No-Fault Insurance: What's Covered and What's Not

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 and lost wages.

Some states require drivers to have PIP insurance, while other states require that insurers offer it and let vehicle owners decide if they want to buy it.

In states that require PIP coverage, there are various requirements and limitations on who is covered by the no-fault insurance, that is, who are "insureds," as well as the types of vehicles and the types of accidents that are covered.

There are four basic requirements that must be met before no-fault insurance benefits can be claimed by a person injured (the "claimant') in a car accident :

  • Someone sustained an accidental bodily injury
  • A "motor vehicle" was involved
  • The motor vehicle was being used as a motor vehicle at the time of the accident, and
  • There was a sufficient connection between the motor vehicle and the injury

The workings of a no-fault insurance system or even a particular insurance policy can be complicated, so it's critical that you understand the no-fault laws in your area if you're involved in an accident. Or, you might want to consider seeking the advice of an attorney who is experienced in insurance matters.

Who's Covered?

Generally, no-fault laws divide persons who are covered under motor vehicle liability policies into two groups or classifications:

  • Direct insureds, and
  • Indirect insureds

Direct insureds include the "named insured" - the person who entered into the contract with the insurance company and to whom the policy was issued - as well as his or her spouse, relatives, and other household members. Whether someone falls into this category of coverage is determined by examining his or her relationship to the named insured.

Although the states' various no-fault laws vary on who is covered and the terms used to describe them, some things that the statutes have in common include:

  • "Relatives" of the named insured must reside or live in the named insured's household
  • Spouses are covered by the named insured's policy unless and until there is a divorce, and
  • Employees are usually covered by their employers' policies
  • "Indirect insureds" are persons that have some relationship or connection to the insured vehicle. They include:

    • Operators, or drivers
    • Occupants, or passengers, and
    • Pedestrians, which includes persons walking along the streets, and sometimes motorcyclists, which happens in some states where motorcycles are not considered "motor vehicles"

    These classifications are important not only for determining who is covered, but also for determining which insurer has to pay benefits when there is more than one policy, that is, which policy has "priority." Most fault laws have a system that sets priority according to the classification or status of the injured person. In many states, the priority is:

    1. The person seeking benefits (the "claimant") gets them from the policy in which he or she is a direct insured
    2. If no benefits are available in (1), operators and occupants are covered by the vehicle owner's insurance policy
    3. If no benefits are available in (1), pedestrians and non-occupants are covered by the insurance maintained on any vehicle involved in the accident, and
    4. If benefits are not available in (1), (2), or (3), then benefits are paid by an insurer determined by the assigned claims facility

    Priority might be determined differently in your state, so be sure to check your no-fault law if more than one insurance policy is involved in your case.

    What Vehicles are Covered?

    In order for PIP benefits to be payable, the claimant must have been injured by a "motor vehicle." Generally, motor vehicles are defined by no-fault statutes as vehicles with more than two wheels.

    Most no-fault laws base their definitions of "motor vehicle" on the state motor vehicle registration requirements, and then either narrow or expand the definition. For example, motorcycles normally have to be registered, but a no-fault law could specifically exclude motorcycles, or limit the definition of "motor vehicles" to "those having more than two wheels," which, in effect, excludes motorcycles.

    In addition, vehicles that do not have to be registered might still be "motor vehicles" for purposes of determining whether an injury arises out of the maintenance or use of a "motor vehicle," thus triggering the operation of a no-fault statute.

    Because of the great differences among the states on this matter, it is critical that you check your area's no-fault laws to see if a particular vehicle is covered. Nonetheless, some common features of most no-fault laws include:

    • Motorcycles and farm vehicles are generally excluded from coverage
    • Commercial and business vehicles are usually excluded from coverage, either expressly by language in the laws that limits coverage to "vehicles not used in the insured's business or occupation," or similar wording
    • Private (non-commercial, non-business) trucks, pick-up trucks, and vans are covered
    • Specialty vehicles, like off-road all-terrain vehicles ("ATVs") and snowmobiles are generally excluded, but some states include coverage when they are used on public roads

    Just because a vehicle is excluded from the no-fault laws does not mean necessarily that there can be no PIP benefits. For example, if you have a car and a motorcycle and your state excludes motorcycles from coverage, but you are injured when your motorcycle collides with a pick-up truck, you might be able to get PIP benefits from the insurance policy covering your car, or maybe from the policy covering the pick-up truck

    How was the Motor Vehicle Being Used?

