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Page 14 of 44 |
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What is the difference between "no-fault" and "fault" liability in a car accident? |
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No-fault liability generally refers to auto insurance programs that allow insureds to recover financial losses from their own insurance company, regardless of who was at fault in an accident. No-fault programs adopt the approach that everyone pays for their own losses from a car accident. The goal is to cut back on lawsuits, since fault (liability) does not have to be determined. In its strictest definition, these programs also restrict the policyholder's right to sue.
"Fault," the opposite of no-fault, refers to the traditional tort-based system which takes into account who was at fault for an accident, and to what degree, when determining what each person (and their insurance companies) will pay for damages (personal injuriesand property damage).
Usually, the laws of the state in which the car accident occurred determines who pays for the damages. There are roughly four different categories of state liability insurance laws: the traditional tort-based system, mentioned above; a no-fault system where the insurance company is required to pay its own policyholders financial losses, but the policyholder retains the right to sue; a no-fault system with no right to sue except under certain conditions; and states that provide a choice between the traditional tort or no-fault systems.
As of June 2006, 24 states and the District of Columbia and Puerto Rico have adopted some form of "no-fault" liability laws, and the rest still operate under the tort liability system. About half of the no-fault states restrict, in some manner, the right to sue.
Some states have no-fault laws that establish a "threshold." A threshold limits the amount for which you must self-insure. Some no-fault thresholds are based on a stated dollar amount. In other no-fault states, it depends on the circumstances of the car accident. A state might have a no-fault system for all losses sustained, unless property damage exceeds $10,000, someone suffers a serious personal injury, or someone was driving illegally (such as driving while intoxicated).
An attorney can help if you have questions about the exact laws in your state.
In a pure "fault" state, the person who caused the car accident is responsible for paying all damages sustained by everyone involved. In "fault" states, lawsuits sometimes resolve the issue of who is at fault and who will be the one to pay all damages.
For customers in no-fault states, insurance policies can provide coverage for accidents that occur in a fault state, or vice versa. This ensures that the policyholder will have a source of compensation regardless of where the car accident occurred, thus providing more complete coverage. |
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