Origin of No-Fault
The idea of a no-fault insurance system originated with academics in the 1930s as a way to try to make sure medical benefits were paid quickly to crash victims and not clog the courts with small claims cases.
But while people injured in crashes benefited from quick payouts, no-fault laws also meant they largely gave up their right to sue negligent drivers and in a few cases saw a steep increase in insurance premiums.
Most states require that drivers purchase a minimum of liability insurance to cover damage to property and other people’s injuries if they cause a crash. Many drivers end up buying more coverage than is required.
When the National Association of Insurance Commissioners (NAIC) last analyzed no-fault auto insurance laws, 16 years ago, it concluded that it was unclear whether insurance programs that only require a minimum amount of bodily injury coverage and still allow drivers to sue over crashes are better than no-fault.
Wayne Goodwin, North Carolina’s insurance commissioner and head of the NAIC’s automobile insurance working group, said, “the fact that we have so many states that do not have no-fault is indicative of what’s working better.”