Fault Vs. No-Fault Insurance

Fault and no fault are common phrases used when talking about car insurance. They are applicable to two separate aspects of insurance:

  • The type of policy and the car insurance laws of each state.
  • Driving classifications which may impact the cost of your car insurance.

Fault in Relation to Driving Accidents and Moving Violations

In an accident or traffic violation, when you are found to be at fault, the insurance companies have placed the blame for the situation on you. For example, if you are convicted of a moving violation with respect to a car accident, your insurance company will assess insurance points against you and your insurance rates may increase accordingly. Even if you are not convicted of a moving violation your insurance company may determine that you are at fault in an accident and that the cause of an accident you were involved in was due to your failure to observe traffic laws, make proper observations, or drive safely. Points may be added to your driving record if you are found to be at fault in an incident. These added points will indicate to insurance companies that you are a risk.

Types of Fault and No-Fault Car Insurance

These phrases are also used to describe different kinds of state insurance laws and car insurance policies. New Jersey has a legal system called no-fault insurance. This law policy requires that all drivers and automobiles be covered by a policy of insurance, but also places restrictions on lawsuits on recovery for both medical expenses and physical injuries.

If you have elected collision coverage on your automobile and your vehicle is damaged in a car accident, your insurance company will cover the cost of any damages to your vehicle regardless of who caused the accident. It will generally attempt to recover the amounts it pays to you by way of inter-company arbitration with the other driver’s insurance carrier and may even obtain the amount of your deductible back for you. Sometimes, in cases of obvious liability, the other driver’s carrier may directly offer you payment for the damages to your vehicle.

If you have suffered physical injuries as a result of the car accident, you may be able to recover damages against the other driver for those injuries including for any disability or disfigurement that you have suffered, pain and suffering, and lost wages or income. Under New Jersey No Fault Law your right to sue for these damages may be limited by the tort threshold you have elected in your insurance policy. If you have paid extra for a No Threshold Policy then you have no limitation. If you did not pay extra and you have the Lawsuit Threshold or Verbal Threshold in your policy then you can only sue for damages if you have sustained a significant injury and your doctor has objective medical evidence demonstrating these injuries. If you are an out of state resident, then you most likely will be assigned the Lawsuit Threshold under what is referred to as the New Jersey Deemer Statute (NJSA 17:28-1.4).

New Jersey No-Fault Law : Who Covers My Medical Bills?

New Jersey’s No Fault Law also covers payment of medical bills. In New Jersey each driver and passenger is generally responsible for the payment of his or her own medical bills, regardless of fault in the accident. If an individual involved in an accident has a policy of automobile insurance in their own name, is a named insured under a policy, or resides with a blood relative who has a car insurance policy, his or her medical bills are paid by that carrier. If an individual is not so covered then their medical bills are paid by the insurance carrier covering the automobile that they were driving or were a passenger in.

Individuals can also elect in their automobile insurance policies to have their health insurance provide primary coverage. In any event, payment of medical bills is governed by a strict payment schedule and care for common injuries must be provided under a standard care plan adopted by the New Jersey Department of Insurance. Pre-authorization is required for non-emergency care. Your policy generally provides for an initial deductible and you are then responsible for a 20% co-payment until your medical bills reach $5,000.00. By way of example, if you have selected a $1,000.00 deductible on the first $5,000.00 of medical bills you would personally pay $1,800.00 and all amounts after that would be covered 100%.

After you receive the Explanation of Benefits (EOB) form from your automobile insurance carrier you can then submit it to your health insurance carrier which may cover all or part of the $1,800.00. Please keep in mind that it is illegal for your health care providers to bill you for any amounts in excess of the New Jersey Fee Schedule paid by your automobile insurance carrier.
New Jersey No-Fault Law : Lost Income as A Result of an Accident

New Jersey No Fault also covers claims for lost income. If you are out of work because of a car accident and you are a New Jersey resident, you should file a claim for New Jersey State Disability. This generally covers a minimum of $100.00 per week. You should also file a claim under the Personal Injury Protection (PIP) Income Continuation Benefits of your own automobile insurance policy. The amount of this benefit will be determined by your actual income loss and the election as to amount of weekly benefit you made in the policy. If your actual loss exceeds the amount you are entitled to in coverage, then your attorney can include this excess lost income in a lawsuit for personal injuries.