In some states, when two drivers are involved in a car accident, the person responsible for the accident is liable to the other for injuries the other person sustains in the accident. About half of the states in the United States have adopted “no-fault” liability laws. No-fault liability laws make each driver involved in a car accident responsible for their own damages regardless of who was at fault in causing the accident.

A no-fault auto insurance policy provides insurance that compensates the insured person for the losses they suffer in a car accident, even if the insured is not responsible for causing the accident. In some states that have adopted no-fault insurance laws, there is an exception to no-fault liability when a person sustains a serious personal injury or significant property damage, and the value of their loss exceeds a specific amount.

By contrast, states that have adopted at-fault liability laws require the person who caused the car accident to pay damages to all the parties who suffered losses because of the accident.

Special Rules for No-fault Policy Holders

No-fault insurance covers bodily injury of the insured, the insured’s passengers, and others, e.g., pedestrians, caused by a car accident, regardless of which party would be liable under traditional at-fault liability laws.

No-fault insurance coverage eliminates personal injury lawsuits in smaller accidents in exchange for direct payment by the injured person’s own insurance company for medical bills and lost wages, regardless of fault. No-fault coverage typically does not apply to vehicle damage. A person would submit their claim for property damage to the person responsible for the accident and their insurance company or by looking to their own collision insurance.

How Does No-fault Insurance Work?

Although most states still do not have no-fault insurance, no-fault insurance is mandatory in some states. It pays medical expenses for a person and their family, the passengers in their vehicle, and any pedestrians injured in an accident.

The insurance covers the medical care cost and is paid out regardless of fault. The medical benefits payable under a no-fault policy are sometimes called “Personal Injury Protection” (PIP).

In states with mandatory no-fault insurance systems, claims for compensation for pain and suffering are permitted for injuries that meet a certain threshold. This threshold amount is different from state to state. States with so-called “monetary” thresholds require that the monetary value of the claim amount reach a specific dollar amount to qualify for damages for pain and suffering. States with “verbal” thresholds require that the injured party demonstrate a defined level of injury, expressed in such language as “serious and permanent.”

Finally, eight states have hybrid systems. Hybrid systems provide that no-fault coverage supplements the required third-party liability insurance. These states do not have limits on lawsuits. All present no-fault systems permit claims and recovery against at-fault drivers to pay economic losses over the no-fault benefits.

Twelve states that currently have true no-fault insurance systems are:

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

Reportedly, drivers in Michigan pay the highest auto insurance rates in the U.S. because the state has comprehensive no-fault auto insurance laws. Under Michigan law, drivers are required to purchase and carry three types of insurance on every vehicle, including personal injury protection (PIP), property protection insurance (PPI), and residual bodily injury and property damage liability (BI/PD).

Drivers can opt out of no-fault coverage in Kentucky, New Jersey, and Pennsylvania.

In these three states, drivers may choose between the limited restrictions of no-fault insurance and full tort liability insurance, meaning there are no limits on a person’s ability to sue a driver who is at fault in causing an accident. That is why these states are called “choice no-fault states.”

In these states, a person can expand their right to sue so that their injuries and medical costs would not need to reach a certain threshold before a person would have the right to sue. However, remember that auto insurance premiums would probably be more expensive if a person opts for a full-tort policy and an unlimited right to sue. Also, a person would lose access to PIP coverage if they decided to expand their right to sue in Kentucky.

Generally, true no-fault states require drivers to purchase minimum levels of personal injury protection (PIP) coverage to cover compensation for their injuries in a car accident. The amount of coverage required varies by state, as does the nature of the coverage, which means exactly what it covers.

Depending on the state, PIP coverage may reimburse the policyholder for medical expenses for treating injuries and other accident-related expenses, as well as lost wages, or it may not. Again, the nature of the coverage depends on the state and the language and provisions in a particular insurance policy.

In both the 38 at-fault and 12 no-fault states, drivers are usually required to buy a minimum amount of third-party liability coverage and uninsured motorist protection, in addition to PIP.

Then states allow drivers to add personal injury protection to their policies but do not mandate it. In these states, a person can add personal injury protection benefits to their policy if they choose. For example, a person might choose not to add PIP if they already have health insurance. They may calculate that their health insurance would cover the cost of their medical treatment for injuries suffered in a car accident.

The only problem is that health insurance alone does not cover any income a person may lose if they cannot work for a time. And it would not cover funeral expenses if a person is killed in a crash. In addition, health insurance may have a deductible that a person would have to pay themselves before their health insurance coverage starts covering their medical expenses.
However, if a person opts to add PIP coverage, their coverage for bodily injury would work the same in add-on states as it would in an at-fault state.

The states that allow PIP coverage but do not require it are as follows:

  • Arkansas;
  • Delaware;
  • Maryland;
  • New Hampshire;
  • Oregon;
  • South Dakota;
  • Texas;
  • Virginia;
  • Washington;
  • Wisconsin.

Unless certain conditions apply, true no-fault states restrict a person’s ability to sue the person who caused an accident. Generally, a person has to meet one of two thresholds before they can file a lawsuit:

  • Verbal Threshold. The injuries must result in serious disfigurement or death;
  • Monetary Threshold. The expenses must exceed a dollar amount that is specified in state law.

But there are different laws and interpretations of no-fault insurance rules and policies. So, it is up to consumers to become informed about what their insurance policy covers. A person should work with their insurance company or agent to understand whether no-fault coverage is part of the car insurance picture in their state and what no-fault auto insurance options they have. Then a person needs to make the right choices to protect themselves and their family in the event of a car accident.

Claims tend to take longer to resolve in states with at-fault insurance systems than in no-fault ones. This is because insurers must determine which driver was at fault after an accident to know which driver’s insurance company is responsible for paying for the other’s injuries.

Of course, the time it takes may depend on the accident’s severity. Accidents involving little injury and damage can probably be resolved more quickly, whereas accidents involving significant injury and damage may take more time.

Should I Contact a Lawyer?

If you are unsure of insurance laws in your state and confused about what kind of car insurance you need to buy, you can consult a car insurance lawyer for guidance.

If you have been involved in an automobile accident and have suffered injuries, you should contact a car accident lawyer. You may also need a lawyer’s assistance if you cannot resolve an issue with your insurance company.