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Background on: No-Fault Auto Insurance

No one wants to be involved in an accident. However, as much as you try to avoid them, chances are you will probably be involved in at least one accident during your lifetime. Fortunately, your insurance policy will help you bear the financial responsibility for the injuries you suffer. One example of such a policy is the no-fault auto insurance.

This post will take a closer look at no-fault car insurance, telling you what it is, how it works, its background, and how we can help you file a no-fault insurance claim.

The Different Car Insurance Systems

Before touching on no-fault auto insurance, we thought we’d start by briefly looking at some of the different car insurance systems. State car liability insurance falls into four categories:

  • No-fault
  • Choice no-fault
  • Add-on
  • Tort

The primary differences between the four stem from whether they place restrictions on your right to sue and whether the policyholder’s insurer pays for the benefits, regardless of who causes the accident.

Tort Liability

Tort liability places no restrictions on lawsuits. This means that you can sue a policyholder at fault for an accident for out-of-pocket expenses like medical costs and for the pain and suffering you have endured as a result of the accident.


With add-on insurance systems, first-party coverage is not mandatory. Instead, the insurance adds these benefits on top of the traditional tort liability system. Without any mandate, the benefits might be low.

No-Fault and Choice No-Fault Insurance

discussing the damage of a car

In states that use add-on and tort liability insurance systems, insurance companies first attempt to determine who caused the accident. If they deem you not at fault for the accident, you can file a claim against the other driver’s insurer for any injuries you sustain.

On the other hand, no-fault insurance does not consider who caused the accident. Instead of filing a claim against the other driver’s insurer, you file the claim with your insurance company. The company then evaluates the claim and pays out damages to you, depending on the extent of your losses.

No-fault insurance systems aim to reduce auto insurance costs by taking small claims out of courts. To do this, each insurance company compensates its policyholder for the cost of their injuries, regardless of who caused the accident.

The specifics of your no-fault auto insurance will vary from state to state. For instance, in true no-fault states like New York and New Jersey, the first-party benefits, also called personal injury protection, are mandatory.

However, the extent of this coverage varies, with the variations often involving dollar limits on hospital and medical expenses, lost income, and funeral expenses.

Motorists in no-fault states can still sue for severe injuries if their case meets specific conditions. These conditions, called the tort liability threshold, can be expressed in verbal terms or monetary terms. For instance, Kentucky has a monetary threshold, while Pennsylvania and New Jersey employ verbal thresholds.

Choice No-Fault

States that use choice no-fault insurance systems allow drivers to select one of two options. You could choose a traditional tort liability policy or a no-fault insurance policy.

How Does No-Fault Insurance Work?

A standard no-fault policy will consist of personal injury protection, property damage liability, and bodily injury liability coverages. Property damage liability pays for the damages caused to property or someone else’s vehicle, while bodily injury liability covers medical costs and other related expenses.

However, these coverages do not pay for your medical expenses. This is where personal injury protection comes in. This coverage allows you to file a claim for the medical costs you incur after a car accident, regardless of who caused the accident.

Depending on the terms of your policy, the coverage could also pay for your lost wages or reimburse you if you had to hire someone to handle routine household chores while you were recovering from your injuries.

Different states have varying rules on what the no-fault auto insurance will pay for. For instance, personal injury protection coverage in New York has a cap of $50,000 for each person. Also, the lost wages payout allows for 80 percent of your income, up to a maximum monthly payout of $2,000.

The Background of the No-Fault Insurance System

discussing the no fault policy in a car owner

Early Beginnings

In the 1960s, traditional liability insurance systems became the target of criticism from the general public purchasing them, the agencies and companies marketing them, and the state officials regulating them.

Most of the criticism focused on the often time-consuming and expensive process of determining who is legally liable or at fault for the accidents.

In the 1970s, many states saw the introduction of legislation to reduce the inefficiencies and delays of the traditional system. This legislation allowed accident victims to recoup financial losses, such as lost income and medical expenses from their insurance companies.

The Introduction of Variations of the No-Fault System

Since its introduction in the 1970s, several states proposed different variations of the no-fault auto insurance system.

