No-fault insurance means that an automotive insurance provider pays for a portion of the damages regardless of the fault or cause of an accident. Under a no-fault policy, the insurer pays damages automatically up to a limit specified in the policy terms. The amount helps cover some of the expenses associated with a car accident regardless of who is “at-fault” or responsible for causing the collision. A no-fault insurance system differs greatly from the tort insurance system. Under the tort system, the at-fault party must pay for the other driver’s damages. These damages may include property damage, injuries, loss of wages, or “pain and suffering.”
List of the No-Fault States
Most states operate under the tort insurance system. Currently, only 12 states have no-fault auto insurance laws in effect. The 12 no-fault states are as follows:
- New Jersey
- New York
- North Dakota
In addition to these 12 states, the District of Columbia also follows a no-fault system. (Note: Puerto Rico, an unincorporated territory of the United States, operates under a no-fault insurance system as well.)
All other states operate under the tort system. With the tort system, drivers must carry liability insurance to cover damages they may cause in an accident. When an accident occurs, tort system states use comparative and contributory negligence laws to determine if one or both drivers a responsible for the accident. The at-fault parties then pay for the damages based on standards of the state’s insurance regulatory department.
Some states also allow the option of choosing full or limited tort insurance. For example, limited tort insurance policies may cost less, but drivers generally cannot receive damages for “pain and suffering” unless they experience long-term or permanent injury.
Primary Types of No-Fault Insurance
Having no-fault insurance guarantees payment for certain damages regardless of the at-fault party. The state’s regulatory body determines the cap or limit on this compensation based on industry standards and established state insurance department regulations. In addition to providing a small safety net, this type of policy may shield the at-fault party from being sued for certain damages in the event of an accident or collision. Inversely, this policy also means the drivers forego their rights to sue other parties for basic damages in the event of an accident.
The types of no-fault insurance offered differ for each of the 12 no-fault states. All states follow requirements established under the department of insurance or regulatory body. The most common types of no-fault insurance include the following:
- Personal Injury Protection (PIP)
- Choice No-Fault Policies
- Public Liability and Property Damage (PLPD)
- Property Protection (PPI)
- Residual Bodily Injury and Property Damage Liability (BI/PD)
For example, several no-fault states only require drivers to have basic personal injury protection (PIP). In Florida, for instance, drivers who suffer physical injuries during an accident use their own personal injury protection (PIP) regardless of which party caused the accident. Parties who are not at fault place a claim against their own PIP rather than using the at-fault party’s bodily injury liability (BIL) coverage. However, the at-fault party can still be responsible for other types of damage. In this example, the injured party’s no-fault coverage would pay for bodily injury, but the at-fault party’s property damage liability would cover any vehicle expenses.
Other states allow drivers to choose between traditional tort insurance or no-fault insurance. The industry refers to states with this type of flexibility as “choice no-fault states.” Pennsylvania, New Jersey, and Kentucky each allow drivers to choose between full tort coverage and limited tort (no-fault) coverage for motor vehicle insurance.
In addition to basic PIP policies and choice-no-fault policies, some states operate under comprehensive auto insurance systems. For example, Michigan has an all-inclusive motor vehicle insurance requirement known as public liability and property damage (PLPD) coverage. Each Michigan motorist must purchase an auto insurance policy that covers three basic areas: personal injury protection (PIP), property protection (PPI), and residual bodily injury and property damage liability (BI/PD). In Michigan, property protection (PPI) can cover up to $1 million in damages to standing property like buildings, gates, and fences. However, this type of no-fault insurance does not cover damage to cars involved in the collision, and it does not compensate for other vehicles unless they were legally parked upon impact. As a result, policyholders who want to cover the risk of damaged or stolen vehicles must purchase additional physical damage coverage (or a comprehensive coverage plan) that pays in the event of a collision.
Several of the 12 no-fault states have adopted the no-fault auto insurance system to reduce the burden of vehicular lawsuits. No-fault insurance severely restricts the right of either party to sue (unless serious injury or death occurs as a result of the accident). Monetary damages for non-monetary losses (such as “pain and suffering”) usually only occur if the injured party can prove serious or permanent harm.
