No-fault auto insurance, or personal injury protection insurance, is designed to help you recover economic losses and medical expenses that result from a car accident, regardless of who caused the accident. No-fault insurance is allegedly designed to limit a driver’s ability to pursue litigation against another driver and speed up the claims process.
If you are a California resident driving out of state, you may find yourself sharing the road with drivers who have no-fault insurance. If you are in an accident, your insurance company will be bound by the laws of that state. Read on to learn the very basics of no-fault insurance, and how claims and litigation work in the event of a car accident.
No-fault insurance aims to achieve rapid, full compensation of auto accident claims without the need for litigation.
38 states total, including California, are at-fault states.
In at-fault insurance states, when you get into a car accident, you call up your insurance company and a representative handles your claim and determines any compensation owed to you based upon the facts of your accident and your policy limits. You are also permitted to file a claim through the other driver’s insurance, if they are deemed at fault. The claims process may be completed in only a few weeks, especially if your accident requires little investigation and there are no injuries.
However, when the other driver does not cooperate, or the other driver’s insurance does not cooperate, this can drag out the claims process, leaving you with a damaged car and little or no money to fully compensate you or your loved ones. But it does not stop there. Either you or the other driver can file a lawsuit to resolve liability or compensation disputes in court. Even if your insurance closes out the claim, you could be dealing with the legal aftermath of a car accident for months or even years.
No-fault states are different. In these states, generally speaking, drivers are not permitted to file a claim through the other driver’s insurance, as state law indicates that nobody will be deemed at fault in most cases. There are exceptions in every state including a damages threshold.
This system somewhat limits the ability to litigate claims. If one party does want to pursue litigation, they must exceed the no-fault threshold; in other words, they must be severely injured or suffer severe financial loss to litigate a car accident, motorcycle accident, or trucking accident in a no-fault state.
Currently, 12 states have some form of no-fault insurance laws: Florida, Michigan, New Jersey, New York, Pennsylvania, Hawaii, Kansas, Kentucky, Massachusetts, Minnesota, North Dakota and Utah.
No-fault insurance falls into two categories: strict no-fault and choice no-fault.
Strict no fault: The strict no-fault system is intended to eliminate litigation, as the whole point of the law is to manage accident claims without determining who is at fault.
Here is an example to illustrate no-fault insurance. Let’s assume you are involved in a car accident. You were stopped at a red light and suddenly rear-ended. It’s not your fault, right? In a no-fault state, the fact that you had no role in causing the accident does not matter. Your insurance company will compensate you for the accident based upon financial losses or injuries you may have suffered. The other driver’s insurer will similarly compensate them. No fault will be assigned to either of you.
Choice no fault: In choice no-fault states, drivers can choose a no-fault insurance policy or a traditional tort liability policy. New Jersey, Pennsylvania, and Kentucky are the only three states in which a driver has a choice to opt out of no-fault insurance.
Generally speaking, in New Jersey, people that do not voluntarily opt out of no-fault insurance are presumed to want no-fault coverage and are limited in the ability to sue. In Pennsylvania, the opposite is true: people that do not voluntarily opt out of no-fault insurance are presumed not to want it, and therefore retain the unrestricted option to sue. If you live in a choice no-fault state, pay close attention to your insurance policy so you are not caught off guard if you’re involved in an accident. Always seek legal counsel.
Tort liability: The majority of states are tort liability states, or at-fault states, in which there are no restrictions on lawsuits. A driver deemed at fault for a car accident can be sued by the other driver and the other driver’s passengers for out-of-pocket expenses and losses and pain and suffering from the accident.
The law imposes strict limits on the ability to file a lawsuit in no-fault insurance states. That doesn’t mean you can’t sue—it just means you can’t file a frivolous lawsuit.
As discussed, no-fault insurance has been adopted in a dozen states as an attempt to close accident claims more swiftly.
This does not mean you are precluded from filing a lawsuit. In general, in states with strict no-fault insurance laws, drivers involved in an accident can only sue for severe injuries if their case meets either a verbal threshold or a monetary threshold. As such, no-fault insurance differs slightly depending on the state.
| States with Verbal Threshold | States with Monetary Threshold |
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Florida |
Hawaii |
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Michigan |
Kansas |
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New Jersey |
Kentucky |
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New York |
Massachusetts |
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Pennsylvania |
Minnesota |
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North Dakota |
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|
Utah |
A verbal threshold is based upon a person’s degree of injury, as characterized by how the injury is described. The threshold must be exceeded in order for an individual to bring a lawsuit. For example, if you are involved in an accident and sustain a neck sprain, you may not meet the verbal threshold and therefore you may not be able to sue the other driver. However, if you happened to sustain a severe injury—such as the loss of function to one or more body parts—then your case may exceed the verbal threshold and a lawsuit may move forward.
A monetary threshold is based upon a person’s degree of financial loss. Again, this threshold must be exceeded before a lawsuit can move forward. Consider your financial loss if the accident resulted in you no longer being able to work and earn an income. Such a situation may satisfy the monetary threshold.
If you live in an at-fault state, or are injured while visiting an at-fault state such as California, and wish to pursue an action, seek an experienced personal injury law firm. At Penney & Associates we are experienced personal injury lawyers that handle many types of injury claims. Contact us today.
