No-Fault Auto Coverage Explained

What the Heck is No-Fault Coverage?

No-fault insurance coverage can be very complex and you may want to consult a personal injury lawyer to help you through the process if you are injured in an accident. These 12 states currently have a no-fault auto insurance:

North Dakota, New York, Pennsylvania, Florida, Michigan, New Jersey, Hawaii, Kansas, Kentucky, Massachusetts, Minnesota, Utah, the District of Columbia.

All the other states are considered fault states”. In many states, the entire concept of monetary thresholds has come under strong attack. Critics argue that these thresholds are ineffective blocks to lawsuits because, in these days of soaring medical costs, it is easy (and advantageous) for an accident victim to run up a medical bill in excess of the dollar threshold most states have specified, particularly if he or she is aiming at a sizable court settlement.

Also, monetary thresholds invite abuses, such as inflated doctors’ bills and faked injuries. It is a simple matter for victims’ attorneys—who advertise very aggressively for clients in many sections of the country—to counsel their clients to increase their medical bills above the threshold so that a lawsuit can be brought.

In the past, both New York and Florida used a monetary threshold. In New York, victims could sue if they had more than $500 in medical bills; in Florida, they could sue if bills totaled at least $1,000. When New York had the $500 threshold, it was a relatively simple matter to meet the laws definition of “seriously injured,” so that lawsuits were not eliminated. Insurance companies were paying for a lot of lawsuits and for no-fault discount auto insurance benefits as well. As a result, insurance premiums skyrocketed, increasing about 37 percent a year until in 1977 the New- York state legislature replaced the dollar threshold with a descriptive or verbal one.

The legislature also placed ceilings on fees charged by doctors and hospitals for treating auto accident victims. Lawsuits quickly dropped and personal injury auto insurance costs increased less than the rate of inflation, as measured by the Consumer Price Index. According to the New York State Insurance Department, from 1977 to 1988, rates increased about 42 percent while the CPI rose by more than 80 percent. Florida experienced a similar drop in lawsuits and stabilization of premiums when it replaced its monetary threshold with a verbal threshold.

Find discount auto insurance coverage in no-fault states

In states which do not have compulsory first-party discount auto insurance, drivers who do not voluntarily purchase some form of first-party insurance and who are injured through another fault must rely on their own assets, or on successfully suing the at-fault driver (unless the at-fault driver is uninsured and the victim has UM coverage). This lawsuit system retains all the defects described in the important 1960s DOT study that spurred the drive to no-fault measures. It is time- consuming, costs the taxpayers money, does not guarantee a recovery even if deserved or may provide a far higher recovery than deserved, and, as a system, delivers only about half of the total dollars expended to the actual victims, often after years of delay during which the victim receives nothing.

In some jurisdictions, juries are increasingly sympathetic to injured plaintiffs and sometimes make very large awards for “pain and suffering,” reasoning that the at-fault drivers insurer will pay and therefore no one will really be “hurt” by the large award. However, the increasing tendency to sue, both in auto and a wide range of other types of accidents, spurred in part by an increasingly aggressive plaintiffs’ bar, and the tendency of courts and juries to give high awards because “insurance will pay” drives up the cost of third-party liability discount auto insurance for all drivers. For example, from 1982-1986 auto accident litigation in California increased at the rate of 13.2 percent annually.


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