No-fault auto insurance states are outnumbered by the states that have liability-based insurance. Twelve states, including Puerto Rico, have some form of no-fault insurance, in which no matter who was at fault for the accident, each driver's insurance company picks up the tab for the drivers' medical costs up to a specific dollar limit.
States may have no-fault laws as a way to minimize the number of personal injury litigation cases in the courts. When drivers turn to their insurance companies to cover medical bills, court claims are generally unnecessary and insurance carriers don't need to spend time and money on investigations, demands, negotiations and settlements. However, no-fault states allow lawsuits if the damages are above a certain threshold.
The No-Fault States
At the time of publication, the no-fault states are Florida, Michigan, New Jersey, New York, Pennsylvania, Hawaii, Kansas, Kentucky, Massachusetts, Minnesota, North Dakota, Utah and Puerto Rico. These states fall into two major groups according to the type of threshold they apply to the restriction on lawsuits. Kansas, Kentucky, Hawaii, Minnesota, Massachusetts, North Dakota and Utah set a monetary threshold. In Minnesota, for example, you can't recover damages in the court for medical costs that total less than $4,000. Minnesota also allows lawsuits, no matter the medical costs, if the accident results in death, permanent injury, permanent disfigurement or a disability that lasts more than 60 days.
The other type of threshold is known as the verbal threshold, which is used in Florida, Michigan, New Jersey, New York and Pennsylvania. These states allow lawsuits when the injuries fall under a certain description or definition written into the law, as for example, the "significant and permanent" injuries description used in Florida.
The Non-Fault Choice States
New Jersey, Pennsylvania and Kentucky allow insured motorists to waive limitations on their right to sue. In Kentucky, motorists may complete a written declaration to that effect. Without this rejection, the state bars damage claims for less than $1,000 in medical expenses and allows them in all cases if there's a permanent injury or disfigurement, or death.