Liability vs. No-Fault Auto Insurance

If you get into a car accident in a no-fault state like Florida (otherwise known as a liability state), your experience will be very different from an accident in an at-fault state like Alabama.

Similarities

• Property damage liability: In both no-fault and at-fault states, the at-fault party will pay for the other party’s property damages under property damage liability. In other words, if you get into an at-fault accident in either system, you’d file a third-party claim with the other party’s insurance provider. [Learn more about third-party car insurance in our guide.]

Differences

• Medical payments: In no-fault states, each party pays for their own medical expenses under medical coverage, also known as personal injury protection (PIP). In at-fault states, the party at fault would be responsible for the other party’s medical expenses.
• Auto insurance premiums: Auto insurance costs are higher on average in no-fault states.
• Right to sue: In no-fault states, the victim can only sue for noneconomic damages, such as injuries. In at-fault states, the victim can sue for both economic and noneconomic damages.¹

Wondering if you live in a no-fault state or an at-fault state? Check out your state’s fault system below.

When the U.S. auto insurance industry began, all states had at-fault insurance systems. However, many people were unsatisfied with their insurance coverage, as the process of determining who was at fault in a car accident was lengthy and expensive. As a result, some states introduced no-fault legislation.

Here’s a brief history of no-fault auto insurance systems.

• 1960s: In 1965, University of Virginia law professor Jeffrey O’Connell and Havard law professor Robert E. Keeton proposed the Keeton-O’Connell Plan, a no-fault accident compensation system. Under this system, drivers at fault in car accidents could file claims under uninsured motorist coverage. In addition, the plan would have prevented drivers who were not at fault from being sued or suing the at-fault party. This plan laid the groundwork for future no-fault systems.
• 1970s: It wasn’t until the ’70s that the first no-fault legislation passed, allowing accident victims to recoup financial losses such as hospital expenses, medical expenses, and lost wages from their own insurance providers.
• 1980s: A consumer nonprofit organization called Project New Start developed legislation that would allow people to choose between liability and no-fault systems, which is the current model in New Jersey, Pennsylvania, and Kentucky.
• 1990s: The concept of “pure no fault” came about, which would have prohibited personal injury lawsuits related to car accidents. Pure no-fault systems would have led to fewer wasted resources in the crowded liability system and more affordable medical care and rehabilitation. To pay for no-fault auto insurance, legislators introduced a “pay at the pump” system where drivers would pay a gas fee, but opposition to this fee killed attempts at pure no-fault systems.³
• 2000s and beyond: Today, 34 states (including Washington, D.C.) have at-fault systems, 14 states have no-fault systems, and three states let drivers choose between at-fault and no-fault coverage.

Although “no fault” sounds like a positive term, it actually leads to higher costs for the policyholder. But let’s start with the good.

The first step in filing a claim is looking up your insurance provider’s and the other party’s provider’s contact information. For your convenience, we’ve provided it below.

Read on to learn how to file a claim, step by step.

If you file a claim in a no-fault state, the property damage portion needs to be a third-party claim, meaning it’s with the other party’s insurance provider. Follow these steps:

1. If you’re at fault in the accident, contact the other party’s insurance provider and file a property damage claim. Make sure you have a police report for your insurance claim.
2. If you have injuries, file a first-party claim with your insurance provider.

How to File a Claim in an At-Fault State

If you’re involved in an accident, the claims process in at-fault states is a bit complicated compared to no-fault states.

1. File both third-party property damage and bodily injury claims.
2. If you have any property damages or injuries and you have optional collision coverage or medical payments coverage, file first-party claims for your property damage and injuries.
3. Your insurance company will complete the rest of the process to determine fault in the accident. You could be found either fully at fault, partially at fault, or not at fault.

Just how do insurance companies figure out fault in a car accident?

Once you submit your claims, you’ll work with either an insurance adjuster or claims representative, who will assess the damages either in person or through photos. They will also review your notes and the police report. Then, the adjuster will determine fault. However, exactly who will have to pay and how much depends on your state’s negligence laws, as listed below.

Types of Negligence

Depending on what state you live in and your percentage of fault, you’ll be responsible for all or some of the victim’s compensation. It all depends on your state’s negligence laws, which are either comparative or contributory.

Comparative Negligence

Comparative negligence laws allow for partial fault between both parties, meaning that they can split the costs according to their degrees of fault. Comparative negligence can be further divided into pure and modified comparative negligence.

• Pure comparative negligence: Accident victims can recover some money for their injuries no matter how negligent they were, even if they’re more responsible for the accident than the defendant.
• Modified comparative negligence: Accident victims’ recoveries are limited only if their fault exceeds a certain percentage. For example, in Colorado and Georgia, victims can only receive any money if they’re less than 50 percent responsible for the accident.

Contributory Negligence

Contributory negligence means that if the plaintiff (victim) is found to have had any level of negligence, they can’t receive any compensation.

Negligence Laws by State

Check out the negligence laws in your state below.

In some states, the plaintiff must meet a monetary threshold (a dollar amount) and/or a serious injury threshold in order to sue a defendant for car accident damages. Other states don’t have these thresholds.

Before you buy car insurance, it’s important to know the minimum coverage your state requires. If you don’t meet this threshold and drive without insurance, you could face financial and legal penalties, including license suspensions, which affect car insurance. [Read our auto insurance guide to find your state’s requirements.]

When it comes to auto insurance laws, liability is the name of the game. To learn more, read our articles on liability coverage and full coverage vs. liability.

While you can’t change your state’s laws, you can arm yourself with the best liability auto insurance. Keep reading for answers to more auto insurance FAQs.