How Do Car Accident Settlements Work in No-Fault States?

There are 12 no-fault car insurance states, but that doesn’t mean the at-fault driver is always off the hook when it comes to covering the other driver’s damages.

No-fault car insurance was designed to cut down on big-money car-accident lawsuits. Settlements for medical damages are an average four times higher than those for non-injury accidents. So, in no-fault states, drivers must file with their own insurance company to cover medical bills through required personal injury protection (PIP) insurance.

The no-fault states are:

• Florida
• Hawaii
• Kansas
• Kentucky
• Massachusetts
• Michigan
• Minnesota
• New Jersey
• New York
• North Dakota
• Pennsylvania
• Utah

If medical damages exceed your coverage, you can sue the other driver if the damages meet a threshold. Five states go by a “verbal threshold” – how serious the injury is. Seven go by a “monetary threshold” – damages must meet a certain dollar amount.

Whose Insurance Pays in a No-Fault Accident?

In a no-fault state, each driver’s PIP covers their own bodily injury damages, up to the coverage limit. Drivers file medical claims with their own insurance company, not the other driver’s, even if the other driver is at fault. This differs from the other 38 states, where the at-fault driver’s insurance pays medical bills and other damages related to injuries.

While each state has different rules, PIP covers “reasonable and necessary” medical expenses. This includes things like doctor visits, medical expenses (medication, bandages, etc.), lost wages and funeral expenses. Some of the states also cover replacement services – hiring someone to do things you can’t because of injury, like childcare or mowing the lawn.

Drivers in no-fault states can make claims for property damage against the at-fault driver’s insurance company. Drivers in all of the no-fault states are required to carry property damage liability insurance to cover those claims. You can also pay for the damage yourself if you have collision insurance, though this likely will require paying a deductible.

Ten of the no-fault states (excluding Florida and New Jersey) require drivers to also carry some amount of bodily injury liability. This allows drivers who aren’t at fault to make claims against the other driver if medical damages exceed their own PIP coverage.

Drivers can also sue the at-fault driver if their injuries exceed coverage, but the injuries must meet that state’s threshold in order to sue.

Average No-Fault Car Accident Settlement

Most car accident claims are settled out of court, which means the amounts aren’t public record. Given that, the average U.S. personal injury settlement is $21,000, and the average per-vehicle claim is $4,700, according to the Insurance Information Institute.

Claims are generally lower in no-fault states because:

The insurance company won’t pay more than the PIP coverage, which ranges from a required $3,000 minimum in Utah to $50,000 per person in Michigan and New York. If you exceed your coverage, you can then sue the at-fault driver, but thresholds limit what you can sue for.

Several no-fault states now require drivers to carry bodily injury liability to cover injuries for the other driver and passengers, meaning once you exceed your PIP coverage, you can make a claim against the at-fault driver. But the amount will be limited by the driver’s coverage.

Also keeping claims lower is the fact that, unlike at-fault states, medical costs in no-fault states only cover tangible expenses, not pain and suffering.

Timeline for a No-Fault Car Accident Settlement

While a car accident settlement may be less in a no-fault state than an at-fault state, the good news is that it won’t take nearly as long to get the money. Because fault doesn’t have to be sorted out, insurance companies can investigate and settle claims much more quickly.

Here are five steps that help drivers reach quick settlements:

1. Notify your insurance company ASAP if you are in an accident, even if there’s only property damage. If you plan to file a PIP claim, let them know in that first phone call.
2. An adjuster will be assigned to your case by the insurance company, and you’ll be given a claim number. The adjuster will interview you about the accident – stick to the facts.
3. Submit medical records from your injuries in the accident, as well as proof of lost wages and related expenses, such as medication, bandages, and medical equipment. If your state allows you to claim replaceable expenses, for instance, paying someone to mow the lawn since you can’t because you’re injured, get proof of that as well.
4. Agree to an amount with the insurance company – it’s all right to negotiate for what you believe is a fair amount.
5. If you and the insurance company can’t reach an agreement, you may want to hire a personal injury attorney to help you get a fair settlement.

There are also some things to beware of with settlements:

• Don’t sign a release that allows the insurance company to review your medical history – they may use it to say your injuries are pre-existing conditions.
• Be wary if they record your interview. Some no-fault states require the person making the claim to be recorded but if your state doesn’t, don’t agree to it. Things you say in a post-accident or pain-filled fog may be twisted around to be used against you.
• Hiring an attorney if you are injured in an accident can help you negotiate the sometimes-complex rules of no-fault insurance claims.

Suing in a No-Fault State

While no-fault insurance is aimed at discouraging lawsuits, drivers can still sue if they meet the threshold set by that state.

The thresholds – verbal and monetary – have complicated rules that are a little different in each state.

Florida, Michigan, New Jersey, New York, Pennsylvania, and Puerto Rico have verbal threshold, also known as serious-injury thresholds.

Hawaii, Kansas, Kentucky, Massachusetts, Minnesota, North Dakota, and Utah have monetary thresholds, though drivers in Kentucky, New Jersey and Pennsylvania can pay a higher premium and opt out of the monetary threshold and sue for medical damages, no matter what the amount.

Verbal Threshold

Criteria for injury severity must be met for a suit to be filed in verbal threshold states. Each state is different, but in general the accident must have:

• A fatality
• Significant loss of an essential body function
• Permanent injury
• Significant disfigurement or scarring
• Total or partial disability for an extended period

Monetary Threshold

The cost of medical damages must meet a certain amount to file a claim with the other driver’s insurance company in states where drivers are required to have bodily injury liability coverage. Thresholds are higher for filing a lawsuit. In both cases, the PIP “reasonable and necessary” medical expenses criteria apply.