No-fault laws will affect the procedure and potential outcome of any personal injury case arising from an auto accident, if you live in a no-fault state. Your potential sources for recovery of damages will likely be limited by statute, and your ability to bring a lawsuit is restricted as well. In this article, we'll look at the impact of no-fault laws on personal injury cases.
No-fault laws -- currently in effect in about a dozen states -- severely limit potential sources of financial recovery after an auto accident.
The guiding principle of no-fault law is that all drivers are required by law to insure themselves against potential injuries and damages caused by an auto accident. As a result, if you have been injured in an auto accident in a no-fault state, your first and legally preferred source of recovery is your own insurance company. Only if certain statutorily specified conditions are met, may you file suit against another party in an attempt to recover damages.
Whether you have been injured in an auto accident or simply sustained damage to your vehicle, no-fault law requires that you first collect from your own insurance company through a "Personal Injury Protection (PIP) claim". One minor exception to this rule comes in the form of “mini-tort” statutes. A “mini-tort” claim is a statutorily defined claim that is paid by the other driver’s no-fault carrier. The amount of a mini-tort claim payable under the law usually falls somewhere between $500 and $1,000.00. Your insurance company will likely require you to file a mini-tort claim as a matter of course, even if your damages exceed the mini-tort amount. Often, the mini-tort proceeds are then deducted from any payout your insurance company makes.
No-fault laws are designed to reduce the number of auto negligence suits filed in state court. By statutorily mandating payouts, requiring insurance and placing restrictive conditions on your ability to file suit, courts are not inundated with auto negligence claims. Non-economic damages are not allowable in no-fault claims, which is a major reason why insurance companies support such legislation. Only in the most serious and life-altering cases can you bring suit and collect non-economic damages. You’re effectively limited to recovery for your economic damages -- documented repair and replacement costs, medical expenses, and lost wages.
All no-fault states have instituted a "threshold" for bringing suit in an auto negligence action. In Michigan, for example, an injury that constitutes a serious impairment of bodily function can give rise to an auto negligence suit, and open up the possibility for non-economic damage recovery (including pain and suffering damages). However, if your injury is not deemed a “serious impairment” under the law, your case will be dismissed.
Other states have instituted an economic threshold for bringing suit. They cap the amount of money your insurance company is obligated to pay, and if your economic damages exceed (or most likely will exceed) the cap, you may file suit to recover from another party. Economic thresholds are far easier to analyze and estimate than physical injury thresholds.
(For more on this concept, see The "Serious Injury" Threshold in a No-Fault Car Accident Case.)
While no-fault laws are restrictive, they do serve a purpose. If you sustain minor injuries or simply total your vehicle with no injury at all, you are covered by your own insurance. An insurance claim is usually far less adversarial than a lawsuit. And the turnaround time for payment of your claim is much faster than it would be with the court system involved. Insurance companies may dispute certain aspects of your claim -- indeed, it is not unheard of for injured parties to sue their own insurance companies for payment of no-fault benefits -- but by and large the system works well, especially for recovery after a minor car accident.