In the United States, laws covering auto insurance are determined by each state. A state can be a tort liability state, no-fault state, or a combination of both. It can be a challenge to understand the difference. There are certain advantages provided by being a no-fault state.
Beginning of No-Fault Insurance
During the 1960s, the traditional auto insurance system became the focus of public criticism. There was widespread dissatisfaction by individuals who purchased auto insurance policies and also by the agencies and companies that sold them. Even the state officials regulating auto insurance didn’t like the system.
The main frustration was the significant amount of time and expense associated with determining legal liability for an accident. An effort was made to significantly decrease the inefficiencies and delays with the system. In the 1970s, many states introduced legislation that made it possible for accident victims to be compensated for the medical, hospital, and other financial losses from their own insurance companies.
Twenty-four states, as well as Puerto Rico and the District of Columbia, passed no-fault insurance legislation.
In these states, drivers maintain insurance to cover themselves if they experience property damage or injuries from an accident. A car accident lawyer knows their client’s insurance company won’t have to pay out a claim to the other driver.
In this situation, it does not matter who is at fault for an accident. All those involved must file a claim with their own insurance company. In these states, it is common for drivers to be required to pay for personal injury protection coverage (PIP). This is usually part of the auto insurance policy they purchase.
PIP coverage is required in no-fault states. Each state determines its own minimum PIP coverage levels for vehicle insurance. It is designed to pay up to a specified amount for a driver’s medical bills as well as the medical bills of their passengers when involved in an accident. The types of things covered by PIP are insurance deductibles, funeral expenses, lost wages, services an accident victim can’t perform because of their injuries, medical expenses over coverage limits, and more.
According to most no-fault laws, a driver can still use the services of a car accident lawyer to sue for severe injuries. This includes pain and suffering if their case meets certain criteria.
This could be a monetary threshold such as the dollar amount of medical bills and more. The system often results in reduced costs and decreases the delays associated with a claim being processed.
Insurance companies favor laws that don’t provide a dollar threshold on lawsuits. The dollar target often promotes the submission of fraudulent claims. These laws must have a provision that creates a way for the threshold to be changed. This is so it can keep pace with inflation.
If this isn’t possible, the effectiveness of no-fault insurance, with regard to lowering litigation, is eliminated. It has been shown in some states there are dishonest providers of professional services who regularly cheat the system.
Insurance Rates Increase
Under the no-fault system, a driver’s insurance company could determine they are to blame for an accident. They can require the driver to pay some or all of the deductible as part of the payment to repair the damages to their vehicle.
This could result in an insurance company increasing a policyholder’s premiums. A determination of fault will go on a driver’s record. They will experience a rate increase when their policy is renewed or if they try to get insurance from another company.
Prior to No-Fault Insurance
Before there was no-fault insurance, the two insurance companies would engage in a serious battle to determine fault for an accident. Once this had been established, the company insuring the driver who had been determined to be at fault would have to pay all of the damages. It was a long process that took a significant amount of time. The client of a car accident lawyer could be left without compensation for a significant amount of time.
No-fault insurance is a way for accident victims to quickly receive compensation for their medical bills, property damage, and other types of loss. It can make it easier for a car accident lawyer. It eliminates the high costs associated with long legal battles that require time and resources.
By eliminating a significant amount of legal expenses, insurance companies can then provide their customers with lower insurance rates and better service.