To the uninitiated, fault sounds easy enough: it ought to be assigned to the perpetrator of a crash, right? And insurance payments should flow easily from there.
Unfortunately, determining fault in insurance isn’t a science. The Zebra’s insurance expert and licensed agent Neil Richardson breaks down the complicated concept of fault as it applies to auto insurance, and warns of misunderstandings that can get people into trouble both legally and financially.
The first disclaimer: The intricacies of fault are highly subjective and vary from state to state and insurer to insurer. “We are delving deep into claims practices, which each insurance company handles a bit differently,” Neil said. So as you read on to learn more about fault, remember that the specifics of your policy are subject to variance.
First, How Do You Define “Fault” in Insurance?
No-Fault State vs Tort State
Insurance companies need to know who (or what) caused damage or injuries after a wreck so they can determine who pays. Simple enough. However, each insurance company handles both coverage and claim payments differently, and each U.S. state has its own set of laws about both what car insurance must cover and about how fault is defined and determined.
Some U.S. states are “no-fault” states, and the rest are “tort” states.
- In no-fault states, each driver turns to his or her own auto insurance for coverage for medical expenses no matter who caused the crash
- In tort states, insurers conduct an investigation into who caused the crash, and car insurance companies pay for damages based on who is found at fault. Drivers sometimes have to sue the other party for damages in tort states.
Most states are tort states. Just 12 states have no-fault coverage, and of them, three (Kentucky, New Jersey, and Pennsylvania) give drivers the choice of either tort or no-fault coverage. In the remaining nine (Florida, Hawaii, Kansas, Massachusetts, Michigan, Minnesota, New York, North Dakota and Utah) there is no such choice—drivers must carry no-fault coverage.
And now it gets really interesting (really!). Below, a Q&A with our insurance expert, after which we hope you feel confident in the ins and outs of fault, too.
Quoted: How does “no-fault” work in auto insurance scenarios?
Neil Richardson: Drivers insured in “no-fault” states are often confused when they have a wreck. “No fault” only refers to injuries, not to property damage. So, if you cause a wreck in a no-fault state, the other driver’s insurance will cover their injuries, but your insurance is still on the hook for property damage (including damage to your vehicle), which is covered under liability. If you’re injured in that same wreck, your insurance will cover your bodily injury (and that of your passengers), but it’ll only cover damage to your vehicle if you’ve purchased additional comprehensive and collision coverage, which is often called “full coverage”—a term which is something of a misnomer.
Q: Who determines fault?
NR: Fault is determined by the adjuster assigned to each incident and the state in which the crash occurred. There isn’t an exact set of standards or requirements to determine fault across the board in the U.S.
Q: How is fault determined?
NR: Insurance companies assess the damage and review the events preceding the wreck. They gather information from both parties (or, all parties if the wreck involves more than two vehicles), and any available witnesses. The insurance companies then attempt to determine who caused the crash, and based on the decision, which insurance company must pay for injuries and damages.
Now, degree of fault is another complication that often comes up. If you were merging onto a highway while another driver is attempting to exit and there is a wreck, both parties could be considered partially liable for the crash. So, your insurance company might agree to 70% of the damages, while the other driver’s insurance might take the remaining 30%. Comparative fault helps insurers because they often share the burden of a claims payout rather than suffering the full cost of the damage.
Split or shared liability (fault) varies by state, and some states consider a driver who is 51% or more “at fault” to be 100% of the liable for damage. In most states, if both parties are considered 50% liable then they are both considered to be at fault and would need to be covered by their own policy in most cases.
Q: What happens if fault is unclear?
NR: If it’s difficult to prove fault, insurance companies will sometimes split the cost of damages 50-50 (if the state allows). Say two cars are involved in a wreck in an intersection. Unless there are witnesses, it can be very difficult to prove who had the red light and who had the green. This is one reason why witnesses are so important — if you don’t have them, both parties can claim they had the green.
Q: Say I’m injured in a collision caused by another party in a no-fault state. Is there ever an instance in which the other person’s insurance would have to pay?
NR: Yes. Your insurance pays the primary costs, but if your medical expenses exceed the coverage limits of your policy (called Personal Injury Protection coverage, which is usually about $10,000), the other party’s liability insurance will kick in.
So, even in no-fault states, if there’s bodily injury after a crash, the insurance companies still must determine fault. If you’re injured but also at fault, you can’t go after the other driver’s coverage if you exceed your own. There is also a stipulation in the law in “no-fault” states that would allow for a person to sue another driver for “pain and suffering” depending on the threshold allowed in those particular states. Pain and suffering is not covered under PIP.
Q: Aside from coverage, what other differences exist between no fault and tort states?
NR: Interestingly, as shown in The Zebra’s State of Auto Insurance Report, many of the no fault states ended up being the most expensive states for auto insurance.
Fraud rates also differ between no-fault and tort states. Florida, Michigan, and New Jersey have a lot of fraud with PIP coverage because the coverage limits in those states are substantial, and therefore auto insurance tends to be much more expensive in these states. In Florida, there’s a $10,000 PIP coverage limit, but in New Jersey the limit is between $15,000 and $250,000, and Michigan doesn’t even have a limit, raising the potential for an ill-gotten windfall.
In a state that does use fault for bodily injuries, it’s hard to go after someone else’s auto insurance for a fake injury. It still happens, but it’s more difficult.
Q: How do insurance companies determine “degree of fault” if multiple vehicles are in a crash?
NR: With a multi-car pileup, fault varies significantly based on the details of the crash and the state. There isn’t exactly a broad explanation of how fault is determined in those situations.
Q: How does fault work when a driver hits an object (or an animal) and not another vehicle?
NR: If you hit something stationary that isn’t moving, it’s considered a crash, and you would have to have collision coverage on your policy to be covered. A few examples: a pothole, wood or a tree limb, a piece of machinery that fell off a truck, and roadkill. As far as the insurer is concerned, it’s your responsibility to avoid hitting inanimate objects.
However, if you hit a living, moving animal, or a moving inanimate object hits you (like rubber from an exploded tire on a semi up ahead), you can make a claim if you have comprehensive coverage on your policy. In the eyes of the insurer, since the animal (or rubber) was moving, you couldn’t have been expected to know where it would go, and so it isn’t your fault for hitting it. If you don’t have comprehensive and collision coverage, you’ll have to pay for property damages out of pocket.
Most people carry both comprehensive and collision coverage (if they decide they want optional coverage in case their vehicle is damaged). You can carry comprehensive coverage on your policy without adding collision, but you can’t carry collision without comprehensive in the majority of cases. Since collision is normally much more expensive, some people will leave it off their policy (though people with loans are required to have collision coverage). But, people who still want their vehicles to be covered against theft, vandalism, fire, flooding, and animals should add comprehensive coverage. This means that if this person wrecks his car (by hitting roadkill, or another stationary object in the road, for example) then he has no coverage to get it repaired, but if this person happens to hit a (living) deer in the road, then the damage would be covered under comprehensive.
Language matters when it comes to insurance claims: if you have comprehensive but not collision, and you’re hit by that piece of rubber we just mentioned, it would be important to tell the insurance agent that you were “hit by a piece of tire,” not you “hit a piece of tire.” See the difference?