You’ve learned that an insured’s auto liability insurance pays only for losses that the insured is legally liable for.
But in many cases, this traditional fault system has created a backlog in the courts and excessive costs—all to determine who is at fault.
In an attempt to deal with these problems, some states have adopted no-fault laws. Under these laws, an insured driver is reimbursed by his own insurance company for medical expenses and loss of wages, regardless of who was at fault in the auto accident. Subrogation from the other company is not allowed.
Suppose Samuel’s car crosses the center line and strikes Mohammed’s car head on. If this accident occurred in a state with a pure no-fault law, then Mohammed’s insurance company would reimburse him for the injuries he sustained in the accident and Mohammed would be prevented from suing the other driver who normally would have been declared at fault.
With pure no-fault, there is no reimbursement for pain and suffering losses.
But at this time, a pure no-fault plan does not exist in any state.
What does exist is a variety of modified no-fault plans that allow one party to sue another if the injuries are severe or if medical expenses exceed a specified amount.
For example, one state’s no-fault law provides that one party may sue another for pain and suffering if the medical expenses exceed $2,000 or if there has been death, disfigurement, dismemberment, or a fracture.
To this point, we have not mentioned the impact of no-fault insurance as it relates to physical damage and medical payments coverage.
That’s because both of these coverages are already no fault.
No-fault plans are not standardized. If your state has a no-fault law, you need to learn how it works.