    In addition to the need of an injury and the involvement of a "motor vehicle," in order for no-fault PIP benefits to be recovered or paid, the vehicle must have been being used as a motor vehicle at the time of the injury - that is, the vehicle was being used for "transportation," which is the primary function of a "motor vehicle."

    For example, a camper that can be driven is no longer a motor vehicle once it is parked at a campsite. So, injuries that are sustained when kitchen appliances inside the camper malfunction would not be covered under a no-fault law because the camper was not being used as motor vehicle.

    Are the Injury and the Vehicle "Connected?"

    Before no-fault PIP benefits can be claimed, there has to be some connection or "nexus" between an injury and the ownership, operation, maintenance, or use of a motor vehicle. When an injured person was either the occupant of a motor vehicle or a pedestrian, whether on or off the road, and he or she was injured as a result of a collision with a motor vehicle, there generally exists a sufficient connection between the injury and the motor vehicle to justify an award of no-fault benefits.

    In most states, the connection between the injury and the motor vehicle has to be something more than simply that the motor vehicle was the "situs" or place of the injury. Merely being in, on, or near a motor vehicle when an injury occurs usually is insufficient to trigger the no-fault law.

    For example, if one passenger mishandles a gun and accidentally shoots and fatally injures another passenger, the vehicle is simply the "situs" of the injury and there is no real connection between it and the injury. So, PIP benefits generally would be denied. But, injuries sustained while an occupant is entering or exiting ("alighting") a vehicle, or loading or unloading goods from a vehicle, will usually provide a sufficient connection.

    Also, physical contact with the motor vehicle is not necessary to trigger PIP benefits: The focus is on whether the accident arose from the use of a motor vehicle. So, when an insured pedestrian was hurt when he tried to avoid being struck by an out-of-control car, but is not actually hit by the car, the pedestrian should be able to recover no-fault PIP benefits.

    In general, the courts will consider several factors to determine if a motor vehicle "caused" an injury:

  • Physical proximity, that is, how close the injured party was to the vehicle
  • The activity of injured person, that is, was the injured person performing a task necessary for the operation, use, or maintenance of the vehicle?
  • Whether the injury was intentional: most no-fault laws expressly exclude coverage for injuries that are caused by the insured's intentional acts
  • Other Matters Relating to Coverage

    If your state requires motor vehicle owners to carry no-fault insurance coverage, your failure to do so can result in various penalties, such as:

    • Criminal sanctions, which usually consists of a misdemeanor conviction, or
    • Suspension of your driver's license ("operator's permit or license")
    • Being barred from recovering any economic damages, like medical expenses, and/or non-economic damages, like damages for pain and suffering

    The no-fault provisions of a motor vehicle liability insurance policy provide coverage both within the state where the motor vehicle is registered, as well as in any other state or territory of the United States. In addition, some no-fault laws provide coverage for travel throughout Canada.

    Nonetheless, travel can present problems. There is no consistent, uniform rule on when out-of-state residents can recover for injuries sustained in motor vehicle accidents while traveling through no-fault states. Some courts allow the victim to recover PIP benefits, whole others do not.

    Similarly, there is no agreement as to which insurer has to pay when an insured from a no-fault state travels and is injured in another no-fault state. Some states require payment from the insurer in the state where injury occurred, while others require the victim's insurer to pay.

    Questions for Your Attorney

    • Do I have to have no-fault car insurance? What will happen if I don't have it?
    • If I'm injured while riding my motorcycle, can I receive no-fault PIP benefits?>
    • Is my mobile home covered by the no-fault laws?
    • I was injured in a car accident while I was on vacation in another state. Can I get no-fault PIP benefits? Should I call my insurance company or the other driver's?
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