In order to understand exactly why you shouldn't count on automatically getting a settlement after a car accident in a no- fault state, you first need to understand how no-fault car insurance works. There are two important components to no-fault car insurance.
First, if you get into a car accident, your own automobile insurer will pay some or all of your medical bills and lost earnings, regardless of who was at fault for the accident, under your no-fault or "personal injury protection" (PIP) car insurance coverage. Even if you caused the accident, your insurance company will still pay for your medical bills and/or lost earnings up to a certain limit.
Second, you are generally not allowed to make a liability claim for personal injury damages (including pain and suffering) against the at-fault driver unless your medical bills reach a certain monetary threshold or you have suffered qualifying "serious injury".
As an example, a state no fault law might prohibit claims for personal injury damages against the driver at fault unless the injured person’s medical bills exceed $5,000. But once your medical expenses reach this amount, you're free to step outside of no-fault and file a liability claim against the driver who was at fault for the car accident.
When thinking about a no-fault settlement, the first thing to remember is that the only benefits you're usually receiving in a no-fault claim are medical bills and/or lost earnings -- plus, in some instances, compensation for "replacement services" to cover household services you can't perform because of your injuries, and other out-of-pocket losses.
And because most states put a limit on the amount of medical bills and lost earnings that a claimant can recover under the no fault laws, a no-fault settlement won't usually be large. And in some cases, the insurer may refuse to pay for certain claimed losses.
Let’s take a couple of examples. Let’s say that you got into a car accident and incurred $3,000 of medical bills and $2,000 of lost earnings, and that both of these amounts are within your state's no-fault limits. In most situations, the no-fault insurer will simply pay the bills and pay the lost earnings, as the carrier is obligated to do, and as long as you submit the proper proof of earnings. In this situation, because the no-fault insurer paid all of the no-fault damages to which you are entitled, there is nothing further to settle.
Now let’s look at an example on when you might get a "settlement" that is less than what you are asking for. Typically, you would settle a no-fault claim when there is a serious dispute between you and the insurer as to reasonableness and/or relatedness of your medical bills or as to the amount of your lost earnings claim. Let's say that you have $12,000 in medical bills, which is within your state's no-fault limits, but that you incurred half of those bills after your doctor released you to return to work. Let’s also say that most doctors only charge $8,000 for all of that treatment.
In this case, the insurer might claim that the medical treatment you received after you returned to work was unnecessary, or that the bills were too expensive in the first place. No-fault insurers are still allowed to contest things like the medical necessity or the cost of treatment. Insurers are only required to pay medical bills that are fair and reasonable. If a bill is too high, the insurer won’t pay it. But, after a bit of settlement negotiation, you (or your lawyer), the insurer, and the doctor might come to an agreement and settle the no-fault claim. Perhaps you might all agree that the doctor will accept another $1,500 and call it even. That would be an example of a no-fault settlement.
A key thing to remember about this kind of no-fault settlement is that, if the sticking point is unpaid medical bills, the amount in dispute won’t go to you; it will go to the health care provider.