A higher percentage of accident victims get benefits in jurisdictions with no-fault auto insurance than in those without it, the Department of Transportation has concluded in a soon-to-be-released report.
The report on no-fault auto insurance systems in 22 states also says that victims in states with no-fault get the benefits far more swiftly, and that no-fault systems pay a larger percentage of premium income to injured claimants than other types of policies.
But the no-fault states on the average have higher insurance premiums than other states, particularly where it is extremely easy to sue the other driver even after collecting the no-fault benefits, the report says.
In a no-fault insurance system, a person injured in an accident does not have to depend on suing the other party to collect benefits for medical expenses, lost wages, hiring someone to perform services during the period of illness, or, in the case of death, funeral expense and survivor losses.
Instead, each auto owner buys a no-fault policy that pays his or her costs when the driver is injured. The aim is to avoid costly lawsuits that may take years to decide, put money into lawyer's pockets and divert immediate benefits from the injured person. In return for collecting directly for his or her own injuries from his own insurance company, the state may forbid the injured person from suing the other driver unless the injuries exceed a certain amount or intensity -- for example, in Colorado more than $2,500 in medical and rehabilitation expenses.
No-fault laws differ greatly. For example, in Michigan, which many consider the model no-fault system, the amount of necessary medical and rehabilitation expenses an individual could receive at the time the study was done was unlimited, wage loss was limited to $53,100, replacement services to $21,900 and funeral expenses to $1,000.
In Massachusetts, on the other hand, the maximum medical expense allowed was $2,000, maximum wage-loss payment $2,000 and funeral expenses $2,000.
The DOT report also says:
* The number of personal-injury claims paid per 100 insured cars was 1.8 in no-fault states compared with 0.9 in 28 traditional-insurance states.
* No-fault systems pay victims faster: According to one study, within a year after notifying their insurance companies, the victims in no-fault cases received 96 percent of the money they ever would receive, but in traditional-insurance cases, they collected only 52 percent within a year.
* Of each personal-injury premium dollar, no-fault states returned 50.2 percent in benefits, while the average traditional-insurance state returned 43.2 percent. From 1976 to 1983, auto insurance premiums increased 91 percent in no-fault states compared with only 50 percent in traditional states on combined premiums for bodily-injury and personal-injury insurance. However, most of the extra increase in no-fault states was in those states where it was extremely easy to sue even after collecting no-fault.