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No Fault Car Insurance History

No fault auto insurance is a specific insurance format in use in 12 states plus the Commonwealth of Puerto Rico. No fault theory began to gain ground in the 1920s in response to dissatisfaction with the traditional tort system of auto insurance. But no state actually managed to pass a no fault auto insurance law until 1971 when it was made a law in the state of Massachusetts. That law was written and sponsored by then Massachusetts state legislator Michael Dukakis, who had studied under eminent no fault theorists [1].

Rise of No Fault Law

In the 1970s and early 1980s, legislative support for no fault auto insurance law (also called personal injury protection or PIP) gained significant momentum, particularly in the first half of the 1970s. Between 1970 and 1976, 26 states passed some form of PIP auto insurance into law. As the years passed, the excitement over no fault began to wane, however. Today, over a dozen of the original PIP states have gone back to some variant of tort law, the most recent being the state of Colorado in 2003.

No Fault Auto Insurance Explained

No fault theory rose to prominence because it promised to address some of the major issues nagging tort law. For one thing, tort law seemed to encourage expensive, drawn out court litigation, clogging the dockets and costing insurance policy holder millions of dollars in the form of higher premiums. As the years passed and these problems persisted and grew worse, public support for the PIP philosophy grew.

PIP auto insurance is an insurance type that promises prompt payment on medical claims regardless of fault in an accident situation. It includes payment for economic losses including medical and health expenses, lost wages, and reasonable and necessary expenses related to injuries sustained in auto accidents. The idea behind no fault was to allow each driver to draw payment from their own policy for injuries they suffer, saving the courts and drivers from expensive and time consuming litigation. There was also a feeling that a switch to PIP would save both insurance companies and drivers money on their costs.

Different states administer no fault in different ways, but the basic tenets are the same everywhere. No fault law is often a misunderstood type of insurance, and this misunderstanding may have contributed to unrealistic expectations of the savings in cost it was projected to deliver versus tort insurance. Many people outside the insurance industry tend to believe that no fault states do not have any concern for finding fault in car accidents, unlike tort states which use fault to assign financial responsibility for accidents.

But this is far from the case. Any insurance policy including liability coverage must have some concern for finding fault. And every PIP state requires liability insurance for every driver, along with almost every other state of the union. This insurance form is indeed interested in liability or fault, also known as negligence, in a car accident. The personal injury protection portions of these policies are just designed to allow for swift medical treatment for all injured parties without immediate regard to fault. These plans do not include property damage concerns, which are dealt with in liability policies. If you get into an accident in a no fault state and you caused the accident, you still have to pay for the damage you cause to the other person's car. And you can even be sued for medical damages if their costs exceed the limits of the driver's PIP policy.

So even in these states, lawsuits still make their way into the courts at a high rate. In some states, there are high rates of auto insurance fraud. New York is a notable example, where state officials are waging a battle against fraud rings that include lawyers, doctors, collision shops, and other groups.

No Perfect Auto Insurance Solution

Clearly time has taught us that there is no perfect solution to auto insurance, at least none that has been introduced up to this point. Different systems have different advantages and disadvantages. PIP auto insurance is a method that has some imperfections in application, but it has worked well enough for quite a sizable minority of states to stick with it up until the present. The history of no fault law dating back to early academic theory and inquiry, and leading up to its implementation and repeal in different states is illustrative of the fact that auto insurance is complicated and expensive and hard to manage efficiently, no matter what system is in place. No fault has its share of faults, but in states where it is the law, drivers need to understand all its precepts and be ready to follow them to the very letter.

[1] Retrieved 2010-03-14.


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