Each state has its own specific laws that dictate how car accidents are handled. In a no-fault, drivers can receive compensation from their own auto insurance company in case of a motor vehicle accident – regardless of who caused it. It’s different from a fault or tort state, where the compensation can only be recovered from the party that caused the accident.
How Does the No-Fault System Work?
In a no-fault state, you must buy no-fault automobile insurance, also referred to as personal injury protection (PIP) insurance. In the event of a motor vehicle accident, whether it’s a single-vehicle accident caused by colliding with a stationary object, a collision involving two or more vehicles, a collision involving a pedestrian and an automobile, or any other type of accident, you can immediately file a claim with your insurance provider and receive compensatory benefits up to the limits of your policy. The other parties involved in the accident can also file a claim with their auto insurance provider and receive compensation.
How Does the No-Fault System Differ from Fault Based System?
The key differences between the no-fault system and the fault-based system include the following:
The Element of Fault
The primary difference between the no-fault and fault-based systems is the fault element. In a no-fault state, all the parties involved in an auto accident can file a claim with their auto insurance provider and receive compensation – regardless of who was at fault for the accident. There is no need for the parties involved to prove each other’s fault or liability.
In a fault state, the party injured in the auto accident must sue the party that caused the accident to recover compensation. The injured party must prove that the other party was at fault to recover compensation from them.
The Right to File a Personal Injury Claim
In a no-fault state, your right to file a personal injury claim (also referred to as a tort claim) against third parties is restricted by law. Since your auto insurance company compensates you for your injuries and lost earnings, you cannot recover compensation from the party that caused the accident.
At the same time, your right to file a tort claim is not prohibited in a no-fault state. If you are seriously injured in an auto accident – and if your injuries meet the threshold for severe injuries under the law – you can sue the party that caused the accident and recover compensatory damages – in addition to the no-fault benefits you receive from your own insurance company.
In a fault state, on the other hand, you have the right to sue all the parties that caused or contributed to the auto accident and recover compensation. Since your auto insurance provider is not responsible for compensating you for the accident, filing a claim against the at-fault party is the only way to recover the compensation you need.
In a no-fault system, you can receive the total compensation you are entitled to (up to the limit of your policy) regardless of the extent of your fault. In a tort system, the amount of compensation you can recover from the at-fault party largely depends on the extent to which you were responsible for the accident.
- For example, in states that follow the pure comparative negligence doctrine, you can receive compensation even if you were 99% at fault for the accident. At the same time, your compensation will be reduced by 99%.
- In states that follow the modified comparative negligence doctrine with a 50% threshold, you cannot receive compensation if you are found to be 50% at fault.
- In states that follow the modified comparative negligence doctrine with a 51% threshold, you cannot receive compensation if you are found to be 51% at fault.
- In states that follow the contributory negligence doctrine, you cannot receive compensation if you are found to be at fault – even by 1%.
Origins of the No-Fault System
In the 1960s, the civil justice system in states across the country was overburdened with a litany of traffic accident-related tort claims. It prompted many legal experts to develop an alternative approach to resolve traffic accident-related claims.
Robert Keeton, a law professor at Harvard Law School, and Jeffrey O’Connell, a law professor at the University of Illinois, developed the first proposal for a no-fault system. In 1967, Massachusetts became the first state in the country to adopt the no-fault insurance plan, a modified version of the plan proposed by Robert Keeton and Jeffrey O’Connell.
Apart from reducing the burden of judicial machinery, the no-fault system was meant to address the built-in deficiencies and inadequacies of the tort system. These include:
- Due to the fault-based approach of the traditional tort system, victims often had to wait for too long to get the compensation they needed. As a result, many victims could not get the medical care they needed.
- Poor and marginalized people were unaware of their legal rights and often could not get the necessary legal assistance. As a result, they were taken advantage of by unscrupulous insurance companies and could not get the compensation they were entitled to under the law.
- With the emergence of the no-fault system, drivers finally had the option of receiving the compensation they needed without having to negotiate with the insurance company or litigate their claims.
