No Fault Insurance
No fault insurance opponents claim that it has a negative effect on drivers due to the misconception that they do not have to practice safe driving habits. On the other hand, those for no fault insurance law believe that it allows accident victims to receive the needed medical attention without having to wait for at-fault proof.
Auto insurance is a system in which drivers are required to carry insurance. While it protects the driver, it also restricts them from suing other drivers for damages. If you live in a no fault state and you have an accident, your insurance carrier will pay for your damages up to policy limits. It does not matter who was at fault. The other party’s damages will be paid by their insurance policy.
Under a 100 percent no fault system, driver’s damages are completely covered by their own policy. This system also prohibits drivers from ever suing the other party for damages. Nonetheless, there are no states enforcing a 100 percent no- fault system. The 12 no fault states implement parts of the no fault system and parts of the standard liability system. This allows for lawsuits under certain circumstances. It’s important that you familiarize yourself with your state’s regulations before purchasing an insurance policy.
The no fault part of your policy is also called personal injury protection (PIP). Coverage under a PIP varies depending on the state you live in. Generally, it covers most injury-related expenses. Other general benefits are funeral expenses, death benefits, medical costs, compensation for loss of services, and loss of wages. The amount of PIP also depends on the state you live in. In some states like District of Columbia, Pennsylvania, and Kentucky drivers have an option whether they want to purchase PIP. If they choose to decline, they operate under the standard liability system.
Unfortunately, establishing liability can take time and all the while accident victims may be left without the needed treatment. Under the no fault system, doctors are often unable to recover their fees. To remedy this situation, many states have implemented laws regulating the coverage that insurance carriers in that particular state need to provide for medical costs resulting from an accident. This provision ensures that there is coverage available for accident victims.
Coverage normally includes the following: lost wages, medical bills, and replacement services. This is the expenses incurred because of needing to pay someone else to do things for you that you can’t do as a result of the accident. Hiring a baby sitter is an example of a replacement service.
No fault insurance is not a replacement for health insurance. You can submit claims through your health insurance if you’re injured in an accident. No fault insurance will pay for items such as co-pays and other fees not covered by your health insurance. If there’s an accident, the at-fault driver could still be responsible for damages even if he’s uninsured. The car’s insurance company can recover losses from him.
Another fact about no fault insurance is that it doesn’t pay for pain and suffering. It also doesn’t replace uninsured or under-insured motorist coverage. No fault protection is not an answer to all accident related issues. Its coverage depends on the state.
Thirty-one members of a no fault insurance fraud ring were arrested for submitting false claims to 13 different insurance companies. These claims were filed between March 1999 and July 2003. The alleged offenders staged automobile accidents in the Bronx and Manhattan. They used two different scenarios. In the first one, two vehicles would crash into one another. In the second one, the driver of a vehicle would crash into another vehicle. The second vehicle would often be a cab or taxi. The occupants were asked to go to no fault clinics in the Bronx. They would make false injury claims. All together, they submitted approximately $500,000 in medical expenses to various insurance carriers. Approximately half of that amount was paid.
A second example of no fault insurance claims also took place in New York State. Charges were filed against four psychotherapists. The psychotherapists claimed having provided services to hundreds of accident victims. Some of the charges were over-billed and other charges were for services that were never provided. Charges of falsifying business records, grand larceny, and insurance fraud were filed against the defendants in Kings County Supreme Court.
Many states are making progress in combating no fault auto insurance fraud. New York State is an example of this. Many insurance companies have reduced their premiums due to reduction in fraud. The most affected are honest consumers.
When people hear the term no fault insurance, they automatically think of no fault car insurance. They ignore the fact that no fault insurance also involves homeowners and commercial insurance plans.
If no fault insurance is not available as the primary payer, then Medicare becomes the secondary payer of claims. This is the case even though state law states that no fault insurance is secondary to Medicare. Normally, no Medicare payments are made if it’s believed or expected that the no fault insurance company will make payments. A provider of services may not collect any payments from Medicare or the beneficiary until the beneficiary receives the no fault insurance settlement.
In cases where the no fault insurance carrier does not make payments to providers within 120 days, they can submit their claims to Medicare. Medicare then makes a conditional payment. Once the no fault insurance settlement is available, Medicare is first to recover losses.
If a provider decides to bill Medicare conditionally after the 120-day period, the provider must withdraw any claim against the no fault insurance policy. If they want to continue their claim against the no fault carrier, then they cannot bill Medicare.
Most people think that no fault car insurance deals with automobile damage. This is false. No fault insurance deals with necessary expenses, loss of wages, and medical bills. The purpose of this law is so that accident victims don’t have to wait for an at-fault decision to receive the medical care they need.
Another misconception regarding no fault insurance is that you will be covered if you were not at-fault in an accident. The truth is that your no fault policy will cover you regardless of who was at fault. You can receive the needed medical help without having to wait.
