General Motors (GM) lost its final bid to limit payouts from malfunctions caused by faulty ignition switches yesterday. The decision by the U.S. Supreme Court to deny certiorari means that hundreds of death and injury lawsuits against GM can now move forward after years of being stalled.
At the forefront of the appeal was the automaker’s 2009 bankruptcy filing, which the company claimed protected it from liability for injuries caused before the company’s reorganization. However, last year the U.S. 2nd Circuit Court of Appeals reversed a lower court’s ruling, stating that the bankruptcy does not grant GM immunity from such lawsuits. In denying GM’s appeal, the Supreme Court is effectively allowing the 2nd Circuit’s decision to stand.
What Lead to the Ignition Switch Lawsuits
In 2014, GM began a recall of 2.6 million vehicles when news began to surface of improperly manufactured ignition switches that were causing accidents on the road. The flawed design of the switches allowed the ignitions to rotate while being operated, causing the car to lose power. In some cases, this occurred at high speeds, causing fatal crashes.
To date, at least 124 deaths and 275 other injuries have been attributed to faulty GM ignition switches. The 2014 recall included model years as early as 1997 (see full list here), and the company was forced to pay nearly a billion dollars in fines by both the National Highway Traffic Safety Administration (which oversees road vehicle safety) and the Department of Justice. Additional civil and criminal penalties have been added since then, bringing the total up to $2.5 billion that the company has paid out to the government.
Now that the hundreds of lawsuits against GM can move forward once more, it is likely that the amount General Motors will have to pay in the form of compensation to victims or their surviving family members will balloon. In addition to paying for medical costs, funeral expenses, and the cost to replace damaged property for cars that have crashed, GM also faces lawsuits from individuals who claim that the value of their cars declined due to the faulty switch.
One estimate puts the total amount of outstanding claims against GM at $10 billion, approximately four times the amount that the company has already paid in fines and penalties. Of course, that’s still a far cry from the $49.5 billion that the company received in taxpayer aid under former-President Obama’s auto industry bailout.
GM Bankruptcy Offers No Protection
Despite the Supreme Court’s denial of GM’s appeal, the company still seems convinced that it can successfully defend itself against the suits that have already been filed.
“The Supreme Court’s decision was not a decision on the merits,” the automobile manufacturer said in a statement, “and it’s likely that the issues we raised will have to be addressed in the future in other venues because the Second Circuit’s decision departed substantially from well-settled bankruptcy law. As a practical matter, this doesn’t change the landscape much in terms of the GM litigation.”
However, for the time being the company will have to continue making its case to the hundreds of individuals whose lives have been wrecked by faulty ignition switches. Before the denial, GM had already reached settlements in a number of lawsuits, but there are plenty more who are hoping that the court system can bring them a measure of justice for their injuries and other damages.
Whatever the ultimate outcome is, one thing’s for sure: GM is still a long way from putting those faulty ignition switches behind it.