A crash course in auto accident liability

The pros and cons of no-fault insurance: What's best for you?

Accidents have been inevitable ever since the invention of automobiles. Also inevitable are the never-ending legal disputes over who is responsible for damages.

Two different approaches have emerged to deal with auto accidents: no-fault insurance and liability litigation. Drivers who want to register a vehicle should be required to subscribe to a minimum standard of no-fault insurance, but thus far, states have been reluctant to fully enact such a mandate.

Nevada and Pennsylvania adopted the scheme but repealed it later. California considered the option for several years but never adopted it. Both Nevada and California follow financial responsibility law, which ensures the operators have the means to pay for the damages that they may cause others, thus keeping uninsured drivers off the roads.

No-fault insurance, the more recent approach, ensures that each party is compensated for damages. Under a no-fault system, involved parties go through their own insurance companies to pay for the damages. In other words, drivers share in the cost of accidents.

The no-fault system has been successful in allowing faster payment of damages and in ensuring equal treatment. The system has some advantages and disadvantages, however, and a combination of fault and no-fault may offer the most equitable system.

Advantages of no-fault insurance:

• It ensures a fast payment of benefits. Accident victims also get a more equal payment rather than uneven payment for different cases.
• It significantly decreases the number of court cases as well as the legal hassles associated with them.
• It reduces premiums for car insurance because money is not spent on legal costs.

Disadvantages of no-fault insurance:

• It significantly restricts, or even eliminates, the ability to sue, even in cases where one party is clearly at fault.
• It may lead to an increase in careless driving, since the affected parties both get the same compensation. An insurance system should never increase the probability of accidents.
• It increases the number of persons receiving benefits, which offsets the benefits obtained by saving legal costs.

In the fault-based liability litigation system, jury trials are held and the party at fault is legally determined. This can result in long, drawn-out court battles, with the affected parties waiting a long time for financial aid. The claim may go on the person’s record, even if the person is not at fault, and can result in an increase in the premium. This insurance plan does not allow the people involved to sue, nor does it cover damages for pain and suffering.

The best outcome is a mixture of the two systems. For example, when damages exceed a certain limit, it is possible for the party not at fault to sue those who are at fault, which makes it a combination of liability litigation and no-fault insurance.

Auto accidents have been with us since the first autos. So far the perfect, accident-free car has not been invented. Neither, it seems, has the perfect insurance system.