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Explanation of Auto Insurance, “No Fault” Coverage

Car insurance lawsuits can be very contentious. Paying a complex claim can take months or years, especially if there are lawsuits involved. This is why many states have adopted auto insurance laws. “No fault”by speeding up claims processes and avoiding lawsuits for small or insignificant claims.

No-fault law systems vary slightly depending on the state. They generally mean that your insurer will pay for medical expenses and other losses caused by an accident, regardless of who caused the accident. This system saves money that would otherwise have been spent on minor litigation, it is also aimed at lowering customer payment rates to insurers.

According to the Insurance Information Institute (III), current “no-fault” insurance laws allow drivers to make claims for serious injuries only if the cases meet certain conditions related to the severity of the damage.

States where the auto insurance law, “No Fault” Coverage is in effect

Here are some states that have adopted “no-fault” insurance laws:

  • Florida
  • Hawaii
  • Kansas
  • Kentucky
  • Massachusetts
  • Michigan
  • Minnesota
  • New Jersey
  • New York
  • North Dakota
  • Pennsylvania
  • Puerto Rico
  • Utah

What is the origin of “no fault” insurance laws?

The traditional process of auto insurance claims was in crisis in some states during the 1960s. Insurance companies and the governments of those states complained that determining the fault of the causers of accidents was very expensive and time consuming.
No-fault insurance is based on the idea that if drivers’ medical claims are paid by their own insurance companies, regardless of who was at fault, then there will be less fraud and unnecessary delays in the claim process. In addition, the circumstances under which claims for damages can be made are limited, many cases are eliminated in court, which facilitates the work of the legal system.

Comparing traditional versus no-fault insurance

If another car hits you, according to traditional insurance, your claim will be directed to the insurance provider for damage to third parties of the cause of the accident. Another option is to establish the claim with your insurer and she will be in charge of continuing the process against the insurance company of the driver who caused the accident.
Investigations by both companies will attempt to determine:

  1. Who is guilty?
  2. Reasonable medical expenses according to your damages
  3. The type of property damage (not monetary) caused by the accident
  4. Which company should pay for the damages?

But if the driver is injured, there can be a long delay in the settlement of the claim and payment of medical expenses. Delays in determining guilt also delay payment of claims. Drivers who file lawsuits, but do not agree with the material damages that have been determined in the police investigation, have the possibility of bringing the other driver to trial.

In states where “no fault” laws exist, the process is different, the claim is against your own insurance company, it will pay regardless of who was at fault for the accident. Both insurers will continue to investigate the case only if they can increase the at-fault driver’s payment installments, or recover the damage deductible, paid for your collision coverage.

You will be able to receive compensation for property damage only if your medical expenses are minimal, or the damages are considered serious enough that they meet the requirements of the verbal limits (treshold) of your state.

Restrictions on lawsuits

States with “no-fault” laws have limits on claims for property damages (non-monetary), as stated in III. These limits are expressed in dollar amounts (the minimum amount used for medical expenses), or verbal (certain damages or levels disability that are specifically mentioned in the law)
The monetary limits range from $ 1,000 in Kentucky to $ 4,000 in Minnesota. If the expenses exceed these amounts, the person can be sued.

The following states have monetary limits: Hawaii, Kansas, Massachusetts, North Dakota, Puerto Rico and Utah. Those with verbal limits are Florida, Michigan, New Jersey, New York and Pennsylvania.
Some states have “no-fault” provisions in their auto insurance policies, but they are not considered “no-fault” states. For example, Oregon directs its insurance companies to provide personal injury protection for damages resulting from the use, maintenance or possession of a car.

Either way, this status allows a not guilty victim to sue (without restrictions) the responsible driver for damages and disability. Therefore, even though Oregon has a “no-fault” insurance provision, it is not really such a state.