What was wrong with No Fault

After a particularly irritating call to my insurance agent I breifly fantasized about the idea of never having to make a payment or deal with another insurance agent. In 96 I believe there was an initiative floating around that would increase the price of gas but insurance would now be covered by that price increase (I believe .50-.75 a gallon was mentioned).

The debates:

#1 What was so wrong about the pay at the pump thing, I think it sounded like a great “added value” kind of thing.
#2 What’s so wrong with “No-Fault” in general, once again it sounds like a good idea, why should I get rich because somone else ran a red for the first time in thier lives and dinged me up a bit. It happenes to damn near anyone at some point in thier lives, so its not like person X is more deserving or cash compensation than person Y.

No fault info

In California a lot of people go without insurance, and we can buy uninsured motorist coverage. The insurers fight almost every payment. Of course, it is still based on fault. The collision and medical payment coverages are more like no fault, and I like the way they are handled. And I don’t handle enough automobile personal injury suits to expect to lose any business, so I’m all for no fault, if it would be cheaper. But does the state pick up the catestrophic injury costs of uninsured people showing up at the county hospital without coverage?

The pay-at-the-pump was particularly promoted by Andrew Tobias, who is one smart finance guy. It was opposed by the Insrance Industry and plaintiffs’ attorneys, who would have lost business.

I think it would have worked. Advantages:
– Lower structural costs (more efficient)
– more fair recompense

– government-run monoplistic (so prone to being fouled up)
– required some entirely new structure to determine who would handle each claim. (government? randomly chosen insurance co.?)

Over 30 years ago, NY State had the Rockefeller-Stewart Report (named after the governor and insurance superintendent) that recommended no-fault. I heard a talk from Stan Dorf, the chief NY State actuary at the time, who helped write the report. He said the Committee began by saying that the best no-faulot plan would be to simply pass a law saying that nobody could sue for an auto accident. However, that was not politcally viable, so they added a requirement for first party insurance.

That committee was encouraged by Professors Keeton and O’Connell, who wrote a book (or article?) describing the flaws in the tort liability system. The one I remember is that those with minor in over-collected; those with serious injuries got less than they deserved.

Many states now have a partial no-fault system – no fault for small claims, but one can sue for larger claims. A practical problem is organized fraud, where people with minor or fake injuries are allegedly given dozens and dozens of medical treatments, which are billed to the insurance company. One would think this scam would be easy to control, but this has not been the case. According to an article in the NY Times a few days ago, the total cost of this fraud in NY amounts to $250 for every driver in the state!

Here’s the problem I have with that idea: If you make insurance a mandatory thing that is handled by the government, you immediately take away all competitiveness of rates. As it is now, I can call as many insurance companies as I like, and compare rate quotes. And believe me, I do just that. You can save quite a bit of money by shopping around.

I disagree - I don’t believe that all drivers are equal, and I believe most good drivers are opposed to paying higher rates in order to subsidize poor drivers. That’s why “no-fault” ballot initiatives don’t pass. I know there are some pretty irresponsible people out there driving, and I’ll be damned if I’m going to pay the same insurance rate as them.

Yes you can save money (I have too) but… If pain and suffering and punitive damages, not to mention lack of courtroom costs in many cases, wouldn’t the price of “insuring” fall like a stone?

Maybe we should take a look at the rates, taking for example.

2 30 year old males driving new $20,000 cars (lets say toyota camry) in the same zip code, etc, etc all equal except.

Driver A has 1 - 2 year old speeding ticket (I’m sure many dopers fantasize about this record)
Driver B has a first offense DUI 1 year old, and 3 speeding tickets over a 3 year period (lets say they were all for 15 mph over posted)

Any insurance folks who can throw us rates? I realize that $600-$800 a year is alot of money in many respects but I bet the difference isn’t much more than that. Its much easier to up everyone $10 a month than hit the 20% of drivers who cause 80% of the problems for double the rates.