The country has nine pure no-fault states, three no-fault choice states, and 10 add-on no-fault states.
Pure No-Fault Insurance States
- New York
- North Dakota
In these states, you can only buy no-fault insurance, and your right to file a tort claim in case of an accident is restricted.
Choice No-Fault Insurance States
- New Jersey
In these states, you can buy no-fault or traditional tort insurance – depending on your needs and preferences.
Add-On No-Fault Insurance States
- New Hampshire
- South Dakota
In these states, you can add no-fault or personal injury protection to your auto insurance coverage if you want to.
Advantages of the No-Fault System
There are several reasons why the no-fault system is considered a more efficient alternative to the traditional tort system. These include:
You Can Recover Compensation Even If You are at Fault
The most significant advantage of the no-fault system is that you can receive compensatory benefits even if you were injured in an auto accident caused directly by your negligence. This is in stark contrast to the fault-based system, where your ability to recover compensation depends on whether you were responsible for the accident and, if so, to what extent.
One of the significant downsides associated with the traditional tort system is that depending on the circumstances, the at-fault party’s insurance company might try to blame you – partially or totally – for the accident. While it might sound unethical, insurance companies do it all the time to get away with paying as little as possible – or nothing at all.
In such a scenario, unless an experienced personal injury lawyer represents you, the insurance company might get away with blaming you for the accident. As a result, you might not be able to receive the compensation you deserve.
You Can Receive Compensatory Benefits in a Timely Manner
Under the no-fault system, you can get the compensation you need promptly since the insurance company does not have to investigate your accident to find out what caused it and determine the liability of the parties involved.
Under the fault-based system, you might have to wait anywhere from a few months to a few years to get the compensation you need. This is because the insurance company will thoroughly investigate the accident to determine who can be held liable and the extent to which they can be held responsible. This process can be time-consuming, mainly if multiple vehicles are involved in the accident.
Moreover, if the claim is not settled through negotiation, it needs to be litigated, which can take well over a year or even longer – depending on how complex the claim is. Even if you sign a medical lien with the hospital – a legal arrangement wherein you can get the medical care you need without paying any money and pay the hospital after your claim is settled – your loved ones might still struggle to keep up with the out-of-pocket expenses and miscellaneous expenses, especially if you are seriously injured and if you happen to be the primary breadwinner of the family.
The no-fault system eliminates these problems by providing you with the compensation you need when you need it the most.
No Risk of Settling for Less Money
Under the tort system, you must negotiate hard with the at-fault party’s insurance company to get the compensation you need. Even if the at-fault party were 100% at fault, the insurance company would not voluntarily pay you what you are entitled to. They will do everything they can to reduce the compensation – including falsely blaming you for the accident and accusing you of failing to take steps to mitigate the damages caused by the accident.
There are many tactics that the insurance company might use to blame you for the accident. For instance, they might contact you after the accident and ask you to provide a statement or answer a few questions about the accident. They might ask you leading questions to get you to say something that can be considered an admission of fault. Based on your statement, the insurance company might blame you partially for what happened and try to reduce your compensation to the extent they can.
The insurance company will also look for inconsistencies in your accident report (the one you filed with the police immediately after the accident) and your statement to the claims adjuster. If there are any, they might accuse you of lying or exaggerating your injuries to get more money from the at-fault party. Unless you have a skilled personal injury lawyer who can counter these accusations and establish the at-fault party’s fault and liability, you might be forced to accept whatever the insurance company offers.
Data shows that many people – particularly those who fail to get adequate legal representation – tend to settle their claims by accepting whatever compensation the insurance company offers because they cannot afford to invest the time and effort needed to negotiate with the claims adjuster and recover total and fair compensation.
It is not the case with the no-fault system, as you do not have to negotiate with anyone to get the compensation you need. As long as you file the claim promptly and submit the required documents, you can get all the benefits to which you are entitled.
Covers the Whole Family
One of the biggest advantages of a no-fault policy is that it covers your whole family. Suppose your family members get injured while riding in someone else’s vehicle or in a pedestrian accident. In that case, they can get compensated for their injuries and lost earnings under your policy.
