How Does a No-Fault Car Insurance Claim Work?

An explanation of how no-fault car insurance claims work, and when a lawsuit may still be possible.

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Most states follow the rule that if you are involved in a car accident and you are injured, then you have the option of bringing a claim for compensation against the negligent driver -- usually through that driver’s insurance company. In that situation, as part of the "third party claim" process, you must convince the other driver’s insurance company that its own insured was at fault for the car accident. Only then can you collect any damages for your injuries.

Proving the other driver’s fault to the insurance company can be a long and complicated process involving the submission of police reports, witness statements, photographs, and any other information or documentation the insurance company may require. Even after all of that, the other driver’s insurance company may still deny the claim, forcing you to file a lawsuit.

Because pursuing an insurance claim in that manner can be an expensive and time-consuming endeavor, several states have changed their automobile insurance systems and instituted “No-Fault” insurance coverage.

What is No-Fault Insurance?

If you are injured in a car accident caused by the negligence of another driver, and you live in a no-fault state, the procedure for submitting an insurance claim is much more streamlined than in states that follow a more traditional fault-based insurance system.

Rather than submitting your claim to the negligent driver’s insurance company, you submit your claim to your own insurance company. Your insurance company then pays damages to you for the injuries you suffered in the car accident, regardless of who was legally responsible for causing the car accident.

This process is in many ways much more efficient and direct. In submitting a no-fault insurance claim, you do not have to worry about whether the insurance company will deny your claim because of any dispute about the cause of the accident. You do not bear the burden of having to prove to the other insurance company that that fault of the accident lies with the other driver, and not you.

But the other side of the coin is that in a no-fault claim, you're limited in the kinds of compensation you can collect. Whereas in a third party insurance claim or lawsuit against the at-fault driver you can recover "pain and suffering" damages on top of reimbursement for medical bills and lost income, "pain and suffering" and other "general" damages are not available in a no-fault car insurance claim.

What is the Purpose of No-Fault Insurance?

One purpose of no-fault insurance is to reduce the monetary costs associated with lengthy insurance claims and litigation. Since any dispute about the cause of a car accident becomes irrelevant in a no-fault insurance state, the insurance companies in those states tend to pay claims much more quickly and with much less hassle.

Because no-fault insurance greatly reduces possible disputes about insurance claims, it also significantly reduces the likelihood that any of the parties will resort to filing a lawsuit to resolve those disputes. Some no-fault states still allow an injured party to sue the negligent driver for damages, but usually those lawsuits are limited to a narrow set of circumstances, like when the accident caused "significant" injury or resulted in medical bills above a certain threshold.

Which States Have No-Fault Insurance?

Several states are considered “no-fault” states when it comes to car insurance:

  • District of Columbia
  • Florida
  • Hawaii
  • Kansas
  • Kentucky
  • Michigan
  • Minnesota
  • New Jersey
  • New York
  • North Dakota
  • Pennsylvania, and
  • Utah.

Each of these states has its own variations on the no-fault system. For example, some of these states follow a "choice no-fault" system in which, at the time you purchase the insurance policy, you elect whether you want to be insured under no-fault or the more traditional liability-based insurance system.

Additionally, even among no-fault insurance states, each state has different rules covering what type of damages can be pursued in a no-fault claim. While most states allow you to claim medical expenses and lost wages, some no-fault states still require any property damage claims to be pursued directly against the negligent driver, and not your own insurance company.

And remember, unless your car accident claim qualifies to "step outside" of no-fault, you won't be able to collect "pain and suffering" damages in connection with the accident and your injuries.

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