No Fault Auto Insurance System
If you’re the single cause an accident, your insurance company might not pay a single dollar to the other party for the damages caused, unbelievable yet true if you live in any one of these states DC, FL, HI, KS, KY, MA, MI, MN, NJ, NY, ND, PA, UT. These thirteen states come under the no-fault insurance system.
These states now require the every driver to have his or her own insurance cover as well as restrict them from suing other drivers for damages caused. Your insurance company is supposed to pay for the damages suffered by you. Their respective auto insurance companies cover other drivers involved. Since it is mandatory to carry insurance by all motorists in these states theoretically there shouldn't be any uninsured motorist.
The reason why these 13 states have implemented the no fault insurance system was to guarantee immediate medical treatment to drivers in the event of accident and to reduce administrative and legal costs involving insurance claims. Theoretically this should have led to lower insurance premiums. However residual liability issues actually drive up the insurance premium.
In some states drivers are held financially accountable for the injuries caused in certain circumstances. In some states if the injuries are of a certain level drivers causing them can be sued for causing pain and suffering while in some states injured parties can sue if the total costs reached a certain predetermined dollar level.
Following case illustrates the classic no fault insurance system.
Brian Edwards lived in a four-storied apartment building complex. It had garages on the ground floor and a very wide driveway. The width of the driveway allowed users to exit their own parking spot and turn around without having to back into the street. This had become second nature to all the tenants of the building.
One summer morning Brian wanted to visit the mall to buy his weekly supply of groceries. As was his habit he got into the car and was backing out when he heard a loud scream. He thought he must have run over his dog that would usually follow him out whenever he left home. He opened the car door only to find his elderly neighbor Mr. Phillips under the left rear wheel of the car. Brian immediately called for help and with the help of some neighbors picked up the rear of the car while other neighbors pulled Mr. Phillips out, meanwhile a neighbor had already called 911. The left rear wheel had run over Mr. Phillips just below the abdomen.
Mr. Phillips announced that he was fine and that nothing was hurting and turned down everybody's suggestion to go to the hospital. The police patrol car and the ambulance from the hospital arrived and the Para-medics after examining took Mr. Phillips to the hospital that was a few blocks away. It turned out that Mr. Phillips was sunbathing on the driveway just behind Brian's car and Brian didn't see him as he walked to his car. Mr. Phillips sustained no internal injuries, no fractures just a bruise and a tire track across his lower abdomen.
Brian felt absolutely miserable, owned up to all that had happened and offered to try and cheer up Mr. Phillips.
Next day Brian called up his insurance company and explained the incident. They asked Brian just two questions:
- Does Mr. Phillips drive a car?
- Does Mr. Phillips own a car?
Brian answered in the affirmative. The insurance company than told Brian due to No Fault insurance Mr. Phillips car insurance company would cover all the medical costs. Brian was clearly at fault, yet his insurance wouldn't cover the damages to Mr. Phillips.
Brian was at a loss of words he even suggested that Mr. Phillips sue him since he was fully responsible. Mr. Phillips merely said that it was just an accident and he should not feel guilty about it. In lighter vein he said that next time he would sunbath on the grass and risk the doggy poo.
Higher Insurance Premiums
It's interesting to note that states having no fault auto insurance have the highest insurance premiums and also higher auto accident risk.
No fault auto insurance is helpful when you have a high number of uninsured motorists on the road, as in case of an accident the victim does not suffer if the "at fault" party is unable to pay his/her liability. Critics point out that this insurance system does not punish reckless drivers and neither does it offer incentives for safer driving habits.
25% of all lawsuits in the New York City civil court are no fault litigation.
It has also spawned a billion dollar a year no fault fraud industry.
