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.
In at least one state, New York, the no-fault plan suddenly and unexpectedly led to an enormous flood of litigation beginning around 1995 and continuing unabated to date (2007). As documented by the New York State Insurance Department and by New York's Court of Appeals, a billion-dollar-a-year "no fault fraud industry" has emerged, in which large numbers of people -- mostly immigrants -- are recruited by criminal "rings" to pile into automobiles which are then involved in deliberate or "staged" accidents. The "victims" are then referred to compliant "medical clinics" which supply unnecessary, questionable or redundant treatment and/or medical supplies. Medical bills are sent en masse to no-fault insurers, and when payment is denied, suit is commenced by a number of law firms which apparently specialize in just this kind of claim.
In 2002, the New York State Insurance Department amended the no-fault regulations to shorten the time period in which claims must be reported, from 90 days to 30 days; the new regulations also reduced the time in which medical bills must be submitted to insurers, from 180 days after treatment, to 45 days. According to the Insurance Department, these revised regulations have helped to reduce the number of fraudulent claims.
Nevertheless, no-fault litigation is reported to constitute 25 percent of all lawsuits filed in the New York City Civil Court.
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