No-fault auto insurance

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.

Incidentally, the mandate in no fault insurance states IS similar to Obamacare in some ways. But if there’s no vehicle in the family, you don’t need medical payments coverage, or PIP. The majority of the United States does not have mandatory medical payments coverage on auto insurance.

Florida drivers are pissed their no fault laws are costing them an extra 1 billion per year because of frivolous claims. Staged accident fraudsters, scummy lawyers and unscrupulous doctors have played FL insurance statutes like a fiddle. Governor Scott Brown is pushing for drastic changes to the law that will reduce fraud and reduce premiums.

There is a huge movement to reform the Michigan no fault laws, since they are proposing sweeping changes to an expensive system that provides unlimited medical lifetime benefits for car accident victims. Drivers pay $145 per year for the unlimited medical benefits. 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
  • Florida, January 1, 1972 (compulsory property damage liability)
  • Puerto Rico, 1970

States that have repealed their no-fault laws:

  • Colorado: effective April 1974, repealed July 2003
  • Connecticut: effective January 1, 1973; repealed 1993
  • Georgia: effective 1975; repealed 1991
  • Nevada: effective 1974; repealed 1980
  • Pennsylvania: effective 1976; repealed 1984 (reenacted 1990)

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 whom 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 take a claimant to arbitration, even if it wins 99 percent of the issues and loses just 1 percent, 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,4 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.6 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.