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General Motors Co. to Pay Millions in Compensation
WASHINGTON, D.C. -- General Motors Co. is likely to pay millions of dollars to compensate family members of those killed in car accidents caused by faulty ignition switches in some of its vehicles, according to plan announced this morning.
Kenneth R, Feinberg, a compensation specialist hired by GM who also directed the 9/11 fund, said today that the priority of the program is to compensate those families who lost loved ones or those who have suffered catastrophic injuries such as severe burns, paralysis or amputations as a result of the accident.
"This is designed to help claimants," Feinberg emphasized, "not to punish GM."
Any potential claimant seeking punitive damages from the company should not participate in the program, he urged. Once a claim is approved, then the claimant would sign a release not to sue GM.
Under the formula, payouts to these claimants would depend on their age, earnings, medical expenses and any dependents that would be affected, Feinberg said.
A minimum of $1 million would be made available to a claim with a family member that was killed in an accident and another $300,000 awarded for any surviving spouse and dependent.
In addition, further compensation would be calculated based upon the deceased individual's age, earnings, number of dependents, and whether they were a student.
A hypothetical claim based on a 17-year-old student with no dependents and no income, for example, would receive $2.2 million under the formula, while one based on a 25-year-old with two dependents earning $75,000 a year would receive $5.1 million.
Those affected by life-altering catastrophic injuries could expect more under the plan, Feinberg said.
A 10-year-old that became a paraplegic because of an accident related to the ignition switch defect, for example, would receive $7.8 million under the program. A 40-year-old paraplegic earning $70,000 a year who is married with no children would receive $6.6 million.
The scenarios are based on data provided by the U.S. Bureau of Labor Statistics, Feinberg noted.
Should any claimant feel that there are other circumstances that might affect the value or payout, then Feinberg said he would meet with them individually to discuss any issue related to the claim.
For those who were not seriously injured as a result of a defect-related accident, the formula provides payments ranging from $20,000 to $500,000, depending on the length of their hospital stay or extent of medical treatment.
In order to collect a settlement in this case, a claimant would have to provide documentation of medical treatment within 48 hours of the accident.
GM earlier this year recalled millions of vehicles, including the Chevrolet Cobalt, which was discovered to have a defective ignition switch that could cause the vehicle to lose power, brakes and steering. Congress has since launched an investigation on the matter, and GM has paid a $35 million fine.
To be eligible, the claim must involve one of the vehicle models listed in the plan protocol, and in an accident in which the air bag did not deploy. Were the air bag deployed, the electrical system would've been working and therefore not caused by a faulty ignition switch.
However, if a claim is deemed eligible because of a switch defect, other circumstances would not be considered such as whether the driver was texting or intoxicated.
Feinberg said that GM has not placed a cap on total compensation for those affected by death or injury. Also, he said that once a claim is approved, the authority to pay it rests with him, not GM.
GM has linked the faulty ignition switch to 13 deaths and 54 accidents, but others have argued the number is much higher.
Feinberg refused to speculate on how many claims would be filed or how much money would be paid out.
"We will work with the lawyers, the families to do this," Feinberg concluded. "Money is a pretty poor substitute for loss. It's the best we can do."
Published by The Business Journal, Youngstown, Ohio.
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