Car Insurance: Fault and No-Fault States

In the United States, car insurance covering liability for injuries is compulsory in most states. Therefore, US states are generally described as having either a fault or no-fault based car insurance system. However, because each state enforces their car insurance requirements differently, one can’t think, particularly of a no-fault based car insurance system as a single insurance type with all the same requirements and limitations. There are enough variations to “no-fault” and fault insurance that it can become confusing.  While discussing car insurance in both Fault and No-Fault states, ypu will encounter some terms which are important to understand:  tort liability, add-on, no-fault, PIP, fault-based,  choice no-fault, and thresholds.

Tort liability

Most US states have adopted a fault-based (tort liability) system for auto insurance. Since fault in a car accident is generally determined by the state in which the accident occurred and because state laws vary significantly, it is important to know if the state in which your accident occurred has a fault or no-fault based system.

In a tort liability (fault-based) system, insurance companies pay according to each party’s degree of fault. In those states, the at-fault party is responsible for paying the other party’s damages which includes the victim's medical expenses, as well as compensating for additional damages, such as loss of wages and "pain and suffering." After a thorough investigation by the insurance companies of the drivers involved in an accident, in most cases “fault” is determined and the claim is settled. If a dispute arises, an injured party may sue to determine negligence in a court of law. There are no restrictions on a victim’s right to collect for "pain and suffering.” The only requirements to file a claim or sue for damages above and beyond medical bills are: the victim received injuries as a result of the car accident and the other driver involved was found to be at fault. In addition, if you or a loved one has been seriously injured in a car accident and are discouraged and frustrated by the unreasonably low settlements from insurers, we suggest you stop the escalating stress, endless delays, and tiresome runarounds from the insurance companies and find a car accident lawyer in the state where the accident occurred to represent you. By being familiar with the state’s laws that govern auto injuries, comparative fault concepts, how insurance coverage operates, and how to effectively use accident reconstruction, biomechanics, medical testimony in trial settings and other litigation concepts, these lawyers will work with you to obtain the highest possible recovery for your injuries, damages, and losses.

Fault-based (tort liability) systems are the most common form of auto insurance in the United States with 39 states that operate under a tort system.

 

 

Add-on

However, further complicating understanding fault insurance is that some states have “add-on” no-fault automobile insurance laws. With an Add-on drivers are allowed to purchase personal injury protection as an optional coverage. A personal injury protection plan pays benefits to the injured without regard to who caused the accident. However, the driver can still sue or be sued for accident-related injuries, pain, and suffering that is not covered under a state’s fault insurance system.
The following are add-on states:

  • Arkansas
  • Delaware
  • D.C.
  • Maryland

Fill out the form at the top of the page and a car accident lawyer from your state will contact you to discuss your case.


No-fault

Drivers, relocating to a state where no fault is required from a state where there was a fault-based (tort liability) system, really need to educate themselves.

Wanting to lower the cost of auto insurance by having small claims taken out of the courts as well as a way to protect drivers from delayed payout for personal injury claims,  12 states passed legislation to establish a no-fault car insurance system, also called "personal injury protection" or "PIP."  In no-fault states, insurance companies compensate its own policyholders for the cost of minor injuries, regardless of who was at fault in the accident. In other words: regardless of fault, the insurance company automatically pays some or all of certain losses or damages sustained by an accident victim who was covered by the insurer's policy or was injured by someone covered by the insurer's policy. The loses or damages are referred to as “non-economic damages.”  They include medical expenses, lost earnings, and funeral costs. In some “no fault” states, there is a limit to what benefits the automobile insurance company will pay. In other no-fault states there is no limit. Some states have a two-part medical bill limit. In those no-fault states, if the injured person has health insurance, the no fault insurer will pay only a small amount of the injured person’s medical bills, and the health insurer pays the remainder. Without health insurance, once medical bills exceed the state’s no-fault limit, the injured party is responsible for paying them.

