No-fault Insurance

No-fault insurance is a type of automobile accident insurance that was first proposed in the 1960's. It provides that if a driver, passenger, or pedestrian is injured, an insurance company--usually the driver's company--must pay, no matter who caused the accident. Injured people receive payment for medical costs and loss of income. However, many no-fault plans restrict a victim's right to sue for pain and suffering or other nonfinancial damage. Such restrictions forbid a suit for nonfinancial damage unless the medical expenses exceed a certain amount or the victim was disfigured, disabled, or killed. Many other types of insurance, including fire, health, and life insurance, have always been no-fault.

Supporters of no-fault automobile insurance believe it corrects flaws in the older system, which requires that blame be determined before claims are settled. Many victims of automobile accidents go through costly legal battles and wait for years before receiving payment. Insurance companies fight large claims more vigorously than small ones. As a result, many seriously injured victims collect little or nothing, while many with minor injuries get relatively large settlements. People who favor no-fault insurance say it brings quicker settlements and fairer distribution of payments. They also believe motorists pay less for insurance because there are fewer large damage suits and expensive court battles.

Opponents of no-fault insurance argue that it is unfair to release careless drivers from the responsibility for injuries they cause. They also say that no-fault plans do not reduce insurance costs because more injured people receive benefits.

In 1970, Massachusetts became the first state to adopt a no-fault insurance plan. A number of other states later adopted no-fault plans. Some had modified plans, without restricted suits.