Hardest hit victims of the auto bankruptcy -Those injured in accidents may not get their day in court
The Center for Auto Safety is the nation’s premier independent, member driven, non-profit consumer advocacy organization dedicated to improving vehicle safety, quality, and fuel economy on behalf of all drivers, passengers, and pedestrians.
June 4, 2009
by Herb Weisbaum
We’ve all heard about the financial hardships caused by the bankruptcies of Chrysler and General Motors. Employees, dealers and stockholders have all been hurt. But there are other victims who are not as visible: the customers who were injured in defective vehicles made by these companies. This is their story.
Life for Jeanne and Joseph Polio of East Haven, Conn., changed forever on July 1, 2005. They were driving their 2000 Jeep Cherokee when it was T-boned by another vehicle. The Jeep rolled over and its roof collapsed, leaving Jeanne a quadriplegic with medical bills that have already exceeded a million dollars.
The Polios sued Chrysler, claiming the Jeep’s roof was defective. Chrysler says it’s vehicle was not defective and met all government safety standards at the time.
“All they are looking for is their day in court,” says the couple’s attorney, Timothy Pothin. “Chrysler’s action and the outcome of the bankruptcy proceeding may deprive them of that.”
Mrs. Polio says, “It’s not honorable for Chrysler to be able to just walk away from this responsibility.”
Last week, the Polios joined Conn. Attorney General Richard Blumenthal as he announced he’s fighting new Chrysler’s efforts to escape product liability for old Chrysler’s vehicles.
“New Chrysler is trying to take all Chrysler assets but leave injured consumers with fumes,” Blumenthal said. “Abandoning countless Chrysler consumers like the Polios compounds their tragedies and condemns their legitimate claims for justice.”
Lorraine Pullano of Niagara Falls, N.Y., describes herself as “a 24-hour caregiver.” Her husband Nicholas became a paraplegic when he was run over by his 1992 Jeep Cherokee.
In September of 2003, Mr. Pullano was leaving for work, when his Jeep wouldn’t start. He was run over by the vehicle while he was under it trying to jump-start it.
Nicholas Pullano, 54, will spend the rest of his life in bed or a wheel chair. “He cries a lot,” his wife says. She blames stress for her heart attack.
“It turned from a very loving happy home to a very loving sad home,” Mrs. Pullano says.
The Pullano’s sued Chrysler, claiming the vehicle’s design and a lack of safety devices allowed the Jeep to roll over Mr. Pullano. Chrysler says it is not to blame for this accident. Because of the bankruptcy filing, the lawsuit is on hold and a jury may never get to decide.
“This is a company being bailed out by taxpayers for a second time,” says the Pullano’s attorney, Eric Dranoff. “To leave its customers high and dry when it’s consumers who feed the machine is difficult to live with.”
Consumer groups outraged
When a company reorganizes under Chapter 11 protection, it can shed negative assets and break free of past obligations, such as lawsuits.
Some Chrysler and GM customers find themselves facing a harsh reality – they may be left behind in the rush to protect the two automakers.
“This is a real miscarriage of justice,” says Rosemary Shahan, president of the California group Consumers For Auto Reliability And Safety. “Why would we allow it? If we want consumers to have confidence in these companies, why should the most vulnerable consumers lose out?”
On Friday, Consumers Union (publisher of Consumer Reports) sent a letter to the Treasury Department’s Auto Task Force expressing concern that consumer protection and consumers’ rights “are at risk” during the bankruptcy process. In part, the letter read:
“If these newly reorganized auto companies are restructured ‘free and clear’ of these suits, it would mean that consumers who bring successful claims for injuries or damages caused by defective GM and Chrysler vehicles would be left without recourse, since these individuals would be considered unsecured creditors. That status would put them at the end of the line to be repaid from the meager assets left over once secured creditors were taken care of.”
GM lemon law cases also affected
Right now, all GM lemon law claims are on hold until the bankruptcy court decides how the company should handle them. No arbitration hearings will be held, no payments will be made.
The same thing happened when Chrysler received bankruptcy protection. Chrysler owners around the country say they’ve been stiffed after reaching agreements to unload their lemon vehicles. Some have even returned their defective vehicles in exchange for checks from Chrysler that bounced.
Kevin Lancaster of Akin, S.C., got Chrysler to buy back his lemon pickup. The dealer took his truck; Chrysler sent him a check for $30,000 – and it was returned for non-sufficient funds. Lancaster is still making payments of $700 a month on his loan because he doesn’t want to ruin his credit score.
The judge in the bankruptcy case has now agreed to let Chrysler make good on its obligations in lemon law cases already settled. The company promises to do that. And spokesman Mike Pease says the bounced checks were an “unintended consequence of the quick bankruptcy filing,” and will be re-issued.
Kevin Lancaster got a call from Chrysler last week to request some paperwork. But he says there were no promises and no money.
“I’m not feeling too good right now,” he tells me. “I’m very anxious. I toss and turn at night. I don’t know how long this will last.”
According to GM spokesman Tom Wilkinson, “all claimants will have the opportunity to submit their claims and have them resolved as provided by the Bankruptcy Code and other applicable law, both as to amount and priority."
My two cents
People always get hurt when a company files for bankruptcy protection. But GM and Chrysler customers injured in defective vehicles are not just any other creditor. They should be fairly compensated – because it’s the right thing to do.
If the new Chrysler and the new General Motors are to succeed, they must regain consumer confidence. It’s hard to do that when you abandon previous customers injured by your vehicles or who are stuck with a defective vehicle. The Obama administration’s Auto Task Force and the bankruptcy judges must prevent these companies from shirking their moral obligation.