Most of us understand the basic principles of automobile insurance. The vehicles we drive can cost an enormous amount of money (and seem to be getting more expensive every day) and cause significant property damage if driven carelessly. Great bodily harm and significant injury can result from collisions. We need to protect our property and ourselves and do not have the resources to do it alone. So we turn to insurance companies that possess the financial resources that we do not.
Auto insurance companies provide payment and recoup losses based upon who is determined to be at-fault in an automobile collision. This is known as the “tort” system. In tort, if you are determined to be at-fault in a car accident, your insurance company pays for the other vehicle’s damage and any medical payments for the injured people involved.
But there is another important element to auto insurance – the no-fault accident.
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How Can There Be A No-Fault Accident? Isn’t Someone Always At-Fault?
The term “no-fault” doesn’t mean that there are blameless car accidents. Rather, it means that individuals who suffer bodily injury in an accident must recoup their medical payments from their own insurance company. This is known as “first party coverage.” In the tort system, the victim’s insurance company would recover the expense of the medical bills from the at-fault party’s insurance company. In a no-fault state, each party’s insurance company pays for their insured’s medical bills, lost wages, etc. that might have resulted from a car accident.
Why Does No-Fault Exist?
Determining who is at-fault in a car accident can be lengthy, complicated legal process. Courts were often found to be jammed with such cases. No-fault insurance was created to reduce this burden on the judicial system. If each insurance company simply paid for their own client’s medical bills, these expensive (and sometimes useless) trials could be avoided. The theory was that people would then receive payment for their medical expenses more quickly, and auto insurance premiums would be reduced since auto insurance companies wouldn’t have to pay for as many trials.
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So The Victim’s Insurance Company Must Pay All The Victim’s Medical Bills?
Each insurance company is responsible for the insured’s medical bills – up to a limit. These limits are called thresholds, and there are two types:
•Monetary (Quantitative) – there is a specific dollar that has to be reached before tort is allowed. This means that once the medical losses reach a certain amount, one insurance company is allowed to seek damages from the other.
•Verbal (Qualitative) – this is up to the courts to determine if the injuries are significant enough to warrant compensation from whoever is at-fault.
What States Have No-Fault Insurance?
Currently, twelve states and the Commonwealth of Puerto Rico have no-fault insurance laws. They are:
•Florida, Michigan, New Jersey, New York, Pennsylvania, Hawaii, Kansas, Kentucky, Massachusetts, Minnesota, North Dakota, and Utah.
States with the verbal (qualitative) thresholds are: Florida, Michigan, New Jersey, New York, and Pennsylvania.
States with monetary (quantitative) thresholds are:
Hawaii, Kansas, Kentucky, Massachusetts, Minnesota, North Dakota, and Utah.
In Kentucky, New Jersey, and Pennsylvania, residents are able to choose if they want no-fault insurance or the standard tort system.
In Kentucky and New Jersey, if policyholders don’t make a choice, no-fault is assigned.
In Pennsylvania, tort is assigned if the policyholder doesn’t chose.
You Still Need Car Insurance In A No-Fault State
Some drivers have the misconception that they don’t need to carry automobile insurance if they live in a no-fault state. Nothing could be further from the truth. Drivers are still required to have liability insurance. Also, no-fault laws don’t cover physical damage from car accidents. These losses are still covered under the tort system. No-fault insurance only applies to medical payments.
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