No Fault Insurance States

As compared to traditional tort insurance, no fault insurance renders it less important to identify the party at fault for an accident. In traditional tort insurance, the party at fault, and consequently the insurance company of the party at fault, is held liable for compensation owed to the party that is not at fault for the accident. In no fault insurance states like Colorado, Florida, Hawaii, Kansas, Kentucky, Massachusetts, Michigan, Minnesota, New Jersey, New York, North Dakota, Pennsylvania, and Utah, apportionment of blame becomes relevant only after a certain threshold, either quantitative or qualitative, is crossed.

Pure no fault liability does not concern itself with the party at fault. Each party will claim compensation from his insurance company for economic losses like wage loss or medical expenses. Non-economic losses like pain caused, trauma suffered or the loss of a companion is not compensated in a purely no fault liability system.

The 13 no fault insurance states above have adopted a mixed system. Economic losses are taken care of in a manner similar to pure no fault insurance. Non- economic losses are decided on the basis of a threshold.

A quantitative limit lays down a specific amount of damages as the threshold. If the claim goes beyond this limit, the party at fault shall be identified and compensation will be obtained accordingly. Any claim below this limit and claims for non-economic losses will not be entertained.

A qualitative limit focuses on level of disability or occurrence of death as the threshold. No claim can be filed if the party does not suffer from any disability or if a death does not occur.

The former option leads to exaggeration of claim amount to escape pure no fault tort insurance. The latter option leads to litigation to interpret whether the qualitative limit has been breached.

Individuals in no fault insurance states bear the responsibility of assessing insurance needs properly. An individual can demand compensation up to the maximum limit of their own insurance policy. There is no question of seeking benefit from the other party's insurance company for economic losses. A party not at fault may end up with a huge loss if only minimum insurance coverage exists.

Benefits of such a tort insurance principle include relatively less litigation, non-adversarial approaches towards insurance disputes, emphasis on safer driving instead of focusing on identifying which party is at fault, and lower rates. Such states do not subsidize the under-insured and individuals are encouraged to assess their insurance needs liberally.

However, critics point out there is sufficient scope for litigation based on the manner in which the threshold has been fixed. Further, statistics do not indicate significant lowering of insurance costs in such states.