No-fault insurance

In its broadest sense, no-fault insurance is any type of insurance contract under which insureds are indemnified for losses by their own insurance company, regardless of fault in the incident generating losses. In this sense, it is no different from first-party coverage. However, the term "no-fault" is most commonly used in the context of state/provincial automobile insurance laws in the United States, Canada, and Australia, in which a policyholder (and his/her passengers) are not only reimbursed by the policyholder’s own insurance company without proof of fault, but also restricted in the right to seek recovery through the civil-justice system for losses caused by other parties.

Description

No-fault systems generally exempt individuals from the usual liability for causing body injury if they do so in a car collision; when individuals purchase "liability" insurance under those regimes, the insurance covers bodily injury of the insured and the insured's passengers caused by a car collision, regardless of which party would be liable under ordinary common law tort rules. No-fault insurance has the goal of lowering premium costs by avoiding expensive litigation over the causes of the collision, while providing quick payments for injuries or loss of property. Further, no-fault systems often grant "set" or "fixed" compensation for certain injuries regardless of the unique aspects of the injury or the individual injured. Workers compensation funds typically are run as "no fault" systems with usually a fixed schedule for compensation for various injuries.

Proponents of no-fault insurance argue that automobile collisions are inevitable and that at-fault drivers are not necessarily higher risk and should not necessarily be punished; moreover, they note that the presence of liability insurance insulates reckless or negligent drivers from financial disincentives of litigation; also, uninsured motorists are often "judgment proof" (i.e. can't and won't end up paying for their liability anyway), so that in regions with high numbers of such uninsured motorists, no-fault systems may make more sense.

Critics of no-fault argue that dangerous drivers not paying for the damage they cause encourages excessive risky behavior, with only raised premiums and a higher risk rating as the potential consequence, and no jury awards or legal settlements. Detractors of no-fault also point out that legitimate victims with subtle handicaps find it difficult to seek recovery under no-fault. Another criticism is that some no-fault jurisdictions have among the highest automobile-insurance premiums in the country, but this may be more a matter of effect than cause (e.g., the financial savings from no-fault may simply make it more popular in areas with higher automobile-collision risk, or high insurance rates may cause more drivers to go uninsured, increasing the attraction of a no-fault system).

Overview in United States

Most U.S. states have a "traditional tort" liability system for auto insurance in which recovery is governed by principles of provable negligence. However, twelve U.S. states and the Commonwealth territory of Puerto Rico require policyholders to operate under a "no-fault" scheme in which individuals injured in automobile collisions are limited in their ability to seek recovery from other drivers or vehicle owners involved in an collision[1] and an additional 8 states have an "add-on" system in which the insureds retain the right to sue.[1] In 2012, RAND Corporation published a study which found that costs were higher in no-fault systems.[2] In the case of economic (medical and wage-loss) damages, most no-fault systems permit injured parties to seek recovery only for damages that are not covered by available first-party insurance benefits. In the case of non-economic (pain-and-suffering) damages, most no-fault systems permit injured parties to seek compensation only in cases of exceptionally "serious" injury, which can be defined in either of two ways:

In three U.S. states – Kentucky, New Jersey, and Pennsylvania – policyholders are permitted to choose between traditional tort and no-fault recovery regimes. Under such systems, known as “choice” or “optional” no-fault, policyholders must select between “full tort” and “limited tort” (no-fault) options at the time the policy is written or renewed; once the policy terms are set forth an insured may not change his/her mind without rewriting the policy. In both Kentucky and New Jersey, policyholders who do not make an affirmative choice in favor of either full tort or limited tort are assigned the no-fault option by default; whereas in Pennsylvania, the full-tort option is the default.

Several U.S. states have experimented with and repealed their no-fault laws. Twenty-four states originally enacted no-fault laws in some form between 1970 and 1975. Colorado repealed its no-fault system in 2003. Florida's no-fault system sunset on October 1, 2007, but the Florida legislature passed a new no-fault law which took effect January 1, 2008.

In terms of damages to vehicles and their contents, those claims are still based on fault. No-fault systems focus solely on issues of compensation for bodily injury. But it also works the other way: policies pay the medical bills for drivers and their companions independent of who was at-fault for the collision.

