Personal Injuries and No-Fault Car Insurance

Under a "no-fault" auto insurance system - also called "personal injury protection" or "PIP" - the insurance company ("insurer"), pays for a car accident victim's "economic losses," which include things like:

• Medical expenses
• Lost income or wages and
• Burial and funeral expenses

"Non-economic losses," which include things like pain and suffering and emotional distress, usually are not covered by the no-fault insurance provisions. In some states, the victim can sue the driver who caused the accident to recover these damages, and there usually are restrictions on when such a suit can be filed. In some states, the victim can't sue the other driver at all.

The type of expenses that are covered and the amounts that insurers will pay vary from state to state, so it's important to know your state's no-fault laws and the specific language of your policy.

Limitations on Benefits

In some states, an insurer can limit the amount of PIP benefits that will be paid to an insured victim. The limitations can be based on time or the language in the insurance policy.

Time Limits

Some no-fault laws specify the period of time during which no-fault benefits will be paid. For example, in some states, all no-fault payments stop after two years, which is measured from the date of the loss, which is usually the date of the accident.

Other states might limit only some types of payments, like lost wages, to a certain period, while other states might limit the amount. For example, the victim might receive 90% of his or her lost wages in the first year after the accident, but then a smaller percentage in years two and three, and so on.

Policy Limits

Some no-fault laws let insurers specify the amount of PIP benefits that are payable - a " benefits ceiling." For example, some statutes allow a limit with a specific dollar amount for medical expenses, like $100,000, while some statutes allow "unlimited" medical expenses, but only if the they are "reasonable and necessary."

No state with no-fault car insurance allows unlimited benefits for wage losses.

Set-Offs

Most states allow insurers to "set-off," or reduce, the amount of no-fault benefits by the amount received by the injured insured from other sources. The most common set-off is for workers' compensation benefits paid to the insured victim.

Some states allow set-offs for Social Security disability payments and Social Security retirement benefits, while most states do not allow a set-off for Medicare and Medicaid benefits.

Other insurance coverage can also work to limit or reduce no-fault benefits in some states. Benefits that a victim receives from one insurance policy, such as accident insurance, can lower the benefits owed by the no-fault insurer.

Medical Expenses

To recover medical expenses, the insured victim has to show that the medical condition or problem was connected to his or her use of a motor vehicle. Most courts use a test that mixes being at or near the site of the accident and strict proximate cause in tort - showing a direct and near-immediate connection between the injury and the accident.

For example, a victim usually will be denied medical expenses that resulted from an accident where he exited his car, took several steps away from the car, tripped, and fell on the curb of a parking lot, breaking his leg. But, a driver who was injured when she stumbled into a hole in the driveway immediately after she exited, "or "alighted," from her car, usually will recover medical expenses.

In addition, to be recoverable, most no-fault laws require that the medical expenses be "reasonable and necessary." This issue arises most often when the insurer questions the amount of medical expenses or the type of medical treatment, that is, the insurer thinks he expense is too high, or that the victim could have obtained other, less expensive treatment.

Under some PIP laws, there is a presumption that medical expenses are reasonable and necessary when certain evidence is presented, such as a medical bill. Other laws specify what is reasonable and necessary by setting the charges for diagnosis, treatment and rehabilitation of injured persons, or by adopting the fee schedule and guidelines found in the state's workers' compensation laws and regulations.

Work Loss Benefits

Typically, no-fault statutes provide only for the recovery of wages actually lost, as opposed to also providing for lost earning capacity - the future ability to earn.

As a general rule, in order to qualify for work loss benefits, the injured person must have been employed or employable at the time of the injury and he or she must have suffered an actual or real loss of earnings, that is, the loss is easily measured and certain. Remember too that this type of benefit might only be payable for a certain amount of time after the accident.

Replacement Services and Loss of Non-Earned Income

Most states with no-fault insurance laws allow injured insureds to recover "non-wage income." If an injury stops or hinders the insured's ability to make non-wage income, such as income from rental property the he or she actively manages, then most states permit reimbursement of the loss.

Similarly, a member of the household who is injured in an car accident and is not physically able to generate non-wage income - that is, perform household services - is protected by most statutes. Here, the victim has to show an actual loss as well as a connection between the injury and the use of a motor vehicle.

More than One Recovery

Because many no-fault insurance plans provide very low limits on the amount of PIP benefits that are recoverable, an insured often does not receive enough PIP benefits to cover his or her expenses, and so other sources or ways of recovering damages are needed. Some options are:

• Filing a , which is allowed in only some states
• "Stack," or add PIP benefits from multiple insurance policies that cover the injured person, which, again, cannot be done in all states with no-fault systems

Related Resources on Lawyers.com ^sm