Legal Definitions - no-fault insurance

No-fault insurance refers to a type of automobile insurance system where, after a car accident, each driver's own insurance company pays for their policyholder's medical expenses and other specific losses, regardless of who was at fault for the collision. The primary goal of this system is to ensure prompt payment for injuries and reduce the number of minor lawsuits related to car accidents.

Under a no-fault system, the benefits paid by an individual's own insurance are often called "Personal Injury Protection" (PIP) benefits. These can cover a range of costs, including:

• Medical treatment and rehabilitation expenses
• A portion of lost wages if the injury prevents the policyholder from working
• Funeral expenses in the event of a fatality
• Other reasonable out-of-pocket expenses related to the accident

In exchange for these guaranteed benefits, individuals in no-fault states typically have restrictions on their ability to sue the at-fault driver for non-economic damages, such as pain and suffering. They can usually only pursue such a lawsuit if their injuries meet a certain "threshold." This threshold can be either a specific dollar amount for medical expenses (a monetary threshold) or a definition of a "serious injury" (a verbal threshold), such as permanent disfigurement or significant loss of a bodily function.

Here are some examples illustrating how no-fault insurance works:

• Example 1: Minor Accident with PIP Coverage

  Imagine Maria is driving in a no-fault state and is rear-ended by another driver, Tom, who was distracted. Maria experiences whiplash and needs several weeks of chiropractic treatment, causing her to miss a few days of work. Even though Tom was clearly at fault, Maria's own no-fault insurance policy, through her Personal Injury Protection (PIP) coverage, will directly pay for her chiropractic bills and her lost wages for the days she couldn't work. She doesn't have to wait for Tom's insurance company to investigate fault or approve payments. Because her injuries are relatively minor and do not meet her state's threshold for "serious injury," she cannot sue Tom for pain and suffering.

• Example 2: Serious Accident Meeting a Lawsuit Threshold

  Consider John, who is involved in a severe car accident in a no-fault state, caused by another driver, Sarah. John suffers multiple broken bones, requires extensive surgery, and will have a permanent disability, incurring hundreds of thousands of dollars in medical bills. John's own no-fault insurance will immediately begin paying for his medical treatments and a portion of his lost income. However, because his injuries are so severe and meet the state's "verbal threshold" for a "serious injury" (e.g., permanent impairment or significant disfigurement), he is also permitted to file a lawsuit against Sarah to seek compensation for his pain, suffering, and other non-economic damages that his no-fault policy does not cover.

• Example 3: "Add-on" No-Fault System

  In some states, an "add-on" no-fault system exists. For instance, David is involved in a collision where he is not at fault. His "add-on" no-fault coverage immediately pays for his medical expenses and lost wages, similar to a standard no-fault system. However, because it's an "add-on" system, David is not restricted by a monetary or verbal threshold. He can still pursue a lawsuit against the at-fault driver for pain and suffering and other non-economic damages, even if his injuries are not considered "serious" by typical no-fault standards. This system provides the quick benefits of no-fault without limiting the right to sue for non-economic damages.