What is No Fault Insurance and How Does a Claim Work?
If you live in a "no-fault" car insurance state, you'll be making a claim against your own insurance company after an accident, regardless of fault.
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About a dozen states have what are called "no fault" car insurance laws (District of Columbia, Florida, Hawaii, Kansas, Kentucky, Massachusetts, Michigan, Minnesota, New Jersey, New York, North Dakota, Pennsylvania, and Utah). No fault insurance means that your own automobile insurer will pay some or all of your medical bills and lost earnings if you get into a car accident, regardless of who was at fault for the accident.
Every state’s law is different. In some “no fault” states, there is a limit to what benefits your own automobile insurance company will pay you; in others, there is no limit.
A very important part of the no fault laws is that, in most no fault states, you are not permitted to make a claim for personal injury damages (which involves compensation for pain and suffering) against the negligent driver unless your medical bills reach a certain level, or your injury is deemed sufficiently serious. This restriction was placed in the no fault laws as a way to try to streamline car accident claims, especially smaller claims. For example, your state’s no fault law might prohibit claims for personal injury damages against the driver at fault unless your medical bills exceed $3,000 or you suffer a broken bone.
What is A No Fault Insurance Claim?
A no fault insurance claim, sometimes called a Personal Injury Protection claim (or PIP claim), is one you make against your own automobile insurer for payment of medical bills and lost earnings under your state’s no fault laws.
Your insurer will pay your medical bills and will reimburse you for some of all of your lost earnings up to the amount of your claim or your state’s no fault limit, whichever is lower. Some states have a two part medical bill limit. In those states, if the injured person has health insurance, the no fault insurer would only pay a small amount of the injured person’s medical bills, and the health insurer will pay the remainder.
Either way, once your medical bills exceed your state’s no fault limit, you are responsible for paying them. If you have health insurance, your health insurer will pay your medical bills from that point on. If you are on Medicare or a state run health insurance program through Medicaid, those entities will pay the bills. If you do not have health insurance, Medicare, or Medicaid, then you are responsible for working out payment arrangements with your health care providers.
How Does a No Fault Claim Work?
Let’s take an example. Let’s say that you got into a car accident, in which the other driver was at fault, and with the following facts:
- your state’s no fault limit for medical bills is $5,000 for people with no health insurance, and $10,000 for people with health insurance
- your state requires no fault insurers to pay three quarters of the injured person’s lost earnings up to $10,000 of lost earnings
- you do not have health insurance
- you have $20,000 of medical bills and $12,000 of lost earnings
- your state requires people injured in a car accident to have $10,000 of medical bills before they can make a claim against or sue the negligent driver.
In this case, your car insurance company would pay the first $10,000 of your medical bills. That is the no fault limit. You are responsible for the payment of the remainder of your medical bills.
Your car insurance company would also pay you $7,500 toward your lost earnings. This is calculated as follows: 1) the no fault limit for lost earnings is $10,000, 2) the no fault insurer only has to pay three quarters of your lost earnings, 3) the no fault insurer will thus pay $7,500 toward your lost earnings.
Because you had $20,000 of medical bills, you met your state’s minimum medical bill requirement for filing a claim against the negligent driver, and so you can make a personal injury claim against the driver that hit you.
You Must Cooperate With Your Insurer in a No Fault Claim
Most states require insured persons to cooperate with their insurance company in no fault claims. That means that the usual rules for dealing with an insurance company in a personal injury case must be disregarded. For example, in most cases, you do not want to give a recorded statement to the defendant’s insurance company.
But, in a no fault claim, state law generally requires you to cooperate with your insurer. Your state’s no fault laws may require you to give your insurer a recorded statement and will generally require you to attend a medical examination with a physician selected by the no fault insurer. If you fail to cooperate with your no fault insurer, the carrier is generally entitled to terminate your no fault benefits.
If you get into an accident in a no fault state, and need legal advice on making your no fault claim, it may make sense to contact a knowledgeable car accident lawyer.