Do You Live in a No Fault State or a Tort Law Insurance State?

Fran
Fran Majidi
May 2, 2019

What does no-fault state mean, anyway? Does it mean that you’re judged according to a whole new set of rules behind the wheel? Does it mean that no fault is determined in the event of a car accident? Or does it mean that the insurance costs are shared despite whose fault the collision was? Traditional insurance states and no-fault states are different in how they handle accidents. In a traditional (or tort law) state, there is fault assigned in an accident whereas in no-fault states your own car insurance pays for damages and injuries even when the accident was someone else’s fault. Below, we break down for you which 12 states are no-fault states and what it means if you live in one.

Tort vs No-fault States

When you buy car insurance you are following state law. If you live in a tort state, you’re buying insurance to pay out to the other driver in case you cause an accident. If you live in a no-fault state, you are buying insurance to cover yourself if an accident causes damage to your car or injures you and passengers. Most states blend both types of insurance, tort and no-fault. Tort car insurance assigns fault and the at-fault driver is then responsible for medical bills, pain and suffering, and damages. The driver who caused the accident is only covered to limits and may be personally responsible if the settlement is larger than their policy limits. Often the driver with the loss sues the at-fault driver for the remainder of his/her costs.

No-Fault States

The following 12 states are considered no-fault states:

The following are verbal threshold states:

A verbal threshold state is one in which there must be an injury resulting in whole or partial loss of a body member or function before a lawsuit can be brought against the negligent party. Usually, verbal threshold states are lumped in as no-fault states. This does not mean that all of these states follow the same rules. Each state’s laws vary. What all of these states have in common is that personal injury protection (PIP) is required, along with liability insurance. The purpose of no-fault laws is to reduce the right to sue, which it does. As a consumer and driver, you should be aware of what the laws are where you live.

What Is Personal Injury Protection (PIP)?

In no-fault insurance states, auto insurance will cover injuries even if you’re at fault and you or one of your passengers gets hurt. In a state without no-fault laws or PIP, you would only be covered for injuries and damages if the other driver was at fault. PIP pays for damages and injuries up to policy limits only, so it’s wise to choose a sensible one. Even in states that do not have no-fault laws, it may be a good idea to buy PIP. Otherwise, liability insurance would only cover losses to the other party. You would not reimburse for damages to your car or any injuries you may sustain. People who live in no-fault states generally pay more in insurance premiums but they have a shorter wait time when they file a claim.

Pros and Cons of No-fault Auto Insurance

Pros:

  • Efficient claims payments Because there’s no fighting about who was at fault, claims are paid out fast and without any hiccups.
  • Fewer lawsuits Because no one can sue another driver in a no-fault state, courts in no-fault states are less burdened with car accident lawsuits. Drivers are free to take care of damages without hiring attorneys to assign fault.
  • Lower insurance premiums Because it’s less costly overall to take care of damages and injuries, some people say no-fault state residents have lower insurance premiums, even when they’ve been in an accident. There is really no clear-cut study on which type of insurance law affects premiums overall. Also, every state has variations on other laws relating to auto insurance so it’s hard to tell if premiums fall or rise based on PIP alone.

Cons:

  • No-fault car insurance states put limits on when you can sue: While this helps keep costs down, it can be limiting for people who feel the compensation was too limited for the extent of their losses.
  • Little incentive to avoid accidents Some people argue that in no-fault states there is no incentive to be a better driver because accidents are settled without much discrimination. Because you can’t sue and you assume responsibility when an accident is not even your fault, some people disagree with no-fault laws.
  • No Savings on Premiums For some people not only are premiums not lower but they are higher. There is really no clear-cut study on which type of insurance law affects premiums overall. Also, every state has variations on other laws relating to auto insurance so it’s hard to tell if premiums fall or rise based on PIP alone.

Scenarios of No-Fault vs Tort Law Insurance States

Michael and Jill collide at an intersection where Michael should’ve stopped but didn’t. Jill’s son was seriously injured and medical costs exceeded $100,000 and her car was a total loss of $35,000. There were witnesses who saw that Michael ran the stop sign without stopping. The police came and took note of the incident.

In most no-fault states, Jill’s own insurance pays for the damages to her car and her son’s injuries because she has PIP insurance (required in her state). If damages and injuries exceed her policy, she cannot sue Michael.

In a tort-law insurance state, Jill and Michael’s insurance companies contact witnesses and review the police report. They fight over the details of the accident before assigning blame to Michael. If Michael’s insurance policy’s limits are lower than the money he now owes Jill, she can sue him.

We want to hear from you. Which do you think is more fair and why? Write to us at fran@contactability.com

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