Primary Challenges of No-Fault Insurance
Using no-fault insurance policies to curtail litigation is not a new concept. In fact, far more states operated under no-fault insurance laws in the past than in the present. Between 1971 and 1976, there were 24 states with no-fault insurance laws. Unfortunately, astronomical medical costs and widespread fraud have made the policy a constant subject of debate and reform.
For example, reformers in New York claim that “medical mills” use no-fault policies to bill personal injury claims of up to $50,000 that healthcare providers then fail to administer. Similarly, fraud has become so widespread in some parts of Florida that $10,000 worth of PIP coverage can cost a motorist thousands of dollars in fees every year. In fact, a 2016 study found that on the whole, Florida drivers pay an extra $1 billion each year as a result of these fraud-inflated premiums. In Michigan, lobbyists have argued against unlimited lifetime medical benefits for accident victims (which costs each motorist $175 annually). This debate reaches persistent deadlock since attempts to overturn the no-fault auto insurance law have failed in at least two state elections.
State policymakers and insurance industry representatives have often noted that choice, reform, or repeal may help reduce fraud. For example, Florida governor Rick Scott signed new measures into law that reduced coverage for non-emergency or minor medical treatments. By reducing this type of automatic coverage, advocates hope to reduce the occurrence of fraud and thereby lower the cost of premiums for policyholders.
Although some states attempt to reform existing no-fault systems, other states have repealed them entirely in order to reduce the cost of automotive insurance premiums. For example, Colorado governor William Forrester Owens signed a law to end the state’s no-fault insurance program in 2003. Within five years, the cost of premiums fell nearly 35 percent, saving drivers an average of $322 per motor vehicle per year.
Colorado policymakers replaced the no-fault system with a traditional tort system. This tort system requires drivers to purchase liability insurance coverage, and at-fault parties must pay for medical injuries or property damage in the event of an accident. Specifically, Colorado law requires $25,000 of bodily injury liability (BIL) per individual, per accident; $50,000 of coverage for all injuries incurred in one accident; and at least $15,000 of property damage liability (PDL) in the event of an collision. Furthermore, standard auto insurance policies cover at least $5,000 of hospital expenses unless the policyholder chooses to forego purchasing medical coverage. Coloradans can skip the medical coverage portion if their existing health insurance policy already covers this expense.
In addition to Colorado, other states that repealed or replaced no-fault insurance system have experienced similar results. For example, Georgia saw a 20-percent drop in auto insurance premiums upon its repeal of the no-fault system in 1991. The state’s lowered auto insurance premiums have remained consistent for over two decades. Similarly, Connecticut ended its no-fault insurance system in 1994 and saw insurance premiums drop by 31 percent by year 2004. Nevada ended its no-fault insurance system in 1980 and policyholders have experienced lower auto insurance rates ever since. Even more startling, a 2007 study found that states with traditional tort insurance laws had a 40-percent lower cost of accident-related medical care than states with no-fault insurance laws.
It is important to note, however, that not all states have experienced backlash regarding no-fault laws. As discussed, there are 12 states with primary no-fault insurance systems. In addition, there are a handful of states with PIP add-on options. (As of 2019, states that offer some type of PIP add-on options include Arkansas, Delaware, Maryland, New Hampshire, Oregon, Texas, Washington, Virginia, and Wisconsin.) A PIP add-on can subsidize any damages received from a traditional tort insurance claim.
Some states with no-fault laws have experienced happy results. For example, motor vehicle insurance rates and premiums in no-fault states Minnesota and North Dakota rank lower than the national average. Even in states with reputations for notoriously high premiums (such as Florida), automotive insurance rates can vary drastically by zip code. In Florida, zip codes with higher crime (such as car theft rates) have much higher insurance premiums than low-crime or suburban areas.
No-fault reform laws may also help mitigate some of the fraud associated with the system. For example, Florida’s newfound reform policy has the following rules:
- Parties who claim medical injury must receive medical treatment within 14 days of the accident. Medical assistance must take place in an ambulance or hospital, or it must come directly from a licensed, practicing professional (such as a medical doctor or chiropractic physician).
