Chrysler To Pay $22.6M To End Dodge Crash Suit

By Leigh Kamping-Carder

Law360, New York (September 11, 2009) -- Chrysler LLC and two insurers have agreed to pay $22.6 million to Gilbert Mohr — who was awarded more than $18 million over the death of his wife and mother-in-law in a Dodge Caravan wreck resulting from an alleged design defect — rather than wait for Tennessee's high court to determine whether it will hear an appeal.

Mohr, Chrysler, the automaker's official committee of unsecured creditors and two insurers that posted bonds covering judgment received court approval for the proposal Thursday in the U.S. Bankruptcy Court for the Southern District of New York.

Mohr will have a general unsecured nonpriority claim against Chrysler, now known as Old Carco LLC, in the amount of $22.6 million, and the two sureties will cover the settlement, according to the order.

Safeco Insurance Co. of America will have to put up $15.1 million and Chrysler Insurance Co. will cover close to $7.5 million, the order said.

The original judgment, handed down in 2005, has been steadily accruing interest, putting the award at over $26 million at this point, according to Jeffrey B. Ellman, an attorney with Kirkland & Ellis LLP who represents Chrysler.

Mohr agreed to reduce his claim by $4.1 million in exchange for resolving the claim and receiving a timely payment, Ellman said.

The sureties will have to transfer the funds to an escrow account within 10 days, according to the order.

In July, the parties agreed to a partial lift of the automatic stay to allow the Supreme Court of Tennessee to decide whether it would hear an appeal from Chrysler. Before the high court could rule, however, the parties reached a deal, according to Ellman.

Mohr asked the court for relief from the automatic stay in order to defend DaimlerChrysler LLC’s appeal in a product liability case arising out of a 2002 accident that killed the plaintiff's two family members and injured two others.

In January, DaimlerChrysler sought permission from the state Supreme Court to appeal the judgment of the Court of Appeals of Tennessee, but the high court stayed that appeal following the automaker's bankruptcy filing.

The appeals court affirmed the trial court’s awards of over $3 million in compensatory damages for the death of Gilbert’s wife, Vicki Mohr, and $1.1 million in compensatory damages for the death of her mother, Maurine Heathscott.

The appeals court also reduced the trial court’s award of $48.8 million in punitive damages to $13.8 million, and remanded the matter to the trial court to enforce the judgment.

In connection with its appeal, DaimlerChrysler posted a bond to supersede the judgment, under which Safeco and Chrysler Insurance, formerly known as DaimlerChrysler Insurance Co., were bound to Mohr in the amounts of $51.6 million and $14.9 million, respectively, the order said.

The fatal accident occurred in July 2002, and Mohr, as administrator of the decedents' estates, filed suit in the Circuit Court for Shelby County, Tenn., asserting products liability claims for compensatory and punitive damages, according to a motion filed by the plaintiff.

A jury found that the vehicle at issue was defectively designed and unreasonably dangerous, based on evidence that Chrysler deliberately modified the design in a manner that compromised the safety of its passenger compartment, the motion said.

That design change let the company bring the vehicle to market more quickly, which meant significant cost savings for Chrysler, the motion said.

Attorneys for Mohr did not immediately respond to requests for comment on Friday.

Mohr is represented by Morris Haynes & Hornsby, Moritt Hock Hamroff & Horowitz LLP and Baker Donelson Bearman Caldwell & Berkowitz PC.

Old Carco is represented by Jones Day.

The case is In re: Chrysler LLC, case number 09-50002, in the U.S. Bankruptcy Court for the Southern District of New York.

--Additional reporting by Ben James