Chrysler Bankruptcy Could Leave Victims of Defective Vehicles With No Legal Recourse; Taxpayers Bail Out Detroit While Companies Resist Safety Improvements

May 21, 2009

Consumer Advocates Testify on Need for Safety Improvements, Importance of Preserving Civil Justice Protections for Victims of Defective Chrysler Vehicles

WASHINGTON, D.C. — A successful hotel manager, Jeremy Warriner from Indianapolis, Ind., was heading home after a long day at work. Another motorist sped through a stop sign, smashing into Warriner’s 2005 Jeep Wrangler. The poor design of the brake fluid reservoir ignited a fire that trapped him in the driver’s seat for five minutes, severely burning his legs. Ultimately, Warriner’s legs had to be amputated.

But because of the Chrysler bankruptcy proceedings, Warriner’s nightmare continues.   He may have no legal recourse if Chrysler is exempted from fulfilling its responsibilities to those injured by its defective products.

Warriner attended a House Judiciary Committee hearing on the current bankruptcy proposal that exempts Chrysler from most of its responsibility and accountability for products sold before the bankruptcy. In the bankruptcy proposal, Chrysler would honor warranties and be responsible for recalls of defective vehicles. But victims of poorly designed and defective vehicles would not receive compensation for injuries sustained.

For example, Chrysler will not be responsible for any vehicles on the road today once it emerges from bankruptcy. No matter how egregious the defect, Chrysler would have no responsibility for injuries occurring after the bankruptcy in vehicles sold before the bankruptcy. Those with pending claims would be left without recourse as well. Chrysler could be held accountable only if someone is injured by one of its sold after the company emerges from bankruptcy.

“Chrysler and other auto manufacturers are clearly facing tough times. But that doesn’t mean my legal rights should disappear, or my injuries should be ignored, even though they were directly caused by their defective product,” Warriner said.

Farbod Nourian, a 24-year-old resident of Los Angeles, Calif., injured by a defective Chrysler vehicle, also attended the hearing. In November 2007, when Nourian was in his final year of college, he was run over by his cousin’s 1998 Jeep Grand Cherokee when it self-shifted from park into reverse. Nourian suffered extensive damage to his spine and internal organs and will require further extensive surgeries later in life as his back deteriorates due to the injuries. 

The vehicle was recalled by Chrysler for the exact “park-to-reverse” defect that injured Farbod, but because his cousin bought it used, he never received notice of the recall. His trial is set for trial at the end of this year but may be jeopardized by the Chrysler bankruptcy.

Congress and the Obama administration can take steps to ensure that those injured by the nearly 10 million Chrysler vehicles on the road today have legal recourse, according to Joan Claybrook, former administrator of the National Highway Transportation Safety Administration and former president of Public Citizen. Claybrook and Clarence Ditlow, executive director of the Center for Auto Safety, testified before the Judiciary Committee. The solutions include:

  • Chrysler and Fiat should accept responsibility for existing products (successor liability);
  • Chrysler and Fiat should establish a tort victims’ fund and allow current and future litigants to proceed within the civil justice system;
  • A retroactive insurance policy should be purchased to cover past, present and future tort claims for injured parties with a minimum limit of $10 million, with an excess policy of another $10 million.

“If we find out next year that Chrysler vehicles purchased last month have major defects that lead to serious injuries, the current bankruptcy proposal leaves these people with no legal remedy,” Claybrook said. “Something must be done to protect the financial solvency of the automakers but also protect the lives of people injured by defective Chrysler products.”

U.S. taxpayers are pumping $40 billion or more into Chrysler, General Motors and GMAC, and $5 billion to their suppliers to bail them out, but these companies continue to resist key safety improvements that would save thousands of lives and mitigate tens of thousands of horrible injuries each year.  

Ditlow added: “What needs to be done is not to stop the restructuring of GM and Chrysler but to stop treating consumers as if they were collateral damage. To ask consumers to bear the cost of design and manufacturing defects in Chrysler and GM vehicles at the same time tens of billions of their tax dollars are bailing out these companies is too much.”

The consumer advocates want Secretary of Treasury Timothy Geitner to insist that auto makers agree to incorporate key safety improvements in all their vehicles, which would be particularly cost-effective as they redesign them for improved fuel economy as the president outlined earlier this week. These should include strong roofs, side window glazing, and pretensioning and load-limiting safety belts to protect occupants in rollover crashes, improved crash compatibility between different size vehicles, side head air bags, and stronger seats and seat backs as well as long-overdue provisions for child safety.

Not only will these safety improvements save lives and prevent devastating injuries such as brain damage, quadriplegia, paraplegia and epilepsy, but preventing harm will play a huge role in reducing health care costs. 

READ JOAN CLAYBROOK'S TESTIMONY.

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