Under a plan proposed by General Motors and the federal government GM will assume responsibility for future product liability claims filed after the new GM company emerges from bankruptcy. More than a dozen state attorneys general have voiced objections to GM’s plan to sell off its desirable assets to a new corporate entity. These could have upset GM’s plan for rapid completion of the bankruptcy process.

This decision will resolve the potential problem of whether customers who have claims regarding their existing GM products, but who have not yet filed lawsuits, can sue GM in state courts. Bankruptcy case law is unclear on this issue, therefore GM and the government’s auto task force chose to assume the liability rather than risk a possible delay in emerging as a new company.

Previously filed product liability lawsuits may be left behind to be handled by the old GM thereby allowing the new GM to emerge with a clean legal slate. Because of its large size, however, GM has instead chosen to assume the legal liability. Last year GM had budgeted more than $900 million for product lawsuits. A committee representing numerous consumer plaintiffs claims to represent $1.25 billion in potential personal injury claims and has objected to GM’s plan to leave such cases with the old GM.

In the meantime, GM has continued to process lemon law claims from California consumers, and presumably those of other states, and honor its obligations to such consumers under existing state lemon law statutes.