Almost half the states in the US have some form of no-fault liability laws. No-fault is a type of insurance in which companies provide automatic compensation for victims of car accidents, regardless of who was at fault; about half of the no-fault states limit the right to sue. The purpose of no-fault programs is to reduce the number of lawsuits (because they eliminate the need to determine who is at fault).
The opposite of no-fault programs is the traditional fault system. Under this system, compensation for auto accident damages is based on the determination of who was at fault (and to what extent); fault disputes are frequently resolved with lawsuits. If a state has no exceptions to the fault law, the person responsible for causing the accident is liable for all resulting injuries and damages.
With few exceptions, car accidents are subject to the laws of the state in which they occur. State laws can differ considerably but they can be divided into approximately four categories:
- Fault, the traditional system based on torts
- No-fault, in which insurance companies pay for the injuries and damages of their own policyholders, but policyholders can still sue
- No-fault, in which the right to sue is severely restricted
- Optional, individuals can choose between fault and no-fault
There are further complications to the no-fault system. Some states have monetary or circumstantial limits to the law. There may be a set dollar amount for which individuals must self-insure. For example, the no-fault system may apply for all financial losses up to $15,000. Circumstantial limits involve the specifics of the accident; for example, if serious injury results, or if an individual was driving while under the influence of drugs or alcohol. If you do not know or are confused by the laws of your state, an experienced car accident attorney can guide you through the details and their implications.
Auto insurance companies in fault states can provide policies that include coverage for accidents in no-fault states and vice versa; this is a more complete type of coverage, ensuring compensation no matter where an automobile accident takes place.