Hamilton/Ferguson, Personal Risk Management and Property-Liability Insurance – SK
No-fault proponents said: “Why can’t WC approach be applied to auto insurance?”
No-Fault Laws – laws that limit the requirement of claimants to prove negligence in auto accident cases so funds can be promptly distributed to injured victims.
Modified Plans – restricts the right to sue, but doesn’t completely eliminate it.
Personal injury protection (PIP) is provided to cover injured victims.
Economic loss = medical expenses, %-age of lost income, substitute services expenses. To be paid by injured person’s own insurer.
Noneconomic loss = pain & suffering, inconvenience, mental anguish. To be recovered from the at-fault motorist.
Below thresholds, only economic losses may be recovered from insurers. Above the thresholds, noneconomic losses may also be pursued.
Monetary or dollar threshold – a limit that medical bills must exceed to sue.
Verbal threshold – determined by the seriousness of the injury (such as “permanent disfigurement”).
Add-On Plans – PIP benefits are provided, but there’s no restriction on the right to sue for more damages. Additionally, in most of these states, the no-fault insurer may have the right to subrogate against the at-fault motorist.
Choice No-Fault Plans- where an insured can choose at time of purchasing or renewing a policy whether or not to participate in no-fault insurance. If selected, premium reductions offered in lieu of the right to sue in certain situations.
Voluntary No-Fault Plans – these are not imposed by law. Insurers don’t have to offer it (unlike in “choice” states) and insureds don’t have to accept if offered. An insurer may have the right to subrogate to recover losses pay to insured.
Other Characteristics of No-Fault Laws
Vehicles Covered – most states: passenger and commercial vehicles except motorcycles.
Out-of-State Protection – usually, if an out-of-state driver is injured when driving in a no-fault state, their insurer is still required to pay no-fault benefits.
Offsets, Coordination of Benefits, and Deductibles – other recoveries (SS, WC, disability) are usually deducted from paid benefits.
Primary Coverage Following Auto or Individual – coverage may follow either the driver (regardless of auto) or the auto (regardless of driver).
Where there is no coverage available in an accident, many no-fault laws provide for an assigned claims plan – where the state assigns insurers to pay the benefits. The insurer has the right to recover losses against the owner/driver of uninsured auto.
Weaknesses of Current No-Fault Plans – some complaints:
Laws don’t go far enough limiting the right to sue, possibly due to low-dollar or lenient verbal thresholds.
Rising medical costs & inflation are eroding the effectiveness of dollar thresholds.
Verbal thresholds are vague. What is a severe injury?
No-fault insurance was meant to reduce premiums, but that hasn’t happened.