Does no fault auto insurance protect you from having lawsuits filed against you after a car accident?

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Question:

Please explain this! I live in New York, which is no-fault auto insurance state and I had all the required insurance on my car. I was distracted by my children, who were arguing in the back seat, and I accidentally went through a stop sign. I hit a car going across the intersection and injured the driver. I just received a notice that he’s suing me for $250,000. I thought that if you had no-fault insurance, you were protected from lawsuits for car accidents.

 

Answer:

If it makes you feel better, you’re not alone in your confusion—no-fault auto insurance is a complex, commonly misunderstood, and fairly misleading topic.

No-fault is meant to provide a fast, hopefully efficient, mechanism for compensating people for smaller personal injury claims without recourse to courts. However, if there is personal injury exceeding the limits of the insurance coverage, the plaintiff can often (but not always; see below) sue for the excess; and they can also usually sue for non-bodily injury claims.

New York’s automobile insurance law requires the following coverage (as a minimum; you can always buy more):

  • Personal injury protection, which pays for the insured’s own medical costs, lost wages, and necessary replacement services (such as housekeeping, if you can’t keep house), up to specified limits
  • Liability, which pays for other people’s injuries and for property damages

If someone who has PIP coverage in NY is injured in an accident, they can’t sue for bodily injury (the medical costs, lost wages, etc.) up to the limit of their insurance—so as long as their injuries come in at less than their insurance coverage, there’s no lawsuit.

HOWEVER—and it’s a big “however”—they can sue for:

  • Economic losses from bodily injury in excess of the insurance limits—and given how expensive medical care is, it’s not hard to see how their PIP coverage could be exceeded
  • Property damage, such as damage to their car—that’s why you have property damage liability coverage in the first place
  • Pain, suffering, loss of consortium, and emotion distress IF they suffered a “serious injury” as defined in section 5102 of the insurance law—basically, death, dismemberment, or a serious, long-lasting disability will all qualify to enable the injured person to sue

No-fault auto insurance therefore provides substantially less protection against law suits than is commonly supposed.

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