The Difference Between No-Fault and Fault Car Insurance

Car insurance laws are often confusing. Drivers often know that state law requires insurance coverage, but they don’t know to what extent or how to proceed following an accident. In fact, most drivers buy the policies their insurance companies recommend and give little thought to the matter after the fact. While a working knowledge of insurance law isn’t essential for drivers, understanding the basics of no-fault vs. car insurance is.

The Two Types of Insurance Models

Two main models of insurance law will affect an accident claim. Some states follow a no-fault approach, while others observe traditional fault laws. The two have notable differences.

No-Fault States

A handful of states follow no-fault laws when it comes to compensation following a car accident. This works the way it sounds – when a car accident occurs, drivers file claims with their own insurance policies, regardless of who is at fault for an accident. At least regarding minor accidents, no-fault insurance states to not consider who is at fault for an accident when paying out claims – they simply pay claimants in accordance of the terms of the policy.

No-fault state insurance companies automatically pay all medical bills using personal injury protection (PIP). On the other hand, property damage claims still rely on the idea of fault.

In some cases, victims of serious injuries may step outside of the no-fault system and file a claim against an at-fault driver for damages. The rules on this vary from state to state, but generally an injury must be severe enough to justify a claim against another driver.

Some states switched to no-fault models to shorten the time for a payout. They argue that instead of spending time in court trying to settle fault arguments, drivers can file a claim and get on the road to recovery sooner. Currently, 12 no-fault states exist: Florida, Michigan, New Jersey, New York, Pennsylvania, Hawaii, Kansas, Kentucky, Massachusetts, Minnesota, North Dakota, and Utah.

Fault States

The rest of the United States follows a traditional fault model when it comes to collisions, though the details may vary from state to state. Fault states follow a tort liability system, which means that when a driver causes a crash, his or her insurance company will be responsible for all damages incurred in the accident. Examples include medical bills, lost wages, property damage, and intangible losses like pain and suffering. California, like much of the nation, follows a traditional fault model when it comes to insurance.

States vary, however, when it comes to rules involving comparative negligence. Under the rule of comparative negligence, a driver may have a car accident claim reduced by the percentage of fault he or she shares. For example, if a jury determines that a claimant is 30% at fault for an accident and he or she seeks $500,000 in damages, he or she could only collect $350,000. Generally, a victim can only collect damages when another party is at least 50% at fault for an accident. In some states, like Maryland, a victim may not be able to collect any damages if he or she is partially at fault for an accident.

Insurance rules vary greatly from state to state, but car accidents fall into one of these two categories. California follows a traditional fault model for car accident claims, which makes it easier for victims to collect compensation for their injuries, pain, and suffering. The main disadvantage to this system is court costs and extended timelines when an insurance company refuses to pay – but a personal injury attorney can help streamline the process and get victims back on their feet.