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In with the new GM and out with the old in switch liability cases

Plaintiffs in cases involving defective ignition switches installed in General Motors Co. vehicles received some good news this week. GM recalled millions of vehicles in 2014 after the faulty switches were linked to multiple accidents. The switches could slip out of the run position, shutting down the vehicle's operating systems, including brakes, power steering and airbags. 

The plaintiffs are people who were injured in crashes caused by the faulty switches, families or loved ones of people who died in ignition switch-related crashes and individuals whose vehicles lost their value as a result of the recalls. All of these are civil court claims, but the decision came from the bankruptcy court, not the trial court.

When GM declared bankruptcy in 2009, its more burdensome liabilities were assigned to "Old GM." The ignition switch liability, however, went to "New GM." But that liability was for compensatory damages -- the damage awards that repay the victims for medical bills or lost wages, even emotional harm at times. Punitive damages are different.

Punitive damages are just that: punitive. They are meant to punish the defendant for actions that were beyond careless; there is an element of intent or conscious disregard of the probability of a negative outcome. The exact definition varies from state-to-state -- here in Illinois, a plaintiff must prove that the defendant was well aware that an injury would probably result but proceeded anyway -- but the purpose is always to penalize.

GM knew that the switches were faulty long before the company began the recalls. The vehicles were from model years 2003 to 2010 -- most clearly predating the bankruptcy. Was Old GM liable, then? And, if so, was Old GM immune from liability as a result of the bankruptcy?

The court said that plaintiffs could not assign blame to New GM for Old GM's actions or conscious failures to act. However, the plaintiffs could show that New GM may have inherited the knowledge of Old GM, whether through employees that served both companies or documents generated by Old GM and now in the hands of New GM.

One attorney working with plaintiffs said the decision was a complete win, but his clients may believe otherwise. Even a large punitive damage award cannot bring back a family member or undo the harm done by the faulty ignition switch.

Source: Business Insurance, "Judge rules GM open to punitive damages over ignition switch recalls," Nov. 9, 2015

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