When two or more vehicles are involved in an accident, it can be hard to determine who was responsible for the mishap. But establishing fault is crucial to an insurance claim. After all, the party that caused the accident should ideally be the one paying for the expenses involved. However, this isn’t always the case as fault can be difficult to prove and it affects claim amount and payouts.
Different states have their own laws to handle insurance claims after an accident. While some states make it mandatory to prove fault and charge the driver responsible for the event, other states require all drivers to carry additional coverage that eliminates the need for assigning fault. The state you reside in not only affects your auto insurance premiums but also the claims process after an accident.
Fault vs. no-fault states
The states that assign fault are called tort states. In case of an accident, fault must be established and the party responsible should pay for the damages. In a tort state, an at-fault driver’s property damage liability insurance pays for the other party’s car repair expenses while the bodily injury liability covers the medical costs. The amount of claim payout varies from one state to another and is also influenced by the coverage limit.
In a no-fault state, the hassle of determining fault is done away with. Instead, all drivers are required to carry Personal Injury Protection insurance (in addition to basic liability insurance), which pays for medical expenses regardless of who caused the accident. On the downside, PIP insurance significantly increases the cost of auto insurance, which is one reason why insurance in no-fault states is more expensive than tort states.
At present, there are twelve US states that have no-fault insurance, besides Puerto Rico:
- Florida
- Hawaii
- Kansas
- Kentucky
- Massachusetts
- Michigan
- Minnesota
- New Jersey
- New York
- North Dakota
- Pennsylvania
- Utah
What is no-fault insurance?
In most states in the US, it is mandatory to have the minimum required car insurance to be able to drive legally. This usually includes bodily injury and property damage coverage. In a no-fault insurance policy, people are also required to add PIP coverage – also called no-fault insurance. In an at-fault state, you would be submitting a claim to the negligent party’s insurance company. But in no-fault state, you file a claim with your own insurer for damages that you suffered, regardless of who was responsible.
The deciding factor here is negligence. When fault is hard to establish, insurers usually fall back on proving negligence on the driver’s part. If you are found at least 50 percent negligent, your rates and claim payout will be affected. Moreover, filing a claim in a no-fault insurance policy does not mean you will be awarded a settlement and even if you do get a payout, your compensation will be limited. In an at-fault insurance policy, you get to claim additional pain and suffering damages but not so in no-fault insurance.
The purpose of no-fault insurance
There are two purposes of no-fault insurance: saving time and money (often involved in a drawn-out claims process) and reducing the likelihood of lawsuits. Both of these situations cause exorbitant expenses and waste a lot of time, often delaying the settlement. Since no-fault insurance doesn’t place importance on who was responsible for causing the accident, there are fewer chances of disputes and faster settlements.
Because claims are paid regardless of who was to blame, it also reduces the possibility of one party bringing a lawsuit against the other. Although there are certain circumstances under which no-fault insurance does allow lawsuits, these are fairly limited. By not assigning fault, precious time is saved and the injured party does not have to wait long to be reimbursed.
Determining negligence
In auto insurance law, negligence means fault. If you were the negligent driver, your claim payout significantly decreases. Anecdotal evidence alone is not enough to establish negligence. Insurance companies usually rely on official police reports to determine who was to blame for the accident.
Pure contributory negligence
If you live in a state that adheres to pure contributory negligence, you get a settlement only if you are 100% innocent in an accident. If the other party can establish that your negligence played even the smallest part in the accident, you cannot file a claim.
Pure comparative negligence
In this kind of negligence, the payout is based on the percentage of fault, but there is no threshold. This makes it difficult to establish whose negligence played the larger role in the crash.
Modified comparative negligence
States with modified comparative negligence have a threshold of fault, usually around 50%. You are eligible for a payout if your negligence was less than the threshold.
Frequently asked questions
What should I do after a car accident?
The first step is usually to call the police and have an official report filed. It also helps to be familiar with your state’s insurance laws and how fault or negligence is determined. This may help you prove your innocence and be eligible for a claim.
How can I file a claim?
Most insurance companies have a 24/7 helpline for filing claims, while some even offer a mobile app alternative. You will be required to provide specific details of the incident such as time and place, damages suffered and sometimes even photographic evidence. It is not uncommon for an insurance company to send an appraiser to the scene before you can file a claim.
Can I still file a lawsuit in a no-fault state?
Yes, but only if your circumstances have crossed the serious injury threshold or monetary threshold.
About the author
Cynthia Widmayer has over two years of experience as an insurance and personal finance writer. She covers home, car and life insurance products for Bankrate, the Simple Dollar, and Coverage.com, among others.
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