fellow car enthusiasts. This is most definitely NOT legal advice.