The “No-Fault” Insurance Law: Is it a Foe or Ally?


We can start this article by understanding what a “no-fault” car insurance is. In non-technical language, “no-fault” means your insurance provider will pay you regardless of who instigated the collision accident in the first place. This means you will be restored, compensated and all claims are paid – period. The downside is that many of the victims are not able to file legal cases over injuries and losses on civil courts because of the jurisdiction itself. Let us take, for instance, in the States of Kentucky, Pennsylvania and New Jersey where they are being offered with two options. “Full tort” means that you will have all the freedom in the world to sue while the “limited tort” applies when you have decided to purchase an auto insurance policy. If you later change your mind, you may have to drop your current policy and have a new one written for you.

It was in the 70’s when half of the U.S. states agreed to pass the “no-fault” insurance law.  Still, twelve states have not enacted the said laws. In New York, no-fault law has resulted to a number of unforeseen consequences.

The Judicial Gates Opened

Just recently, New York City noticed that there were mobs of lawsuits filed, which stems down from the state’s no-fault laws. This practice has continued for another fifteen years – and has become the bread and butter for many unethical lawyers and criminal elements. In fact, it is already considered as very profitable industry bringing in a substantial amount of income to these groups of people. Interestingly, about a quarter of all the civil cases filed in the New York City courts are all related to the no-fault insurance law, according to the Department of Insurance in New York.

So what is going on here?

Apparently, organized criminals will start recruiting poor people (immigrants) and orchestrate them to cause an accident deliberately. They will receive treatment for their injuries from medical facilities – which are of course, fake as well. Now, when the medical bills are submitted to the insurance company, adjusters will usually assume that these documents are counterfeit (because that is how they are trained to be) and eventually reject them and the claim is denied. This is where the game starts and spurs of lawsuits will be filed against the company from the litigators who are themselves are trained to bring down the insurance companies to their knees.

What are being done about it?

There were several propositions in an attempt to curtail the fake claims and unnecessary lawsuits. The New York Legislature suggested limiting the time to 45 days instead of six months as to the submission of the medical bills after the treatment. It offers a partial relief, but the problem remains unsolved. Seeing the severity of the problem, the head of the NY Department of Insurance calls for a more thorough and aggressive investigation and to penalize the criminals who are found guilty about insurance fraud against the insurance companies. They also proposed that public awareness be intensified. According to the latest report made by Insurance Information Institute, in New York City alone, the no-fault system is already costing about $250 million last year for the auto insurance customers.