A D.C. City Council committee approved a bill yesterday proposed by Mayor Marion Barry that would drop the requirement that all District motorists carry no-fault automobile insurance coverage.

Under the measure, any motorist who drives in the District still would be required to carry insurance that meets the city's standards.

However, no-fault coverage, which became mandatory in 1983 and allows motorists to be compensated by their own insurance companies regardless of who is at fault in accidents, would become optional.

The bill would eliminate the restriction against suing for nonmedical pain and suffering unless an accident victim had incurred at least $5,000 in medical bills or suffered disfigurement, disability or death.

The Committee on Consumer and Regulatory Affairs voted 4 to 1 to approve the bill, over the objections of some consumer groups and insurance industry representatives who said the changes would result in higher rates for consumers. The bill now must be considered by the full council.

The chief support for the changes comes from trial lawyers who handle personal injury cases. Lawyers have argued that accident victims are experiencing delays in obtaining compensation and that the bill under consideration by the council would reduce costs by eliminating duplications caused by overlapping medical coverage in automobile and health insurance policies.

In proposing the bill, Barry contended that the no-fault legislation was based on the false assumptions that there were large numbers of uninsured motorists in the District and that insurance rates would decline.

Also, U.S. District Judge Oliver Gasch has declared unconstitutional the provision that restricts a victim's right to sue the person who caused an accident. That case is being appealed.

Council member John Ray (D-At Large), chairman of the consumer committee, said yesterday that the proposed amendments would turn the city's no-fault law into a "good consumer protection law."

He stressed that some states that instituted no-fault laws have had a tremendous increase in insurance costs.

Under the proposed amendments, motorists would be able to buy a level of coverage because they need it rather than because they are required to have it, Ray said.

Council member Polly Shackleton (D-Ward 3), who voted against the bill, said the changes are "totally unnecessary and uncalled for."

Shackleton noted that a commission already has been appointed to study the impact of the city's no-fault law at the end of three years and that she is unaware of any major problems.

"We need some evidence that there are problems with the new law that need correcting," Shackleton said.

"We have none . . . . If it ain't broke, don't fix it . . . . Let's at least wait to see if we have any problems with the existing law before we plunge headlong into another fractious and divisive battle."

The council engaged in lengthy debate over whether the no-fault insurance coverage should be mandatory before approving the existing law. The legislation took effect without Barry's signature.

Motorists currently must carry no-fault coverage, formally called personal injury protection, of $100,000 for medical and rehabilitative benefits, $24,000 for lost wages and $2,000 for funeral expenses.

Under the measure approved by the committee, motorists would have the option of carrying the current no-fault coverage, carrying a new no-fault package that would cut the medical and wage loss coverage in half, or purchasing separate coverage for any one of the categories covered in the no-fault packages.

Barry's proposal would have eliminated coverage for uninsured accident victims, including pedestrians.

However, Ray amended the proposal to create a special fund that would compensate victims for up to $50,000 of medical expenses, $12,000 for wage loss and $4,000 for funeral expenses.

Victims of accidents would not be eligible for compensation if they were at fault.