Limitations of the No-Fault System
Auto insurance premiums in no-fault states tend to be considerably higher than in fault states. If you get injured in a car accident and file a claim, your premiums might increase even more, even though you are the victim, not the at-fault party.
Does Not Compensate You for Non-Economic Damages
One of the most significant limitations of the no-fault system is that it does not compensate you for non-economic damages like pain and suffering, emotional distress, and diminished quality of life. The compensation only covers economic damages like medical expenses, lost earnings, and household service expenses.
How Does the No-Fault System Work in Michigan?
Under Michigan’s auto insurance law, every driver must buy no-fault automobile insurance. Driving a motor vehicle without no-fault insurance is a misdemeanor offense that is punishable by a fine (up to $500) and jail time (up to one year).
The no-fault policy you buy includes three components. These include:
No-Fault or Personal Injury Protection
This component will compensate you for your injuries, lost earnings, and household services if you are injured in an accident. Earlier, all drivers needed to buy unlimited PIP coverage. It is no longer the case, thanks to the changes made to Michigan’s auto insurance laws in 2019.
Under the new law, you can choose the amount of PIP coverage you need from a tiered system. The options available are:
- Unlimited PIP coverage
- $500,000 PIP coverage
- $250,000 PIP coverage
- $50,000 PIP coverage
To choose the $50,000 PIP option, you must be enrolled in Medicaid. Also, your spouse and other resident relatives must be enrolled in Medicaid, have qualified health insurance coverage, or be covered under someone else’s PIP policy.
You can also choose not to buy any PIP coverage if you meet the following requirements.
- You have sufficient coverage under the Medicare program (Parts A and B)
- Your spouse and other resident relatives have qualified health insurance coverage or are covered under someone else’s PIP policy.
Property Protection Insurance
This component will compensate third parties for the property damage you cause (up to $1 million) in the event of a car accident.
Residual Liability Insurance
This is the component that will compensate third parties who are seriously injured as a result of your negligent driving. The maximum amount of compensation that can be paid to third parties under the residual liability coverage is:
- Up to $250,000 per person who is seriously injured or killed
- Up to $500,000 per accident in which more than one person is seriously injured or killed
- Up to $10,000 for property damage
Coordinated vs. Uncoordinated No-Fault Insurance in Michigan
Under Michigan’s no-fault system, you can choose to buy a coordinated no-fault insurance policy or an uncoordinated insurance policy, depending on your needs. A coordinated no-fault policy works in conjunction with traditional health insurance policies. It will only compensate you for expenses not covered under your standard health insurance policy.
On the other hand, an uncoordinated no-fault policy works as a standalone policy. It will compensate you for all the covered expenses, even if they are covered under your traditional health insurance policy. Coordinated no-fault policies generally tend to be cheaper than uncoordinated no-fault policies.
Benefits You Can Receive under a Michigan PIP Policy
The compensatory benefits you can receive under a Michigan PIP policy include the following:
Allowable Expense Benefits
These benefits are meant to compensate you for the expenses associated with your treatment, care, and rehabilitation.
Work Loss Benefits
These benefits are meant to compensate you for the loss of earnings caused by your injuries.
Replacement Service Benefits
These benefits are meant to compensate you for the expenses of hiring third parties to perform domestic services like housekeeping, babysitting, yard work, and maintaining your home – which you otherwise would have performed yourself.
Survivor’s Loss Benefits
These benefits are meant to compensate your family in the event of your death. They typically include funeral expenses, lost income and benefits, and replacement service benefits.
Can You Sue the At-Fault Driver Even After Receiving No-Fault Benefits?
Yes, you can – depending on the severity of your injuries. Under Michigan’s no-fault law, you have the right to file a tort claim against the at-fault party and recover compensatory damages if your injuries are severe and meet the threshold injury requirements.
A threshold injury results in permanent and serious disfigurement, severe impairment of a body function, or death. Among these, severe impairment of a body function is the only condition often contested by insurance companies, as the term ‘serious impairment’ can be subjective to a certain extent.
