No-fault auto insurance laws consist of two components. One is that insured motorists can recover losses from their insurer whether they are at fault for an accident or not. The second is a limitation on the ability of those injured in accidents to sue at-fault motorists. At publication date, 12 states have no-fault laws with both components and 10 more states and Washington, D.C. have just the first component, according to the Insurance Information Institute.
Contrast with Other Laws
The no-fault system contrasts with other states' laws in the way injured people in accidents are compensated. In no-fault states, the insured driver's insurance company compensates the injured driver for losses up to the policy limit even when the driver is not at fault. In other states, the insurer for the driver who was at fault must pay expenses for both drivers. The streamlined process is designed to limit court cases and make for quicker processing of claims by reducing legal disagreement over who was at fault in accidents.
Verbal Threshold States
Five states have no-fault laws that qualify as verbal threshold laws. Verbal threshold refers to the conditions that must be reached for someone to be able to sue a motorist for injuries and pain and suffering resulting from an accident. A verbal threshold uses descriptive terms for injuries to determine whether a lawsuit can move forward. A verbal threshold could refer to a disability or other long-term damage caused by an accident. Verbal threshold states include Florida, Michigan, New Jersey, New York and Pennsylvania, according to the Insurance Information Institute.
Monetary Threshold States
Seven states have monetary threshold no-fault laws. Instead of a verbal description for injuries, these states set a minimum dollar amount in medical bills. If the minimum expenses are met, then an injured person can proceed with a lawsuit. The states with monetary threshold no-fault laws include Hawaii, Kansas, Kentucky, Massachusetts, Minnesota, North Dakota and Utah, according to the Insurance Information Institute. Monetary values vary. For instance, Minnesota sets a threshold of $4,000 and Kansas has a threshold of $2,000.
Three of the no-fault states have choice no-fault laws that give motorists the option of selecting a no-fault insurance policy with lawsuit thresholds or retaining the option to sue. These states are New Jersey, Pennsylvania and Kentucky, according to the Insurance Information Institute. The 10 states and Washington, D.C. that have only one component of no-fault laws are sometimes called add-on states. They allow injured motorists to receive compensation from their insurer whether they were at fault or not. However, they do not have limits on lawsuits. Add-on states are Arkansas, Delaware, Maryland, New Hampshire, Oregon, South Dakota, Texas, Virginia, Washington and Wisconsin.
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