- Insurance companies only pay the $10,000 PIP benefit if the licensed medical professional certifies that the patient is experiencing an “emergency medical condition.” For non-emergencies, the new policy limits benefit payouts to $2,500.
- Injured parties must receive follow-up care if notated in the medical referral. Under the new reform policy, there is no coverage for holistic or alternative treatments like massage therapy or acupuncture.
Policymakers believe that the new restrictions can encourage Floridians to rightfully use private health insurance, Medicaid, or Medicare for long-term injuries instead of draining the no-fault system. While it may be too soon to determine if reform can lower existing premiums, many regulators feel confident that such changes can prevent premiums from increasing too high in the future.
General Information on No-Fault States
If you get into an accident within a no-fault state, what are its implications? Get a clearer understanding of it below:
What does no-fault state mean?
Unlike a tort state, a no-fault state does not pass the burden of expenses to the driver who caused the accident.
Who pays for car damage in a no-fault state?
There is no one rule on this in no-fault state. It is best to see your state’s statutes to know which would apply in your situation.
How many states are no-fault auto insurance?
Only 12 states are no-fault or adopt a variation of it.
Can you sue in a no-fault state?
You may sue if the actual damage is greater than your policy’s coverage. This doesn’t include moral damages like “pain and suffering.”
Learn more about the applicability of your state insurance laws in this section.
Is Florida a no-fault state?
Yes. Your Personal Injury Protection (PIP) will cover 80% of your medical bills and 60% of lost wages. However, you’re allowed to sue the driver at fault if you suffered permanent injury as defined by Florida statutes.
Is California a no-fault state?
No, California operates under the tort system. Drivers have the right to sue for compensation.
Is Texas a no-fault state?
No. And as it is not a no-fault state, Texan drivers are not required to carry a no-fault insurance.
Is Colorado a no-fault state?
Colorado used to be a no-fault state but has since switched to a tort jurisdiction. As such, the driver at-fault will pay for any damages.
Is Kentucky a no-fault state?
Yes, and no. Kentucky is a choice no-fault state. While the default is no-fault, a driver can opt out of this and be able to sue.
Is Minnesota a no-fault state?
Yes. However, by state law, you are allowed to pursue the driver at fault for damages under any of the conditions:
- You have more than $4,000 in medical expenses,
- a permanent injury,
- scarring or disfigurement, or
- 60 or more days of disability.
Is Michigan a no-fault state?
Yes. Your no-fault insurance will pay for your medical bills, lost wages, replacement services, and the damage you cause to other people’s property whether you’re at fault or not. However, it does not pay for your car repairs.
You may also be sued if
- You’re involved in an accident outside the state
- The other driver is registered out-of-state
- You caused an accident that killed, permanently disfigured or seriously damaged
- You are at least 50% at fault in the accident that caused damage to another person’s car.
Is Ohio a no-fault state?
No. Ohio is not a no-fault state, meaning you’re free to sue or be sued for car accidents.
Is Georgia a no-fault state?
No. However, Georgia follows a Modified Comparative Fault rule which bars the driver who’s more than 50 percent responsible for the accident from suing the other party for damages.
Is Illinois a no-fault state?
No, Illinois is a tort state. It adopts ‘comparative negligence’ which means that if a driver is found 80% at-fault, the other party is entitled to compensate for 80% of the damages.
Is Indiana a no-fault state?
No, Indiana is not a no-fault state. Here, all accidents are handled by the Comparative Fault Act which apportions the fault to the both drivers and any identified third party to determine the compensation to be paid.
Is New York a no-fault state?
Yes. And unlike in most states, the insurance follows the car in New York except when in a bus. Unless no one in your family owns a car, your household car insurance will pay for the damages.
Is NJ a no-fault state?
Yes. No matter who was at fault, your PIP coverage will pay for medical expenses and lost wages. However, the Bodily Injury Liability Coverage kicks in when you’re at fault.
Is PA a no-fault state?
No. However, you’re allowed to choose between limited tort (which is essentially no-fault) and full tort.
Is Kansas a no-fault state?
Yes, but it’s not purely a no-fault state. You’re allowed to sue when necessary for out of actual expenses and for non-economic damages under certain circumstances.
Is Oregon a no-fault state?
