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No-Fault Insurance
No-fault auto insurance is a system by which each driver’s insurance is responsible for his/her own medical bills in an accident, regardless of who was at fault. This is similar to mandatory Personal injury protection (PIP) because it pays your own medical expenses, however, PIP only pays your medical expenses if you cause an accident and your injuries are therefore not covered by the other driver’s BIL, or bodily injury liability coverage. Under the no-fault system, again, your insurance company automatically pays for your injuries regardless of fault.
Another aspect of the no-fault system, and perhaps the goal of the system, is that it precludes the possibility of seeking legal recourse against another driver for injuries. When over 20 U.S. states tried to enact a no-fault insurance system in the early 1970s, it was thought that the number of personal injury lawsuits resulting from car accidents would decrease, and that insurance companies and drivers alike would ultimately save money. However, many of those states repealed the laws and returned to a tort system after experiencing an increase in lawsuits (because drivers didn’t want to pay their own expenses and experience rate increases when they didn’t cause an accident).
Pure No-Fault vs. Modified No-Fault
With pure no-fault insurance, a driver can collect an amount up to his/her policy limit for medical costs and related expenses (including lost time, suffering, etc.), but is prohibited from seeking legal recourse against the at-fault driver (or his/her insurance company) for any reason. Currently, no states use a pure no-fault system. Modified no-fault insurance allows for lawsuits if the injuries exceed a certain dollar amount or are particularly severe. All 13 states still using the no-fault system have adapted certain modifications.
When Can Lawsuits Be Filed in a No-Fault State?
Even in a no-fault system, it is still possible to sue another driver for damages. Each no-fault state has particular “thresholds,” beyond which a person may seek legal recourse. In some states, drivers and/or their insurance companies are only entitled to collect whatever costs exceed the policy’s maximum benefit amounts. For serious injuries, injured drivers and passengers may also seek “pain and suffering” or other compensation that can’t be assigned a specific dollar amount.
Qualitative Threshold for Torts: If the injuries are particularly severe, such as death or permanent disfigurement, drivers can attempt to recoup their own expenses as well as additional compensation for their suffering, lost time, or permanent disability.
Quantitative Threshold for Torts: If the medical bills for the injuries sustained in the accident exceed a specific dollar amount, drivers may sue the at-fault driver and his/her insurance company for compensation. The specific limit is determined on a per-state basis.
Who Pays for Vehicle Damage in a No-Fault State?
The no-fault system only applies to medical expenses. In no-fault and tort states alike, vehicle and property damage expenses are the responsibility of the at-fault driver in an accident. This is why no-fault states require all drivers to carry liability coverage. In no-fault states, drivers still have the option of seeking legal recourse against the other driver for damages in excess of the at-fault driver’s liability insurance limits.
Tort Insurance
In a tort insurance system, all damages and injuries are the responsibility of the person determined to be at fault for an accident and are covered by liability insurance. Therefore, in tort states it is absolutely essential that you carefully examine the maximum limits of your liability coverage because if you cause injuries or damages in excess of your insurance benefits, you are personally responsible for paying the remainder. As in no-fault states, in tort states you may be sued by the other driver in an attempt to collect outstanding damage and medical expenses. Depending on the state, you may be limited to seeking whatever damages exceed the insurance payout. You may also seek additional damages (including pain and suffering or lost time compensation) for severe injuries, death, or permanent disability or disfigurement.
Choice No-Fault Insurance
In a choice no-fault insurance system, drivers have the option of declining no-fault coverage, which prevents their own insurance from automatically covering their damages in any accident. In this case, the other driver’s liability coverage will be charged with covering your medical expenses in addition to the damage to your vehicle. The Kentucky auto insurance system is a choice no-fault system. In Kentucky, drivers have the option of declining no-fault coverage in writing and reserving their right to sue for medical expenses in the event of an accident.
No-Fault States
As of September, 2009, the following states have some form of no-fault auto insurance system:
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