Most car accident claims are paid by insurance companies. Which insurance company pays a claim (the victim’s or the at-fault driver’s, for example) depends in part on whether the state in which the accident occurred is a “fault” or a “no-fault” auto insurance state.
The difference between these two auto insurance systems is reflected in two different types of auto insurance that in-state drivers are required to purchase – auto liability insurance or Personal Injury Protection (PIP) insurance.
“Fault” vs. “No-Fault” States
Most U.S. states are “fault” auto insurance states. This means that the victim of a car accident that was the other driver’s fault can file a claim directly against the other driver’s auto liability insurance policy or, alternatively, sue the at-fault party in state court. In a “no-fault” auto insurance state, an injured party must look to his own insurance coverage to satisfy his claim in most cases, and he cannot file a lawsuit against even an at-fault driver.
The following states are “no-fault” auto insurance states:
- The District of Columbia
- Florida
- Hawaii
- Kansas
- Kentucky
- Massachusetts
- Michigan
- Minnesota
- New Jersey
- New York
- North Dakota
- Pennsylvania
- Utah
Exceptions to the “No-Fault” Rule
Every “no-fault” state applies exceptions to its no-fault regime. Although these exceptions vary by state, a victim is typically allowed to pursue a claim against an at-fault driver or the driver’s liability insurance carrier if the value of his claim exceeds the limits of his own insurance coverage, or if his injuries a permanent or debilitating. Check your state’s no-fault statute for details.
Personal Injury Protection (PIP) Insurance
Personal Injury Protection (PIP) covers your personal injury damages from a car accident, even if the accident was your fault. PIP insurance is mandatory for drivers with cars registered in “no-fault” states. It is available as an option even in most “fault” states – after all, it could come in handy in a hit and run accident.
What Kind of Losses PIP Insurance Covers
Although terms vary by state, PIP insurance typically covers:
- Medical expenses (including anticipated future medical expenses if you suffered a long-term injury)
- Lost earnings (missing work due to injury, for example, or having to change careers because your injury prevents you from performing your former job duties)
- Incidental expenses, such as travel to and from health care facilities
- Funeral expenses, if you are an estate executor or a qualifying relative with a wrongful death claim
- Losses that exceed the coverage limits of your health insurance policy, if your health insurance policy is also paying out over the accident.
The difference in coverage from state to state is not always obvious – Utah will cover acupuncture treatments, for example, while some other states will refuse to cover this type of treatment.
If you have questions about the terms of your insurance policy (which may be written in “legalese”) or if you want to know how your insurance policy will affect a claim or potential claim arising from a car accident, it might be a good idea to consult with an experienced personal injury lawyer who is qualified to practice in the state in which the accident occurred.