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No-fault auto insurance is a type of car insurance system that allows policyholders to file a claim with their own insurance company after an accident, regardless of who was at fault. This differs from traditional auto insurance policies, where the at-fault driver’s liability coverage pays for damages.
The no-fault system was created in an effort to lower rising automobile insurance rates and expedite the claims process. By removing the need to determine fault, no-fault auto insurance allows claims to be settled faster. Additionally, restricting lawsuits between drivers except in cases of serious injuries aims to reduce litigation costs associated with auto accidents.
What are the No-Fault Auto Insurance States?
Twelve states have no-fault insurance laws today, while the rest follow a tort or “at fault” system. The 12 no-fault states are:
Florida passed its no-fault law in 1971. The Florida Motor Vehicle No-Fault Law requires Personal Injury Protection (PIP) coverage with a minimum limit of $10,000 for medical payments, disability, and death benefits. PIP covers the policyholder, resident relatives, passengers, and pedestrians struck by the policyholder’s vehicle.
Drivers may only file a liability lawsuit against the at-fault driver if there is a serious injury such as significant scarring or disfigurement, loss of a body part, permanent injury, death, or disability for at least 90 days.
Hawaii adopted a no-fault auto insurance system in 1973. Under the Hawaii Motor Vehicle Insurance Law, all drivers must carry no-fault coverage with a minimum limit of $10,000 per person for medical expenses.
Injured parties may only sue the at-fault driver if medical expenses exceed the no-fault policy limit. Lawsuits are also permitted for exceptions like serious disfigurement or other extraordinary circumstances.
The Kansas Automobile Injury Reparations Act established the state’s no-fault system in 1974. Kansas requires drivers to carry Personal Injury Protection (PIP) coverage with a minimum limit of $25,000. PIP pays for medical expenses, lost wages, rehabilitation costs, funeral expenses, and substitute services.
Lawsuits are restricted except for cases involving disfigurement, loss of income exceeding PIP limits, or medical expenses exceeding $2,000.
Kentucky adopted a “choice” no-fault insurance law in 1975, becoming the first state to make no-fault optional. The Kentucky Motor Vehicle Reparations Act gave drivers a choice between regular tort liability coverage and Basic Reparation Benefits (BRB) no-fault coverage.
Those who opted for BRB were subject to limitations on their right to sue. The minimum BRB limit was $10,000 per person for medical expenses, lost wages, and replacement services.
Massachusetts enacted no-fault insurance reforms in 1970. The state mandates Personal Injury Protection (PIP) with a minimum limit of $8,000 for medical expenses and lost wages.
Lawsuits are allowed only when medical expenses exceed $2,000 or in cases of death or dismemberment. PIP also covers passengers and pedestrians if they do not own a car.
The Michigan Auto Insurance Placement Facility adopted a “partial” no-fault insurance system in 1973. Drivers are required to purchase coverage for unlimited medical expenses and up to 3 years of lost wages.
Injured motorists can only sue for non-economic damages like pain and suffering if the accident caused death, permanent serious disfigurement, or serious impairment of body function.
Minnesota’s no-fault auto insurance provisions were enacted in 1974. The law mandates drivers carry $40,000 in Personal Injury Protection (PIP) for medical expenses and other losses. PIP also covers additional economic losses up to $20,000.
Lawsuits are restricted except in cases of death, dismemberment/disfigurement, loss of wages exceeding the PIP limit, or medical expenses exceeding $4,000.
The New Jersey Automobile Reparation Reform Act established the state’s no-fault system in 1973. New Jersey requires Personal Injury Protection (PIP) with a minimum limit of $15,000 per person and $250,000 per accident. PIP covers medical costs, loss of income, essential services, death benefits, and funeral expenses.
Drivers can only sue if injuries are permanent, death occurs, or special medical expenses exceed the PIP limit.
New York adopted its Comprehensive Motor Vehicle Insurance Reparations Act, a modified no-fault law, in 1973. Drivers must carry $50,000 in no-fault Personal Injury Protection (PIP) to pay for medical treatment, lost earnings, and other reasonable expenses.
Lawsuits are permitted only if there is serious injury, significant economic loss beyond the PIP limit, or death.
North Dakota enacted a choice no-fault law in 1976. Motorists can choose between a tort liability policy or no-fault coverage with Basic No-Fault Benefits of at least $30,000. This pays for medical costs, rehabilitation expenses, loss of income, and more.
Drivers who opt for no-fault face limitations on their ability to sue except for economic losses exceeding the Basic No-Fault Benefit or “serious injury.”
Pennsylvania instituted a choice no-fault system with the Pennsylvania No-fault Motor Vehicle Insurance Act of 1974. Insureds can choose limited tort or full tort coverage.
Limited tort restricts the right to sue except for serious injuries. It requires minimum Medical Benefits coverage of $5,000. Full tort preserves the unrestricted right to sue but comes with higher premiums.
Utah passed its no-fault law, the Utah Automobile No-Fault Insurance Act, in 1973. The state requires Personal Injury Protection (PIP) coverage with a minimum limit of $3,000 per person/$6,000 per accident.
Injured parties can only file lawsuits if medical costs exceed the PIP limit, or if the injuries include death, dismemberment, permanent disability/disfigurement, or permanent loss of bodily function.
No-Fault Auto Insurance Benefits
Proponents argue that no-fault auto insurance has several benefits compared to traditional tort liability policies. No-fault aims to:
- Expedite claims and compensation – By removing determinations of fault, no-fault allows insurers to resolve and pay claims faster. This provides faster relief for injured policyholders.
- Reduce litigation – Restrictions on lawsuits under no-fault insurance theoretically decrease the number of auto-related liability claims clogging up the courts. However, some argue the impact has been modest.
- Lower insurance costs – Proponents contend that no-fault coverage leads to cheaper auto insurance premiums by reducing payments for non-economic damages like pain and suffering. But the cost impact is still debated.
No-Fault Auto Insurance Has Critics
Critics counter that no-fault insurance has some notable drawbacks as well:
- Inadequate compensation – No-fault caps on lawsuits mean seriously injured accident victims cannot fully recover non-economic damages through the liability system.
- Increased claims cost – Some research indicates no-fault leads to more lawsuits being filed, which drives up costs for insurance companies. This could counterbalance any litigation savings.
- Weaker deterrence – Limitations on lawsuits reduce the legal accountability of negligent drivers. This may lessen the incentive for motorists to drive safely.
Conclusion about No-Fault Auto Insurance
The debate over the merits of no-fault auto insurance continues as states weigh the trade-offs it involves. While a majority of states use a traditional tort system, a significant minority have adopted no-fault in some form.
Proponents believe it is a simpler and more efficient approach, but opponents argue it compromises fairness. No-fault laws vary widely among states, so experiences with the system are mixed. But no-fault remains a vital auto insurance reform idea that remains relevant today.