Project NEW START’s Variation

For instance, in the late 1980s, a national nonprofit consumer organization known as Project NEW START developed legislation that offered motorists a choice between a strict, no-fault policy and a traditional liability-based policy.

Those who chose the no-fault policy also had the option of purchasing personal injury protection above the basic limits. They could also buy coverage for pain and suffering. The first year after the law took effect, drivers who chose this option saw their premiums reduce by at least 20% of the statewide average premiums for the insurance required by the financial responsibility law.

The O’Connell Plan

Another version of the choice no-fault policy, also called the O’Connell plan, was named after Jeffrey O’Connell, a University of Virginia Law professor.

Along with Robert E. Keeton, O’Connell first proposed a no-fault compensation system in 1965. Their plan permitted a policyholder who opted for the tort system to file a claim under the policy’s uninsured motorist provision whenever they were in an accident with a no-fault driver. According to the plan, the no-fault driver was both immune from suits and could not sue.

The Pure No-Fault Concept

The early 1990s saw the introduction of the pure no-fault concept. The concept addressed several concerns, including:

  • The waste of resources
  • The inequities of the liability system
  • The need for affordable coverage for rehabilitation and medical care costs

The first implementation of this system was a pay-at-the-pump plan that allowed motorists to pay for their no-fault insurance through a fee collected on gas sales. However, this plan failed in every state that considered it, mainly because of opposition to the gas usage-based fee.

Despite its early failure, several states like California and Hawaii included the pure no-fault idea in various legislative proposals.

Additional Variations

Some car insurance reformers went as far as proposing the removal of noneconomic coverage from tort liability policies to lower costs. Instead, optional coverage with a pre-determined limit would be provided as first-party coverage.

With this proposal, the premium savings would come from eliminating coverage and the lowered temptation to increase medical costs to raise noneconomic damages, mostly calculated as a percentage of economic damages.

More and more modifications of all these proposals have since been introduced in several states. For example, some introduced measures referred to as no-frills policies to provide basic no-fault coverage to all good drivers for a standard statewide premium.

Which States Have the No-Fault Auto Insurance?

a car owner discussing with an insurance agent

At the moment, twelve states have no-fault auto insurance. However, the laws vary from state to state, with these variations split into three categories, true or pure no-fault, choice no-fault, and add-on no-fault.

True No-Fault States

True no-fault states are states that have policies where the insurer will pay first-party benefits to the driver. This means that the insurance company will cover the driver’s expenses regardless of who holds responsibility for the accident.

The states with true no-fault auto insurance include:

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

Choice No-Fault States

These states offer motorists the option of choosing between traditional automobile insurance policies and pure no-fault auto insurance. They include New Jersey, Pennsylvania, and Kentucky.

Add-On No-Fault States

With both pure and choice no-fault states, motorists face restrictions from suing. However, in add-on no-fault states, drivers can sue and add first-party coverage into their policy. The states with add-on no-fault policies include:

  • Wisconsin
  • Arkansas
  • Washington
  • Virginia
  • Delaware
  • South Dakota
  • Texas
  • Oregon
  • New Hampshire
  • Maryland
  • District of Columbia

How We Can Help You File a No-Fault Insurance Claim

At Sadaka Associates, we understand the traumatizing experience accident victims go through. As such, we remain committed to providing you with the legal services you need, helping you navigate the often complicated process of filing an insurance claim.

Thanks to our services, you no longer have to deal with the stress of speaking with insurers. Instead, you can dedicate all your energy to recovery, knowing that we will take care of all legal proceedings.

Reach out to the Law Offices of Sadaka Associates today. You can contact our New York office at 1-800-810-3457 and our New Jersey office at 201-266-5670 to speak to our personal injury lawyers for all the legal help you need filing your no-fault insurance claim.



Principal & Founder
This article was written by Mark Sadaka, a seasoned trial lawyer in nationally significant cases. He fearlessly champions clients impacted by fatal or severe injuries caused by others or corporations. Renowned for his expertise in complex litigation, he's featured in books, sought after by media for interviews, and a highly sought speaker. Notably, he exclusively represents individuals facing life-changing injuries or substantial financial losses.

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