No Fault Auto Insurance Cassie Harmer, Melissa Fjelstrom, Brent Wuehler

What is No Fault Auto Insurance? In general, any auto insurance program that allows policyholders to recover financial losses from their own insurance company, regardless of fault. In general, any auto insurance program that allows policyholders to recover financial losses from their own insurance company, regardless of fault. In practice, actual no-fault includes a restriction on the right to sue. In practice, actual no-fault includes a restriction on the right to sue.

Current Systems of State Auto Liability Insurance Laws Traditional tort liability system Traditional tort liability system Pure No Fault Pure No Fault Modified No Fault Modified No Fault Choice Choice

Pure No Fault Insurer pays for any economic damages (such as medical bills, lost wages, etc.) up to the policy limit Insurer pays for any economic damages (such as medical bills, lost wages, etc.) up to the policy limit Completely prohibited from suing a negligent driver for "non-economic" damages (such as pain and suffering, loss of companionship, etc.). Completely prohibited from suing a negligent driver for "non-economic" damages (such as pain and suffering, loss of companionship, etc.). Presently, no states function under a pure no-fault system Presently, no states function under a pure no-fault system

Modified No Fault Insurer pays for your economic damages up to policy limit. Insurer pays for your economic damages up to policy limit. Allowed to sue for non-economic if meets threshold. Allowed to sue for non-economic if meets threshold. Verbal threshold Verbal threshold Lawsuits for non-economic injuries limited to "serious" injuries or death. Lawsuits for non-economic injuries limited to "serious" injuries or death. Serious is defined differently in each state Serious is defined differently in each state Precluded from bringing a lawsuit unless meet defined criteria Precluded from bringing a lawsuit unless meet defined criteria Monetary threshold: Monetary threshold: Lawsuits for non-economic injuries are precluded unless certain dollar amount in medical bills is reached. Lawsuits for non-economic injuries are precluded unless certain dollar amount in medical bills is reached. Drawback: People will create medical bills they don’t need to meet the threshold Drawback: People will create medical bills they don’t need to meet the threshold

Choice No Fault Choice is another hybrid of the pure no-fault system. Choice is another hybrid of the pure no-fault system. Choose pure no-fault plan, Choose pure no-fault plan, you are unable to sue negligent drivers for non-economic damage you are unable to sue negligent drivers for non-economic damage you are immune from such suits yourself. you are immune from such suits yourself. Choose to retain your personal injury suit rights, Choose to retain your personal injury suit rights, you can sue other drivers who have also chosen to retain and they can sue you. you can sue other drivers who have also chosen to retain and they can sue you. your traditional tort rights are not unlimited. An accident with a pure no-fault driver puts you in a position to not be able to sue your traditional tort rights are not unlimited. An accident with a pure no-fault driver puts you in a position to not be able to sue Choice no-fault tends to lead good drivers to pick the tort option (which is more expensive) and bad drivers to pick the pure no-fault option (which is less expensive) Choice no-fault tends to lead good drivers to pick the tort option (which is more expensive) and bad drivers to pick the pure no-fault option (which is less expensive)

Benefits of No Fault Quicker payment of claims by eliminating costly and time-consuming litigation over liability. Quicker payment of claims by eliminating costly and time-consuming litigation over liability. No splitting of fees with lawyers. No splitting of fees with lawyers. Lower insurance rates because non- economic damage awards and legal fees are eliminated--legal fees currently account for 12% of premium costs. Lower insurance rates because non- economic damage awards and legal fees are eliminated--legal fees currently account for 12% of premium costs.

Benefits cont. Reduction in the number of lawsuits. Reduction in the number of lawsuits. No subsidizing uninsured motorists; your insurer covers the cost of your medical bills. No subsidizing uninsured motorists; your insurer covers the cost of your medical bills. Lower rates mean that auto insurance is accessible to people of lesser means. Lower rates mean that auto insurance is accessible to people of lesser means.

Drawbacks of No Fault No compensation for pain and suffering, paralysis, or other non-economic damages; arbitrary limits are imposed. No compensation for pain and suffering, paralysis, or other non-economic damages; arbitrary limits are imposed. Under pure no-fault and choice systems, bad drivers are protected because they cannot be sued for the damages they cause. Thus, there's no incentive to be a good driver. Under pure no-fault and choice systems, bad drivers are protected because they cannot be sued for the damages they cause. Thus, there's no incentive to be a good driver. Rates are actually higher under no-fault. Regardless of theory, insurance premiums in no- fault states are on average 25% higher than in traditional liability states. Rates are actually higher under no-fault. Regardless of theory, insurance premiums in no- fault states are on average 25% higher than in traditional liability states.