A third myth or misconception is that a person can drive without fear of causing an accident because he won’t be accountable if he does. This is false. No fault car insurance involves the process of claims. Insurance carriers recover any financial losses regardless of whose at-fault.
My no fault insurance policy automatically covers my new car. This is another myth that is not necessarily true. If you buy a new vehicle, you must notify your insurance carrier so that your new vehicle is added to your policy.
These are some of the myths and misconceptions that people generally have regarding no fault auto insurance. Read your policy to make sure you have a clear understanding. Contact your local representative or insurance carrier if you have further questions.
The legislature in Tallahassee passed a bill to revive the no fault system effective January 01, 2008. The voting was as follows: the Senate voted 37-0, and the House voted 105-4 to reinstate the no fault system. Florida drivers are required to carry $100,000 in personal injury protection (PIP). This coverage includes lost wages regardless of who caused the accident. This legislature does not involve any significant changes for those drivers who have continued to carry PIP and who don’t normally file claims. Florida’s state budget for no fault car insurance issues increased by $2 million as a part of this legislation. This amount will go towards hiring additional anti-fraud prosecutors.
Michigan is another state under the no fault law. Legislature in Michigan states that if you have an accident and your car does not have no fault insurance, you may be found liable for any damages. If you’re sued, you may have to pay a lawyer and the court costs. Additionally, you would not qualify for any benefits such as loss of wages, medical expenses, nor any other no fault benefits. Furthermore, if you’re convicted of driving a car without no fault insurance, drive someone else’s car, or allow someone else to drive your car without no fault insurance, you may be put in jail up to one year, receive a fine up to $500, or both.
State law requires that insurance carriers make no fault insurance available to any person who qualifies. To qualify in the state of Michigan you need a vehicle registered in your name or a valid driver’s license. Nonetheless, there are instances when a person may not qualify for no fault insurance.
You are not eligible if your license is revoked or suspended. If you have been convicted of fraud against an insurance company within five years, you don’t qualify either. In addition, if you have lost a claim over $1,000 and there is evidence of fraud, you will not qualify for insurance either.
Other reasons are: if you have been found guilty of a felony involving a motor vehicle, reckless driving, failing to stop at the scene of an accident, or you have been convicted of driving under the influence of alcohol or drugs within the past three years. Additional reasons are if your car does not meet the state’s safety requirements, or if your premium has been cancelled within the past two years due to non-payment. You can often get around this if you pay the whole premium amount in full.
If the insurance company requires you to join a certain club or organization and you do not join, you don’t qualify for insurance. You also don’t qualify if you have more than the allowable number of points on your driving record.
Studies reveal that in states that adopt the no fault system, drivers tend not to practice safe driving habits as much as in other states. They may drive faster, may not use, seatbelts, or use less caution while driving. Perhaps this is due to the limitations on the driver’s liability when an accident occurs. According to a study by Alma Cohen and Rajeev Dehejia, “The Effect of Automobile Insurance and Accident Liability Laws on Traffic Fatalities”, traffic fatalities increased by approximately 10 percent under no fault insurance laws.
Ten percent is a significant increase when you consider the fact that 40,000 lives are lost each year due to traffic accidents in the United States. Approximately $100 billion is spent by Americans each year on automobile insurance premiums. Additionally, each year Americans bear more than $250 billion of uninsured accident expenses. Therefore, the introduction of no fault auto insurance has resulted in an additional 5,160 to 6,450 lives lost in the U.S.
One positive effect of compulsory insurance laws is that it reduced the number of uninsured motorists. The number of uninsured motorists fell from 12.9 percent to 2.4 percentage points. For each point decrease in uninsured motorists, research showed 2 percent increase in accident fatalities. The consumers most affected were the ones that did not previously have no fault auto insurance.
In 12 U.S. states and Puerto Rico, drivers have the option of operating under a no fault system. Under such system, drivers are barred from suing the other party in an accident unless the injuries are extremely severe. For this reason, this provision is sometimes called the limited tort option. No fault insurance policy holders may sue for pain and suffering only under certain situations. The degree of the pain and suffering has to meet one of the two specified definitions of exceptional severity. The first is that the insured would have to describe verbally whether he has crossed a defined severity line. In the second definition, a monetary threshold is set on medical expenses.
There are pros and cons regarding no fault insurance. On one hand, it does away with litigation costs and provides quick settlement of claims. On the other hand, critics point out that it does nothing to punish negligent drivers. Another negative aspect is that no fault insurance makes it difficult to sue if a persons injuries result in a handicap. No fault insurance supporters claim that it is an incentive to take more precautions while driving.
Some states that previously implemented a no fault insurance law later repealed their no fault laws. Originally, 24 states implemented no fault laws in one form or another between 1970 and 1975. In 2003, Colorado repealed its no fault law and Florida followed in 2007. However, the Florida legislature passed a new no fault law, which went into effect as of January 1, 2008.