No Fault Auto InsuranceNo Fault Auto Insurance

Cassie Harmer, Melissa Cassie Harmer, Melissa Fjelstrom, Brent WuehlerFjelstrom, Brent Wuehler

What is No Fault Auto What is No Fault Auto Insurance?Insurance?

In general, any auto insurance In general, any auto insurance program that allows policyholders to program that allows policyholders to recover financial losses from their recover financial losses from their own insurance company, regardless own insurance company, regardless of fault. of fault.

In practice, actual no-fault includes a In practice, actual no-fault includes a restriction on the right to sue.restriction on the right to sue.

Current Systems of State Auto Current Systems of State Auto Liability Insurance LawsLiability Insurance Laws

Traditional tort Traditional tort liability system liability system

Pure No Fault Pure No Fault

Modified No FaultModified No Fault

Choice Choice

Pure No FaultPure No Fault

Insurer pays for any economic Insurer pays for any economic damages (such as medical bills, lost damages (such as medical bills, lost wages, etc.) up to the policy limitwages, etc.) up to the policy limit

Completely prohibited from suing a Completely prohibited from suing a negligent driver for "non-economic" negligent driver for "non-economic" damages (such as pain and suffering, damages (such as pain and suffering, loss of companionship, etc.). loss of companionship, etc.).

Presently, no states function under a Presently, no states function under a pure no-fault systempure no-fault system

Modified No FaultModified No Fault

Insurer pays for your economic damages up to Insurer pays for your economic damages up to policy limit.policy limit.

Allowed to sue for non-economic if meets threshold.Allowed to sue for non-economic if meets threshold. Verbal thresholdVerbal threshold

Lawsuits for non-economic injuries limited to "serious" injuries Lawsuits for non-economic injuries limited to "serious" injuries or death. or death.

Serious is defined differently in each stateSerious is defined differently in each state Precluded from bringing a lawsuit unless meet defined criteria Precluded from bringing a lawsuit unless meet defined criteria

Monetary threshold: Monetary threshold: Lawsuits for non-economic injuries are precluded unless Lawsuits for non-economic injuries are precluded unless

certain dollar amount in medical bills is reached. certain dollar amount in medical bills is reached. Drawback: People will create medical bills they don’t need to Drawback: People will create medical bills they don’t need to

meet the thresholdmeet the threshold

Choice No FaultChoice No Fault

Choice is another hybrid of the pure no-fault system.Choice is another hybrid of the pure no-fault system. Choose pure no-fault plan, Choose pure no-fault plan,

you are unable to sue negligent drivers for non-economic damageyou are unable to sue negligent drivers for non-economic damage you are immune from such suits yourself. you are immune from such suits yourself.

Choose to retain your personal injury suit rights, Choose to retain your personal injury suit rights, you can sue other drivers who have also chosen to retain and you can sue other drivers who have also chosen to retain and

they can sue you. they can sue you. your traditional tort rights are not unlimited. An accident with a your traditional tort rights are not unlimited. An accident with a

pure no-fault driver puts you in a position to not be able to suepure no-fault driver puts you in a position to not be able to sue

Choice no-fault tends to lead good drivers to pick the Choice no-fault tends to lead good drivers to pick the tort option (which is more expensive) and bad drivers tort option (which is more expensive) and bad drivers to pick the pure no-fault option (which is less to pick the pure no-fault option (which is less expensive) expensive)

Benefits of No FaultBenefits of No Fault

Quicker payment of claims by Quicker payment of claims by eliminating costly and time-consuming eliminating costly and time-consuming litigation over liability. litigation over liability.

No splitting of fees with lawyers. No splitting of fees with lawyers. Lower insurance rates because non-Lower insurance rates because non-

economic damage awards and legal economic damage awards and legal fees are eliminated--legal fees currently fees are eliminated--legal fees currently account for 12% of premium costs. account for 12% of premium costs.

Benefits cont.Benefits cont.

Reduction in the number of lawsuits. Reduction in the number of lawsuits.

No subsidizing uninsured motorists; No subsidizing uninsured motorists; your insurer covers the cost of your your insurer covers the cost of your medical bills. medical bills.

Lower rates mean that auto insurance is Lower rates mean that auto insurance is accessible to people of lesser means. accessible to people of lesser means.

Drawbacks of No FaultDrawbacks of No Fault

No compensation for pain and suffering, No compensation for pain and suffering, paralysis, or other non-economic damages; paralysis, or other non-economic damages; arbitrary limits are imposed. arbitrary limits are imposed.

Under pure no-fault and choice systems, bad Under pure no-fault and choice systems, bad drivers are protected because they cannot be drivers are protected because they cannot be sued for the damages they cause. Thus, sued for the damages they cause. Thus, there's no incentive to be a good driver. there's no incentive to be a good driver.

