Journalism in the Public Interest

Automakers’ Bailout and Bankruptcies Shortchanged Accident Victims


Photo by Spencer Platt/Getty Images file photo

As part of their government-brokered bankruptcies, American auto giants Chrysler and General Motors were released of some legal liability for product defects, the Wall Street Journal reported today. As a result, the automakers do not have to pay out damages to car-accident victims who had lawsuits pending or had already won damages before the companies filed for bankruptcy.

Chrysler and GM went on government life support during the financial crisis and were bailed out with more than $60 billion in taxpayer dollars. While the cash infusion may have saved jobs and averted the collapse of the American auto industry, the restructuring process left thousands of accident claimants with little to no legal recourse.

A University of Pennsylvania law professor and bankruptcy expert told the Journal that it's an unusual case of the government picking winners and losers. With mixed legal precedents on the issue, federal bankruptcy judges prioritized certain lenders—the U.S. Treasury, for one, received huge ownership stakes in the two companies—and left car accident victims in the lurch. The Journal explains what happened behind the scenes:

Leaving behind product-liability claims didn't initially raise red flags for the president's auto task force, said people familiar with the negotiations. In part, that was because such methods had been used in other bankruptcy sales. But also, setting aside more money for accident victims, these people said, could have prompted complaints from others who felt shortchanged by the restructurings, at a time when government bailouts were unpopular.

Unable to recover damages from the car companies, some victims and victims’ families have tried to sue other parties. (Bloomberg noted this phenomenon in 2009.)

“They will sue the GM dealer that sold the car because they sold a defective product, or they will sue the owner of the roadway, claiming that the pavement was the problem,” auto-safety expert Daniel Melcher told me. Melcher said the companies’ protection from liability has had a significant effect within his industry.

“The party that we all know is responsible can’t be sued, so people play lawyer games of who else we can sue. They have to go somewhere else to get compensation for the accident.”

Chrysler and GM told the Journal they sympathize with claimants but emphasized that many stakeholders also sacrificed as the companies fought off collapse—jobs were lost, dealerships closed, and lenders weren’t fully repaid.

Chrysler announced this week that it repaid the government loans it took out two years ago, and GM made a similar announcement last year. But as Politifact notes, those claims were a bit misleading.

The U.S. Treasury still holds a stake in Chrysler that it intends to sell, and an Obama administration official has said that the government doesn’t expect to fully recover about $1.9 billion in remaining investments. And while GM has paid back the $6.7 billion in bailout loans, it did so using other taxypayer money. Meanwhile, the government still owns a huge percentage of the company and may never be made whole on that investment.

Barry Schmittou

May 27, 2011, 12:02 p.m.

Obama and Bush have also protected insurance companies that are paying doctors’ to ignore life threatening medical conditions including brain lesions, cardiac conditions, cancer, and Multiple Sclerosis in Workers’ Comp claims, disability claims, and injured War Zone Contractors’ claims.

Quotes from numerous U.S. Judges’ seen at the following website provide absolute proof, but Obama and Bush refused to take action even though they are very aware that patients can die during the years it takes to get their case heard by the Courts :

The Judges’ quotes you’ll see on the website include :

U.S. District Judge Richard Enslen wrote “Metlife and its henchmen” regarding MetLife’s treatment of a disabled psychological patient who has attempted suicide multiple times.

* * A Psychologist wrote that MetLife’s treatment of a disabled cancer patient was “inhumane, dangerous, and reckless”

* U.S. District Judge Timothy J. Savage wrote that Metlife (and their paid consultant Dr. Greenhood) ignored MRI reports that evidenced Multiple Sclerosis and brain lesions of patient Jacquelyn Addis

* U.S. District Judge Robert Cleland wrote that Metlife and Dr. Greenhood ignored a foot that patient Joanne Vick broke in 5 Places after she developed diabetic kytoacedosis following childbirth.

* Multiple Judges’ wrote that cardiac conditions of several patients were ignored by Metlife.

You can also see a motion I just filed with the Court that references a ProPublica article about CNA insurance Company and was sent to Obama’s top directors yesterday. Please go to :

James B Storer

May 30, 2011, 11:11 a.m.

Barry Schmittou:  I appreciate your learned comments and your active and challenging role in taking on these matters.  I am not at all educated in the inner workings of the judicial “system,” but I have a few observations that lead me to the following comments.
1.  Foremost, I believe that the heart of the problem is the takeover of nations (including ours) by corporatism.  There is no need here to define corporatism, as those who submit propublica comments are mostly well aware of the term and potential consequences.
2.  It seems to me, and I may be wrong, that many of these heartless denials apply to needed medical care that can be extremely expensive.  The conclusion one draws, then, is that insurance companies do not perform as true insurance companies nowadays, for I suspect they sufficiently re-insure themselves so as to easily cover their obligations, however great.
3.  It also appears to me that these cases – at least those that are publicized – apply to individuals whose economic plight or seriousness of injuries leave them in a state that renders them unable to successfully fight “big brother.”
Again, thanks for your valuable comments.
Skartishu, Granby MO

Barry Schmittou

May 31, 2011, 1:08 p.m.

Thank you for your kind comments and empathy. I hope your thoughts may help ProPublica to decide to cover this story that is directly connected to the excellent reports they have provided regarding injured and deceased War Zone Contractors

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