Thankfully, the no-fault law reforms of 2019 expanded the definition of severe impairment to make it easier for insurance companies and the courts, if necessary, to determine whether a plaintiff’s injury meets the definition of severe impairment.
The most important criteria for severe impairment of a body function include:
- Whether the injury has impaired vital body function.
- Whether the symptoms are visible or observable.
- Whether the impairment affects the injured person’s ability to perform activities of daily living and lead an everyday life.
- Whether there has been a noticeable decline in the injured person’s life before and after the injury.
It should be noted that a serious impairment does not necessarily have to be permanent under Michigan law. What it means is that even if the impairment is temporary and if you are expected to make a full recovery, you can still sue the at-fault party – as long as your condition meets the criteria above.
Damages You Can Recover in a Michigan Car Accident Claim
You can recover non-economic or intangible damages, which are not covered under your no-fault insurance policy. These include:
- Pain and suffering
- Emotional distress
- Permanent disability
- Diminished quality of life
- Loss of consortium
Apart from this, if the compensation paid under your no-fault insurance policy is insufficient to cover your medical expenses and lost earnings, you can recover excess economic damages from the at-fault party.
Why You Should Hire an Experienced Michigan No-Fault Lawyer to Handle Your Claim
Some people are under the erroneous impression that they do not need to hire a lawyer in the event of an automobile accident because they are assured of compensation under Michigan’s no-fault law. While filing a first-party claim with your own insurance provider is a much simpler and much more streamlined process than filing a third-party claim against the at-fault party’s insurance company, you still need to have an experienced lawyer on your side for several reasons.
Your Lawyer Can Help You File the No-Fault Claim
A successful and confident Michigan personal injury lawyer can make sure you get the no-fault insurance benefits you are entitled to by ensuring that:
- Your no-fault application is properly filled out.
- Your application is free of errors and omissions that can cause your claim to get rejected.
- All the necessary documents, including your medical bills and attending physician’s report, are submitted.
- The monetary losses incurred by your injuries are properly documented (loss of earnings, expenses associated with attendant care, domestic services, home modifications, and other related expenses).
Your Lawyer Can Take Legal Action Against Your Auto Insurance Company If They Refuse to Pay No-Fault Benefits
Suppose your no-fault insurance company fails to pay all the benefits you are entitled to under the law or rejects your claim without any legitimate reason. In that case, your lawyer can take legal action against them and recover the compensatory benefits you are owed. Under Michigan’s no-fault law, auto insurance companies that refuse to honor their legal obligations towards their policyholders have to pay penalty interest (12% per annum on the compensation you are owed) and your attorney’s fees.
Your Lawyer Can Help You File a Tort Claim Against the At-Fault Party
One of the most important reasons you need to hire a seasoned Michigan personal injury lawyer is that they can determine whether your injury meets the threshold injury requirements and help you recover compensatory damages from the at-fault party.
Unlike a no-fault claim, a tort claim requires you to establish the fault and liability of the defendant. Your lawyer can gather the evidence needed to strengthen your case against the at-fault party, establish their fault and extent of liability, and negotiate aggressively with their insurance provider to get the best settlement offer possible.
Choose the Most Trusted Michigan Personal Injury Attorneys with a Proven Track Record of Settlements and Verdicts
Suppose you have been injured in an auto accident. In that case, the experienced Michigan, no-fault attorneys at The Lobb Law Firm can help you file a PIP claim with your insurer and promptly ensure you receive all the benefits you are legally entitled to.
We can also determine whether your injuries meet the state’s threshold injury requirements and take legal action against the at-fault party to recover pain and suffering damages and excess economic damages to which you might be entitled.
We have been fighting for the rights of car accident victims and other personal injury victims in Michigan for nearly 50 years. Our personal injury attorneys are rated highly by their peers and clients and have decades of combined experience in filing first-party and third-party claims.
We are prepared to fight relentlessly to recover every dollar you are owed. Call us today at 248-591-4090 or get in touch with us online and schedule a free consultation with one of our top-rated Michigan car accident attorneys.