No limit on defect payouts, GM says

WASHINGTON -- The attorney overseeing General Motors' compensation to victims of small-car crashes said Monday there's no limit to what the company will pay, provided the crashes were caused by faulty ignition switches.

GM links 13 deaths to defective ignition switches in smaller cars such as the Chevrolet Cobalt and Saturn Ion. But trial lawyers and lawmakers say hundreds of others could file claims of wrongful death and injury.

On Monday, GM recalled at least 7.6 million more vehicles dating back to 1997 to fix faulty ignition switches as the company's safety crisis continues to grow. The latest recalls involve mainly older midsize cars and bring GM's total number of recalls this year to over 28 million.

The company said it is aware of an additional three deaths, eight injuries and seven crashes involving the vehicles recalled on Monday. GM says it has no conclusive evidence that faulty switches caused the crashes.

The company says it expects to take a $1.2 billion charge in the second quarter for recall-related expenses.

Trading in GM stock was halted just before 1:30 p.m. Monday. At the time shares were trading at $36.84, up 23 cents for the day. The stock resumed trading about 30 minutes later. The shares fell 32 cents to close Monday at $36.30 in New York.

Kenneth Feinberg, one of the country's top compensation experts, said Monday that GM has placed no cap on the total amount he can pay to injured people or relatives of those killed. And he alone -- not GM -- will decide how much they each will get, even though he is being paid by the company, which did not like some of the program's provisions.

Feinberg would not estimate the ultimate cost for GM, saying he has no idea how many claims will be made. But based on the methodology he plans to use, a large number of claims could raise the total settlement into the hundreds of millions of dollars, if not billions.

"GM has basically said whatever it costs to pay any eligible claims under the protocol, they will pay it. There is no ceiling," Feinberg said at a news conference in Washington.

Feinberg's broad protocol, which provides for payouts even for accidents that have not yet happened (crashes through Dec. 31, 2014, are eligible) could cost the company financially -- possibly in the billions -- but is seen as an important step toward restoring public trust. Mary T. Barra, GM's chief executive, has called it the company's "civic duty" to compensate victims.

"We are pleased that Mr. Feinberg has completed the next step with our ignition switch compensation program to help victims and their families," Barra said in a statement. "We are taking responsibility for what has happened by treating them with compassion, decency and fairness. To that end, we are looking forward to Feinberg handling claims in a fair and expeditious manner."

With the plan, GM is trying to limit its legal liabilities, control the damage to its image and eventually move beyond the crisis caused by its failure to correct the ignition-switch problem for more than a decade, even as it learned of fatal crashes. The company recalled 2.6 million older small cars earlier this year to replace the switches.

Only those hurt in crashes caused by the small-car ignition switches are eligible, so the program excludes other GM safety problems. Claims will have to prove that the switches caused the crashes. Once a claim is settled, victims give up their right to sue the company.

Claims can be filed from Aug. 1 to Dec. 31. Once the filing is complete, Feinberg promises payment in 90 to 180 days in most cases. People who previously settled lawsuits with GM are eligible to apply for more compensation.

Feinberg said he will not consider whether those injured in crashes contributed to the cause by drinking alcohol, speeding, not wearing seat belts or other behavior. But GM could use that as a defense if the cases go to trial, he said.

"We have no interest in evaluating any alleged contributory negligence on the part of the driver," he said.

In many cases, the cars involved have been destroyed, and it will be difficult to determine whether the switches caused the crash, Feinberg said.

"Unlike the 911 fund or the BP oil spill fund, many of these accidents occurred years ago," Feinberg said. He urged those seeking compensation to use police, hospital, insurance and auto-repair records to buttress their claims. If the accident vehicle is still available, that's even better, he said.

Feinberg said that he's willing to meet privately with any crash victims or their families.

That's "easily the most difficult part of this assignment," he said. "It is very stressful, but it is essential because there are family members who want to be heard."

Legal experts say GM has almost no defenses left in crash lawsuits because it conceded the switches are defective and that its employees were negligent in failing to recall the cars. A GM-funded investigation by an outside attorney blamed the delays on a dysfunctional corporate culture and misconduct by some employees. The company has fired 15 workers in the case.

The ignition switches can slip from the "run" to the "accessory" position, unexpectedly shutting off the engines. That knocks out power steering and brakes and can cause drivers to lose control. In addition, the air bags won't inflate because of lack of power. Feinberg said if the air bags inflated, that negates a claim because that means the crash wasn't caused by the switch.

"This program is designed to help claimants," Feinberg said during the news conference. "This program is not designed to punish General Motors. If people want punitive damages, if they want to use litigation to go after General Motors, then voluntarily they should not submit a claim to me."

Information for this article was contributed by Joan Lowy, Tom Krisher and Dee-Ann Durbin of The Associated Press, Hilary Stout of The New York Times and Tim Higgins and Linda Sandler of Bloomberg News.

A Section on 07/01/2014

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