Rates are actually higher under no-fault. Rates are actually higher under no-fault. Regardless of theory, insurance premiums in Regardless of theory, insurance premiums in no-fault states are on average 25% higher no-fault states are on average 25% higher than in traditional liability states. than in traditional liability states.

Drawbacks of No Fault, Drawbacks of No Fault, cont.cont.

No reduction in litigation costs under a no-fault No reduction in litigation costs under a no-fault system.system. The time and effort insurers once spent defending litigation The time and effort insurers once spent defending litigation

claims is now spent defending lawsuits brought by their own claims is now spent defending lawsuits brought by their own insureds for failure to pay no-fault benefits. In modified no-insureds for failure to pay no-fault benefits. In modified no-fault states, tremendous time and energy is spent litigating fault states, tremendous time and energy is spent litigating over whether or not the tort threshold requirement has been over whether or not the tort threshold requirement has been met. met.

Even your economic damages are limited by the Even your economic damages are limited by the terms of the policy.terms of the policy. In traditional tort states, you are fully compensated for your In traditional tort states, you are fully compensated for your

loss by suing the driver responsible for your injuries. No-loss by suing the driver responsible for your injuries. No-fault states have limits on liability, even for your basic fault states have limits on liability, even for your basic economic damages. These limits result in people being economic damages. These limits result in people being forced to pay for any unpaid medical bills without recourse forced to pay for any unpaid medical bills without recourse against the driver who caused the injuries. against the driver who caused the injuries.

Who requires No Fault?Who requires No Fault?

Currently 13 states and Puerto Rico have Currently 13 states and Puerto Rico have no-fault auto insurance laws. no-fault auto insurance laws. Verbal Thresholds: Florida, Michigan, New Jersey, Verbal Thresholds: Florida, Michigan, New Jersey,

New York and Pennsylvania New York and Pennsylvania Monetary Threshold: Colorado, Hawaii, Kansas, Monetary Threshold: Colorado, Hawaii, Kansas,

Kentucky, Massachusetts, Minnesota, North Kentucky, Massachusetts, Minnesota, North Dakota and Utah. Dakota and Utah.

Three states have a "choice" no-fault law. Three states have a "choice" no-fault law. In New Jersey, Pennsylvania and Kentucky, In New Jersey, Pennsylvania and Kentucky,

motorists may reject the lawsuit threshold and motorists may reject the lawsuit threshold and retain the right to sue for any auto-related injury.retain the right to sue for any auto-related injury.

11 other states11 other states

Utah LawUtah Law

Everyone is required to have a Everyone is required to have a minimum PIP coverage of $3,000minimum PIP coverage of $3,000 Whoever is driving and passengers are Whoever is driving and passengers are

all entitled to your policyall entitled to your policy Medical Bills BenefitMedical Bills Benefit

$3,000 each person$3,000 each person Available within 52 weeksAvailable within 52 weeks

Utah Law, Cont.Utah Law, Cont. Loss of Essential BenefitLoss of Essential Benefit

Someone else comes in and does chores Someone else comes in and does chores around the homearound the home

Maximum $20 a dayMaximum $20 a day Starts 3 days after time disabled from work Starts 3 days after time disabled from work

but if over 2 weeks than starts on day of but if over 2 weeks than starts on day of accident accident

Loss Wages BenefitLoss Wages Benefit 85% up to $250 maximum85% up to $250 maximum Retired can elect to waive this benefitRetired can elect to waive this benefit

Utah Law, Cont.Utah Law, Cont.

Death BenefitDeath Benefit $3,000 survivor benefit$3,000 survivor benefit $1,500 loss benefit (funeral expenses)$1,500 loss benefit (funeral expenses) Loss wages and loss essentials is not allowedLoss wages and loss essentials is not allowed Medical expenses are allowedMedical expenses are allowed

Disability or medical related or a pre-Disability or medical related or a pre-existing condition.existing condition.

REASONABLE, NECESSARY, and DIRECTLY REASONABLE, NECESSARY, and DIRECTLY RELATEDRELATED

ExamplesExamples

A man was changing the oil in his A man was changing the oil in his car. The car slipped off of the jack car. The car slipped off of the jack and smashed his face. and smashed his face.

Anytime you are working, loading, Anytime you are working, loading, exiting, or entering your automobileexiting, or entering your automobile

More ExamplesMore Examples

You or your child slam your hand in You or your child slam your hand in the door of the car.the door of the car.

A man was sitting on his car and slid A man was sitting on his car and slid off. He broke his arm.off. He broke his arm.

More ExamplesMore Examples

A pedestrian or bicyclist darts out in A pedestrian or bicyclist darts out in front of you.front of you.

You get hit by a car.You get hit by a car.

You have a higher medical benefit You have a higher medical benefit limit than your friend who you were limit than your friend who you were riding with.riding with.