States/provinces with no-fault laws

Quebec (only for bodily injury suffered in automobile collisions)[3]
Manitoba[4]
Florida[5]
Hawaii[6]
Kansas[7]
Kentucky<refjkjp://lis.njleg.state.nj.us/cgi-bin/om_isapi.dll?clientID=35273203&Depth=2&depth=2&expandheadings=on&headingswithhits=on&hitsperheading=on&infobase=statutes.nfo&record={6523}&softpage=Doc_Sub_Frame_Pg42 | title=17:28-1.9. - Immunity from liability for certain auto insurance providers | publisher=State of New Jersey | work=New Jersey Permanent Statutes Database | date=2014 | accessdate=21 June 2014}}</ref>
New York[8]
North Dakota[9]
Ontario
Pennsylvania[10]
Kansas ($2000 Threshold)[7]
Kentucky ($1000 Threshold)[11]
Massachusetts ($2000 Threshold)
Minnesota ($4000 Threshold)[9]
North Dakota ($2500 Threshold)[12]
Saskatchewan ($90,000 threshold)[13]
Utah ($3000 Threshold)[14]
Kentucky[11]
New Jersey
Pennsylvania[10]
Saskatchewan[15][16]

See also

External links

References

  1. 1 2 Is no-fault insurance finished?. MSN Money.
  2. ↑ Anderson et al. (2012). What Happened to No-Fault Automobile Insurance?. RAND Corporation.
  3. ↑ "Quebec". Car Insurance Where You Live. Insurance Bureau of Canada. 2014. Retrieved 21 June 2014.
  4. ↑ "Manitoba". Car Insurance Where You Live. Insurance Bureau of Canada. 2014. Retrieved 21 June 2014.
  5. ↑ "627.737 - Tort exemption; limitation on right to damages; punitive damages.". 2013 Florida Statutes. State of Florida. Retrieved 21 June 2014.
  6. ↑ "Motor Vehicle Insurance Information". State of Hawaii, Department of Commerce and Consumer Affairs. Retrieved 21 June 2014.
  7. 1 2 "Filing a Motor Vehicle Accident Claim". State of Kansas, Insurance Department. Retrieved 21 June 2014.
  8. ↑ "Minimum Auto Insurance Requirements". Shopping For Auto Insurance. State of New York, Department of Financial Services. Retrieved 21 June 2014.
  9. 1 2 "65B.51 DEDUCTION OF COLLATERAL BENEFITS FROM TORT RECOVERY; LIMITATION ON RIGHT TO RECOVER DAMAGES.". 2013 Minnesota Statutes. State of Minnesota. 2013. Retrieved 21 June 2014.
  10. 1 2 Goguen, David (2014). "Pennsylvania No-Fault Car Insurance Laws". AllAboutCarAccidents.com. NOLO. Retrieved 21 June 2014.
  11. 1 2 "No Fault (PIP)". State of Kentucky, Department of Insurance. 2010. Retrieved 21 June 2014.
  12. ↑ Goguen, David (2014). "North Dakota No-Fault Auto Insurance Laws". AllAboutCarAccidents.com. NOLO. Retrieved 21 June 2014.
  13. ↑ Your Guide to No Fault Coverage (PDF). Regina: Saskatchewan Government Insurance. 2014. pp. 2, 21.
  14. ↑ Ryskamp, Dani Alexis (2014). "Utah No-Fault Auto Insurance Laws & Regulations". AllAboutCarAccidents.com. NOLO. Retrieved 21 June 2014.
  15. ↑ Right-to-sue part of SGI's no-fault plan: [Final Edition] Ehrkamp, Andrew. Star - Phoenix [Saskatoon, Sask] 29 May 2002
  16. ↑ "Saskatchewan". Car Insurance Where You Live. Insurance Bureau of Canada. 2014. Retrieved 21 June 2014.
This article is issued from Wikipedia - version of the Thursday, May 05, 2016. The text is available under the Creative Commons Attribution/Share Alike but additional terms may apply for the media files.