What States Have No Fault Auto Insurance Laws?

What are the advantages of No Fault Auto Insurance?

The higher the required benefit level, the higher the cost of no fault auto insurance. Because of its mandated high level of benefits Michigan’s law is frequently described as “generous.” This is not a correct description. Drivers in states with low mandated coverage can purchase, by personal choice, additional coverage even beyond that mandated in Michigan. The level of required benefits reflects a judgment about the cost of insurance and the level of benefits society believes people should be required to purchase.

As stated, Michigan has adopted a high level of first-party benefits. Accident victims have unlimited medical and rehabilitation benefits. These expenses are paid by the first-party insurer up to $250,000, with amounts greater than $250,000 paid by a special state fund, the Michigan Catastrophic Claims Association. Therefore, no matter how great an injured persons medical expenses in Michigan, those expenses are not borne by the injured person. If the injured person cannot work, the law requires insurers to pay 85 percent of lost wages, up to a maximum of $2,569 a month for up to three years (the maximum is adjusted in line with the Consumer Price Index).

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Enter your zip code to compare discount auto insurance quotes. In New Jersey, medical benefits also are unlimited, with amounts greater than $75,000 paid by the state’s Unsatisfied Claim and Judgment Fund. However, wage loss payments are capped at $5,200. Families of people killed in auto accidents also can collect the lost-wage benefit in the form of survivors’ benefits. New York also has what are considered to be high first-party benefits. New York provides up to $50,000 in medical, wage-loss and rehabilitation and replacement services benefits.

Instead of placing restrictions on lawsuits in return for assured no-fault auto insurance benefits, five states have superimposed compulsory first-party payments on an unchanged tort-liability system; in seven other states, first-party coverage is optional, with no restrictions on lawsuits (see chart on page 81 for these states).

Because the no-fault auto insurance program is added to the tort framework, the system in these 12 states is generally referred to as “add-on.” Under these laws, a motor vehicle accident victim retains the right to sue anyone believed to be at fault; at the same time, insurance companies are required to offer no-fault benefits to car owners. In all these states auto accident victims may receive compensation up to state-mandated limits from their first-party insurers and may also sue the other driver in the accident for these same costs plus additional sums for pain and suffering and lost wages.

The majority of states with no-fault auto insurance laws also have laws regarding subrogation—the right of a first-party insurer to recover its payments if the other party is at fault. In some states, first-party insurers can themselves bring lawsuits against at-fault drivers. In some, first-party insurers are reimbursed out of any recovery the injured person makes as the result of a lawsuit.

In others, first-party insurers are reimbursed directly by the insurer of the at-fault driver. Most states permit one or more of these methods of subrogation, although in many states, special conditions apply. Hawaii, for example, permits first-party insurers to be reimbursed only by the at-fault drivers insurer, only when the tort (lawsuit) recovery duplicates benefits already paid, and only up to 50 percent of those benefits.
Other states have either no provision for subrogation (for example, New Jersey) or explicitly prohibit it (for example, New Hampshire).

Even in states which permit some form of subrogation, the amount the first-party insurer recovers is seldom if ever equivalent to the amount it has paid out, because of the administrative expenses of recovery and the long delay between the time the first-party benefits are paid out and the time they may be recovered, which inflicts lost opportunity costs on the first-party insurer. Get discount auto insurance quotes from our website.


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