The loses and damages do not include pain, suffering, or the loss of consortium, which is the loss of a spouse's companionship. The term "no-fault" usually pertains only to coverage relating to personal injury, and does not include coverage for property damage such as a car or its contents. Insurance claims when it comes to physical damage to a car or its contents are still based on fault. Those claims are handled in the same way as those in states with a fault law. You would need to file a lawsuit against the driver who was found to be “at fault” or negligent. If you have collision insurance, which is recommended in no-fault states, your property damage would be covered according to that policy.

There are currently 12 states and the Commonwealth of Puerto Rico that use variations of the no-fault auto insurance system:

  •   Florida
  •   Hawaii
  •   Kansas
  •   Kentucky
  •   Massachusetts
  •   Michigan
  •   Minnesota                                                                    
  •   New Jersey
  •   New York
  •   North Dakota
  •   Pennsylvania
  •   Utah  


When Are Lawsuits Permitted in No-Fault States?

Among the no-fault (PIP) states, lawsuits are permitted for injuries meeting a certain “Threshold” which may either a monetary or verbal descriptive of the seriousness of the injury.  Even in some fault states there are “Threshold” determinations. The definition of what constitutes the “Threshold” varies considerably from state to state, but if an injured party meets the threshold requirements, he / she may sue to recover damages for pain and suffering.

In monetary threshold states, medical expenses must be over a certain dollar amount where as in verbal descriptive threshold no-fault states injuries must be relatively severe such as disfigurement, the significant loss of use of a body part, permanent disability, bone fracture or is expressed in terms of length of disability such as a full disability if a person is disabled over 180 days.

In addition there are states with what are called “serious injury thresholds.” Each state’s law has specific definitions as to what constitutes their serious injury threshold. The no-fault states that use severity as a threshold are:

  • Florida
  • Michigan
  • New Jersey
  • New York
  • Pennsylvania

Some states have both verbal and monetary thresholds. In such cases injured persons can file a liability claim if they meets either one.

As a general rule, it is smart to seek prompt legal assistance from an auto accident attorney if you are seriously injured. Delays could very well prejudice your claims, rights, and interests.

States with Monetary Thresholds include:

  • Hawaii
  • Kansas
  • Kentucky
  • Massachusetts
  • Minnesota
  • North Dakota
  • Utah

Before a person can take their injury liability claim to court his / her medical expenses must exceed a specific dollar threshold as stated in their state’s no-fault insurance policy.

Verbal threshold versus No Threshold

Selecting a Verbal Threshold rather than a No Threshold option may save drivers a few dollars on their car insurance rate, but if they are involved in an accident, it could cost them a significant amount of money. The No Threshold option  permits injured car accident victims to sue for unlimited damages, including pain and suffering and other non-economic harm.  If a Verbal Threshold option is chosen, the right to sue is limited to a few specific categories of injuries, including loss of a body part, significant scarring, a displaced fracture, or a permanent injury. Medical records must support a claim that the injuries fall into one of these categories. If not, the injured person will not be able to recover for the injuries compensation above and beyond what is granted in their no-fault car insurance policy. There are exceptions to this explanation. Out of state residents injured in accidents who carry coverage through insurance carriers not qualified to do business in a verbal threshold such as New Jersey are not bound by the limitations. 

Determining whether no-fault insurance is right for most consumers is usually a non-issue. Drivers are required to have it since they live in a no-fault state, except for three no-fault states offering a “Choice no-fault” option that allow drivers to choose between full tort coverage or no-fault coverage.


Choice no-fault
The tort policy used in these three "Choice" states is the same as those used in states with fault laws where fault has to be determined. A driver retains her right to sue, generally without any significant statutory limitations.

  •   Kentucky
  •   New Jersey
  •   Pennsylvania

When a serious injury is suffered during a car accident, it is better to contact a car accident lawyer to discuss options.

Fill out the form at the top of the page and a car accident lawyer from your state will contact you to discuss your case.