No. However, while you’re free to pursue legal action to the person determined to be at fault, you’re still required to carry a PIP insurance.
Is Tennessee a no-fault state?
No. Tennessee is a tort state and follows a comparative negligence rule which allows the person who is 50% or less at fault to recover compensation for his losses.
Is Virginia a no-fault state?
No. In Virginia, both parties are free to sue for damages. However, you can opt to add PIP to your insurance to help cover costs.
Is Alabama a no-fault state?
No, Alabama is a tort state. You’re not required anything aside from the basic coverage of bodily injury liability and property damage.
Is Arizona a no-fault state?
No. Arizona is a tort state following comparative negligence. This means even if you’re the victim, your compensation will be reduced by the % fault attributed to you.
Is Maryland a no-fault state?
No. In Maryland, you’re free to go after the at-fault driver for damages compensation.
Is Missouri a no-fault state?
No, Missouri is an at-fault state. You’re allowed to file a lawsuit against the at-fault driver, or file a claim with your own insurance or with the at-fault’s policy.
Is North Carolina a no-fault state?
North Carolina is a tort liability state. Thus, you can pursue different avenues for compensation for damages.
Is Massachusetts a no-fault state?
Yes. In Massachusetts, you are entitled to up to $8,000 of medical bills from your own insurance company regardless of fault. You’re still free to file a legal claim for non-financial losses against the driver at-fault if you suffered a threshold injury.
Is Utah a no-fault state?
Utah is a no-fault state. However, you may file a claim for compensation against the at-fault driver if your medical bills exceed $3,000.
Is Washington a no-fault state?
No, Washington is a comparative fault state which determines the compensation for damages from the fault of all parties involved. You’re also free to add a PIP insurance to your policy.
Is Nevada a no-fault state for auto?
No, Nevada is a fault state. Here, you have the biggest range of options for compensation when you get into an accident.
Is South Carolina a no-fault auto insurance state?
No, South Carolina is not a no-fault state. It follows a modified comparative negligence where the driver at-fault will compensate for the % of fault apportioned to him.
Is Mississippi a no-fault state?
No, Mississippi is a tort state. The driver who caused the accident will absorb all expenses incurred, both the victim’s and his own.
Is Nebraska a no-fault state?
No. However, under the optional uninsured motorist coverage, your expenses may be covered if the other driver doesn’t have insurance.
Is Iowa a no-fault state?
Iowa is not a no-fault state. Like some tort states, it also follows modified comparative negligence rules.
Is Maine a no-fault state accident?
No, Maine is a traditional liability coverage state. This means that you may seek compensation for damages resulting from the car accident.
Is New Mexico a no-fault state?
New Mexico is considered a fault state. Its car accident compensation laws greatly favor the victim of the accident.
Is Rhode Island a no-fault auto insurance state?
No, Rhode Island isn’t a no-fault state. Moreover, there aren’t any injury thresholds so you can immediately bring a claim or lawsuit against the other party.
Is West Virginia a no-fault state?
West Virginia is a tort state. While you can add a PIP coverage to your policy, it isn’t required at all.
Is WI a no-fault state?
No, Wisconsin operates under the tort system. Like in Pennsylvania, you have the option between the full tort and limited tort with your insurance.
Is Louisiana a no-fault state?
No, Louisiana is a pure at fault state with comparative fault. This means your compensation will be based on your degree of fault in the accident.
Is Connecticut a no-fault state?
Connecticut is a tort state. It’s also very straightforward here as the person at-fault is required to pay the full amount of the victim’s damages.
Is New Hampshire a no-fault state?
New Hampshire is a fault state. Thus, before compensation is made, it must first be proven that the other party is legally responsible for the accident.
Is Montana a no-fault state?
No. In Montana, the one determined to be at-fault is liable for damage compensation. However, you also have the option to recover the costs from your own insurance company.
Is Oklahoma a no-fault car accident state?
No, Oklahoma follows the tort system in determining compensation the one who should pay it.
Is Alaska a no-fault state?
No, Alaska is a fault state. And in cases when both drivers share blame for the accident, it follows a pure comparative fault which reduces the total damages compensation by the percentage of fault allocated to you.