*Originally posted by drachillix *
Yes you can save money (I have too) but… If pain and suffering and punitive damages, not to mention lack of courtroom costs in many caseswere no longer an issue, wouldn’t the price of “insuring” fall like a stone?

Learn english drach, complete sentences…


We need to distinguish between “pay-at-the-pump” and straight no-fault. In the former blowero’s objection is fully valid. We’d all pay the same tax on gas, regardless of how we drive. Also, low-milage vehicles, like SUVs, would pay much more per mile than high-milage vehicles.

With plain no-fault, we each buy our own 1st party coverage (health, collision, wage replacement, etc.) Our rates could vary with our driving skill (or with rating variables associated with accident cost).

A bad driver wouldn’t have his rates increased because of losses he caused to others, but he would be be surcharged by losses to himself and his vehicle.

I think this system could work.

Uh the more you drive, the more fuel you use, the more “insurance” you pay.

Don’t those SUV owners already tend to pay more due to the value of their vehicles? There have already been numerous people berating the “soccer mom” crowd for poor driving in heavy vehicles. Commercial vehicles would also be hit hard but they already pay insane rates on huge high mileage policies that bear the brunt of some of the heaviest value lawsuits.

Yes and no. They probably do pay more for physical damage to thte vehicle – collision and comprehensive. However, typically liability costs have not varied by vehicle.

I have a vague mamory that some insurance companies may have recently begun to vary liability rates by vehicle, and that SUVs may have come out with higher rates. However, this memory is very uncertain.

My vague memory is that the Tobas plan had some special provision for commercial vehicles.

Actually, this special provision is an example showing that the Tobias plan is not quite as simple as it sounds. If we exempted trucks from the special tax, we’d have to decide what’s a “truck.” You can bet that the auto companies would be aggressively lobbying to get SUVs classified as “trucks”.

Question for no-fault proponents:

If your insurance carrier was to offer two types of coverage:

  1. The plan you currently hold (liability/collision/fire & theft etc.)
  2. A discounted plan (let’s say 25%) in exchange of waiving your right to sue for punitive damages in the event you got in an accident for which you had no liability.

Would you take the latter? I know I would, but also know I can’t. My state’s legislators are in the back pocket of the trial lawyers; who would never allow such a reform to pass.

As far as pay at the pump; I’d rather see pay at the pump for toll crossings. Toll booths, who’s revenue goes to subsidize mass transit (as well as fund a bloated bureaucracy and the salaries of sub-human toll takers) should be paid for at the gas pump. The benefits of subsidizing mass transit ridership assists in keeping a percentage of drivers off the roads and aids in the relief on traffic congestion. Why is it that even though all drivers benefit from less crowded roadways, only the shlubs who have to cross a geographic obstacle (via a bridge or tunnel) are forced to pay $1,750 (in the NY metro area) in their annual commute at toll booths?

I believe that Michigan has no fault insurance. Anybody in Michigan want to comment on how it is working?

You are referring to me pulling P&S payments from my own medical coverage or uninsured motorist? Could you expand on that a bit? I don’t see how this would make much difference (but am waiting to have my ignorance dispelled)

@%^#&%&*^& COOKIES!!! That was Drachillix not Cyn

It’s called choice no fault as described on an (admittedly partisan)website that explains all types of no fault laws throught the Unending Suits in America

From the CSE website
“Choice” no-fault plan. Recognizing that to many people, no-fault laws represent an attempt by government summarily to deprive them of cherished tort rights, policymakers in three states — New Jersey, Pennsylvania, and Kentucky — have introduced a no-fault option while simultaneously preserving a tort option for drivers who prefer the traditional tort liability system of accident compensation. New Jersey and Pennsylvania provide a modified no-fault option that incorporates a verbal threshold restriction on the right of an injured motorist to sue an at-fault driver for noneconomic damages. Drivers selecting the tort option, on the other hand, retain an unrestricted right to bring liability lawsuits.
Thus, while no-fault drivers in “choice” states have only a limited right to sue, they are nonetheless vulnerable to unrestricted liability lawsuits in the event of an accident with a tort driver. This means that from an individual insurer’s standpoint, tort-system customers are more lucrative than are those who choose no-fault. Tort drivers can be charged more because they retain their ability to sue for liability, yet because they generally cannot be sued by no-fault drivers, they are less costly to insure than they would be under a comprehensive tort system, where every driver can sue every other driver."

