No-fault insurance refers to medical coverage which you are required by state law to carry on your automobile insurance. "No-fault" relates only to the medical coverage. If someone hits your vehicle, and he's at-fault, he is still legally liable to pay for the damages to your vehicle. All auto insurance companies sell some type of medical or PIP coverage for their auto policies, but not all states have "no-fault" statutes. States with "no-fault" statutes:
Hawaii, September 1, 1974
Kansas, January 1, 1974
Kentucky, July 1, 1975
Massachusetts, January 1, 1971
Michigan, October 1, 1973
Minnesota, January 1, 1975
New Jersey, January 1, 1973
New York, February 1, 1974
North Dakota, January 1, 1976
Pennsylvania, July 1, 1990 (earlier law passed on July 19, 1976)
Utah, January 1, 1974
Compulsory first-party, optional liability insurance; some restrictions on lawsuits:
Florida, January 1, 1972 (compulsory property damage liability)
Connecticut: effective January 1, 1973; repealed 1993
Colorado: effective April 1974, repealed July 2003
If you have an accident for which you aren't at-fault, and you live in a "no-fault" state, you must make a claim under your PIP or personal injury protection coverage and your own insurance carrier must pay for your medical bills. The "no-fault" part comes from the fact that even though someone, say, plowed into the rear of your car while you were stopped at a red light, your own carrier must pick up the medical cost (i.e. ambulance, hospital, rehab, etc.).
In a pure "at-fault" state, the person who caused the auto accident is responsible for payment of all of the damages sustained by the people and property involved. The theory in an at-fault state is that the person (or people) who caused the loss must make everyone else whole again, and everyone is held accountable for the results of his/her actions. In "at-fault" states, courts (through lawsuits) are often called upon to resolve the issue of who is the at-fault person and will be the one to pay for all damages.
Benefits of no-fault insurance:
Intended to create a faster, more efficient payment of claims.
After an accident people can concentrate on rehab and being productive, not staying injured to increase or legitimatize their injuries.
Potentially lower insurance rates.
No longer have to supplement for uninsured motorists.
Could stop insurance companies from overpaying small claims (and raising rates) to avoid lawsuits.
With it, you don't have to sue to get a legitimate injury covered.
Unfair claims settlement practices acts often do not extend the same rights to you if you're making a claim against another driver's insurance as opposed to making a claim under your own insurance policy.
Disadvantages of no fault insurance:
Some states allow "no-fault" insurance carriers to go after the at-fault party (see Subrogation) anyway.
Claims over the "verbal threshold" can still be litigated
Car accidents victims could go right to a neurologist's office or order CAT scans to examine an injury without seeing a general physician first and your PIP policy would have to pay for that, in most cases.
Your PIP or no-fault coverage will only pay for your lost wages up to the limits of your coverage.
Under most no fault laws, medical personnel do not have to follow rules on when to use specific treatments.
You'll have to pay a deductible if you make a claim under your PIP (no fault) coverage.
Some no-fault states may not give you the option of contacting the at-fault driver's insurer to recover property-damage payments and medical expenses not paid by your PIP.
If an insurer takes a claimant to arbitration, even if the insurance company loses just one issue, the company must pay the total bill submitted.
In some no fault states like New York, carriers have only 30 days to challenge claims.
Questionable doctors, lawyers and collision repair facility operators use no fault insurance to defraud carriers and increase your rates.
Most state laws prohibit insurers from surcharging policyholders for accidents in which they weren't at fault anyway.
By 1974, with the considerable resources of the insurance industry in support, nineteen states had enacted some form of limited no-fault, beginning with Massachusetts in 1971. At its peak, twenty-four states had adopted no-fault laws. The laws were hardly uniform, however. Sixteen states instituted a mandatory no-fault system. In mandatory no-fault states, lawsuits seeking compensation for human pain and suffering are permitted for injuries meeting a certain threshold, the definition of which may vary considerably from state to state. States with "monetary" thresholds require the victim to demonstrate that his damages exceed a specific dollar amount in order to access the tort system to obtain human pain and suffering damages.
States with "verbal" thresholds permit such lawsuits only if the injured party can demonstrate a defined level of injury, such as "serious and permanent." Finally, eight states utilize hybrid systems, in which "no-fault" coverage supplements the required third party liability insurance. In these "add-on" states, there are no limits on lawsuits. All present no-fault systems permit recourse to the courts against at-fault drivers for payment of economic losses in excess of the no-fault benefits. No state has adopted a "pure" no-fault system, which completely bars access to the tort system.
Only the District of Columbia has adopted a no-fault law since 1976 and six states have repealed their mandatory no-fault laws. Presently, there are only about ten mandatory no-fault jurisdictions.
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