Drawbacks of No Fault, cont. No reduction in litigation costs under a no-fault system. No reduction in litigation costs under a no-fault system. The time and effort insurers once spent defending litigation claims is now spent defending lawsuits brought by their own insureds for failure to pay no-fault benefits. In modified no-fault states, tremendous time and energy is spent litigating over whether or not the tort threshold requirement has been met. The time and effort insurers once spent defending litigation claims is now spent defending lawsuits brought by their own insureds for failure to pay no-fault benefits. In modified no-fault states, tremendous time and energy is spent litigating over whether or not the tort threshold requirement has been met. Even your economic damages are limited by the terms of the policy. Even your economic damages are limited by the terms of the policy. In traditional tort states, you are fully compensated for your loss by suing the driver responsible for your injuries. No-fault states have limits on liability, even for your basic economic damages. These limits result in people being forced to pay for any unpaid medical bills without recourse against the driver who caused the injuries. In traditional tort states, you are fully compensated for your loss by suing the driver responsible for your injuries. No-fault states have limits on liability, even for your basic economic damages. These limits result in people being forced to pay for any unpaid medical bills without recourse against the driver who caused the injuries.

Who requires No Fault? Currently 13 states and Puerto Rico have no- fault auto insurance laws. Currently 13 states and Puerto Rico have no- fault auto insurance laws. Verbal Thresholds: Florida, Michigan, New Jersey, New York and Pennsylvania Verbal Thresholds: Florida, Michigan, New Jersey, New York and Pennsylvania Monetary Threshold: Colorado, Hawaii, Kansas, Kentucky, Massachusetts, Minnesota, North Dakota and Utah. Monetary Threshold: Colorado, Hawaii, Kansas, Kentucky, Massachusetts, Minnesota, North Dakota and Utah. Three states have a "choice" no-fault law. Three states have a "choice" no-fault law. In New Jersey, Pennsylvania and Kentucky, motorists may reject the lawsuit threshold and retain the right to sue for any auto-related injury. In New Jersey, Pennsylvania and Kentucky, motorists may reject the lawsuit threshold and retain the right to sue for any auto-related injury. 11 other states 11 other states

Utah Law Everyone is required to have a minimum PIP coverage of $3,000 Everyone is required to have a minimum PIP coverage of $3,000 Whoever is driving and passengers are all entitled to your policy Whoever is driving and passengers are all entitled to your policy Medical Bills Benefit Medical Bills Benefit $3,000 each person $3,000 each person Available within 52 weeks Available within 52 weeks

Utah Law, Cont. Loss of Essential Benefit Loss of Essential Benefit Someone else comes in and does chores around the home Someone else comes in and does chores around the home Maximum $20 a day Maximum $20 a day Starts 3 days after time disabled from work but if over 2 weeks than starts on day of accident Starts 3 days after time disabled from work but if over 2 weeks than starts on day of accident Loss Wages Benefit Loss Wages Benefit 85% up to $250 maximum 85% up to $250 maximum Retired can elect to waive this benefit Retired can elect to waive this benefit

Utah Law, Cont. Death Benefit Death Benefit $3,000 survivor benefit $3,000 survivor benefit $1,500 loss benefit (funeral expenses) $1,500 loss benefit (funeral expenses) Loss wages and loss essentials is not allowed Loss wages and loss essentials is not allowed Medical expenses are allowed Medical expenses are allowed Disability or medical related or a pre- existing condition. Disability or medical related or a pre- existing condition. REASONABLE, NECESSARY, and DIRECTLY RELATED REASONABLE, NECESSARY, and DIRECTLY RELATED

Examples A man was changing the oil in his car. The car slipped off of the jack and smashed his face. A man was changing the oil in his car. The car slipped off of the jack and smashed his face. Anytime you are working, loading, exiting, or entering your automobile Anytime you are working, loading, exiting, or entering your automobile

More Examples You or your child slam your hand in the door of the car. You or your child slam your hand in the door of the car. A man was sitting on his car and slid off. He broke his arm. A man was sitting on his car and slid off. He broke his arm.

More Examples A pedestrian or bicyclist darts out in front of you. A pedestrian or bicyclist darts out in front of you. You get hit by a car. You get hit by a car. You have a higher medical benefit limit than your friend who you were riding with. You have a higher medical benefit limit than your friend who you were riding with.