Not perfect, call it a tort-lover’s tax / premium if you will…you want the right to sue you pay more for it. Until this country comes to grips with the true cost of these insane damage awards, caps punitive damages and accepts the English rule, I see no other proposal that comes close.

Ok I now see how over time, demand for lower priced insurance could shift the public to a “no fault” dominated market. If however, as the article states, tort policies are more lucrative, what motivation do insurance companies have to offer no fault?

  1. We’re good guys. We want to serve the public.

  2. Many large insurance companies are non-profit and are owned by their policyholders. E.g., State Farm

  3. If we don’t alternatives, our competitors will

First of all, I believe punitive damages are rarely allowed in that kind of case. Second, if we want tort reform, why not just put a cap on damages, rather than make it so that I have to pay my own damages even if I wasn’t at fault? Seems like a drastic solution. Third, I question whether the prices are going to drop for a good driver. Maybe I’m not understanding this right, but if there’s “no fault”, doesn’t that mean that Joe Crackhead, who’s caused, let’s say, 15 accidents, is going to be paying the same insurance rate as Jane Goodygood, who has caused zero accidents? I mean, I guess the 15 accidents could affect Joe’s rates if he made claims on them all, but the 15 innocent people he crashed into are adversely affected also. As it is right now with the present system, Joe has to pay a lot more for insurance than the average person. No fault would be great for him, but wouldn’t the rest of us be subsidizing people like that?

I guess it depends if you want what is “easier”, or what is fair. And how do you know it would only be $10 a month increase?

You know, I’m looking at the more recent posts, and a couple other people have referred to punitive damages. I didn’t think they usually awarded punitive damages in an automobile accident case, only pain & suffering. Is there something I don’t know about here?

So in a nutshell, If I were to start up Drachillix Insurance selling only “no fault” policies. Offering lightning fast out of court settlements to “tort” policyholders to circumvent as many court appearances as possible. Could I theoretically survive in a tort state like CA?

I was expecting a little debate on this, sounds more like a GQ here these days, might even get more traffic there…Mod?

So in a nutshell, If I were to start up Drachillix Insurance selling only “no fault” policies. Offering lightning fast out of court settlements to “tort” policyholders to circumvent as many court appearances as possible. Could I theoretically survive in a tort state like CA?

I was expecting a little debate on this, sounds more like a GQ here these days, might even get more traffic there…Mod?

Right, punitive damages are rare. However, pain and suffering is pretty automatic. In practice it’s a multiplier. E.g., one might add the specific damages for medical care, wage loss, etc and then multiply the sum by 3 for “pain and sufferering”. The optional alternative offers drivers a lower premium in exchange for not collecting a multiple of their financially-measurable loss.

First of all, a cap would be unfair to the most deserving, i.e., the severly injured. States with partial no-fault have a threshhold, so that small claims can’t sue, but serious ones can.

Furthermore, it’s hard to impossible to switch to pure no-fault, because of resistance from the attorneys. It’s easier to offer drivers a choice (although the attorneys resist that, too.)


Yes, that’s the popular argument against no-fault. It makes sense as far as it goes. The opposing arguments are:[ul]
[li]No-fault saves a lot of money in convenience of no haveing to sue.[/li][li]No fault rewards defensive driving[/li][li]A big part of low accident frequency is how much one drives and where. These factors are relected in no fault loss experience and rates[/li][li]In practice, no fault is more fair to severely injured. The tort system tends to underpay them[/li][/ul] YMMV (so to speak)