The city's no-fault automobile insurance law was essentially gutted yesterday by a U.S. District Court judge's ruling that the city's $5,000 threshold for filing lawsuits to recover medical expenses and other damages from accidents is unconstitutional.

The ruling is a major victory for trial lawyers and other opponents of the no-fault law who argued that accident victims should be allowed to sue under the compulsory insurance plan regardless of the amount of their claims.

The D.C. City Council, in setting the threshold, had attempted to reduce the number of actions filed in court by requiring consumers to collect for medical bills under $5,000 from their own insurance companies, rather than the other driver.

"It's great. It couldn't be better," said attorney John Coale of yesterday's ruling by Judge Oliver Gasch. Coale challenged the constitutionality of the law in a suit filed a year ago.

Gasch's ruling also was hailed by leaders of lawyers who have been pressing for repeal of the law.

"I think the consumers have been vindicated," said Donald Chaiken, past president of the Plaintiff Trial Lawyers Association. "An individual, no matter how badly or how minimally he's injured, should have access to the court system."

City officials could not be reached for comment yesterday on whether they will appeal Gasch's ruling.

Gasch found that the city government has authority to require that all motorists carry accident insurance, as the law mandates, but that the $5,000 figure arbitrarily violates the equal protection rights of motorists with smaller medical claims.

"By setting an unreasonably high threshold of $5,000 in medical expenses, the City Council unreasonably barred motor vehicle accident victims who suffer serious injuries from recovering for pain and suffering and other noneconomic losses," Gasch wrote.

"Such provision is not rationally related to the purpose of providing 'adequate protection' to motor vehicle accident victims," he wrote.

Attorney Robert Cadeaux, another past president of the trial lawyers group, said Gasch's ruling will have the immediate effect of allowing accident victims with claims of less than $5,000 to file for relief in court.

The law, under Gasch's ruling, retains requirements that all motorists carry personal insurance for up to $100,000 in medical bills, plus $24,000 for lost wages and $2,000 for funeral expenses, Cadeaux said.

"It's the best of all worlds," Cadeaux said, lauding the fact that the ruling does not affect the insurance requirement. Prior to passage of the no-fault law, there was no requirement that District motorists have vehicle insurance.

Attorneys had objected to the $5,000 limit because the medical bills of most accident victims do not reach that amount. Those who have bills of $5,000 or more can sue for other damages, such as pain, suffering and mental anguish, which can amount to thousands of dollars more, both for the victims and for attorneys who collect fees.

Insurance companies are not required to pay for pain and suffering in claims involving less than $5,000 in medical bills.

Most states that have adopted no-fault legislation have set lower thresholds for medical bills than the District's $5,000 minimum.

The proposal for no-fault insurance caused occasionally angry debate among the city's political leaders and prompted vigorous lobbying efforts by consumer advocates, attorneys and insurance companies.

Last year, opponents of the legislation, led by council member John Ray (D-At Large), attempted to have it repealed but lost by a hefty margin.

Ray said yesterday he was pleased with Gasch's ruling, but he hinted that his fight for a different law may not be over.

"I'm pleased that he knocked out the threshold, which I opposed," Ray said. "I've always felt that the $5,000 requirement was far too high . . . . Whether we're left with the best law in the District of Columbia is another question.