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The History of No Fault Gavin Blair Liberty Mutual

The History of No Fault Gavin Blair Liberty Mutual. It all began in the 1930s. In the early 1930s a new approach to auto insurance was modeled after the workers’ compensation system. The goal was to fully compensate auto accident claims quickly, without litigation.

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The History of No Fault Gavin Blair Liberty Mutual

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  1. The History of No Fault Gavin Blair Liberty Mutual

  2. It all began in the 1930s • In the early 1930s a new approach to auto insurance was modeled after the workers’ compensation system. • The goal was to fully compensate auto accident claims quickly, without litigation. • Claimants would be compensated by their own insurance company, regardless of fault. • Compensation for pain and suffering would be prohibited.

  3. Massachusetts becomes the first state to enact limited no-fault in 1971 • In 1965, the original idea drafted in the 1930s was refined by Professors Robert Keeton and Jeffrey O’Connell. • A limited No-Fault system was proposed that would apply exclusively to minor auto accidents. • Pain and suffering would still be prohibited, except for those meeting a $500 threshold. • In 1971, Massachusetts was the first state to enact some form of limited No-Fault, with a total of 19 states by 1974.

  4. No-Faultsystems promised four advantages over traditional tort systems • Greater Level of Compensation. • Compensation to more victims. • Lower costs. • Less burden to court system.

  5. The different types of No-Fault systems • PIP Monetary • PIP Verbal • Add on

  6. Basic PIP Benefit and Monetary Threshold by state

  7. Possible fixes to the No-Fault system • Raise the monetary threshold • Hawaii 1992: $1,500 → $10,000 • Kansas 1988: $500 → $2,000 • Massachusetts 1989: $500 → $2000 • Limit the amount paid for medical claims • Fee schedule • Treatment schedule • Anti-fraud measures • Fund licensing boards to investigate claims • Dual systems • Pennsylvania • New Jersey

  8. Unfortunately, the cost of No-Fault insurance has been much greater than its proponents anticipated

  9. New Jersey and New York have the highest Injury to PD ratios

  10. California’s injury ratio is less than half of New Jersey’s Or New York’s * Massachusetts has a very high PD cost. Using the Countrywide average of 91, Massachusetts has an Injury to PD ratio of 2.85.

  11. O’Connell and Joost give 3 reasons why No-Fault laws fail to deliver promised cost savings • Systems are “out of balance”. • Many No-Fault Systems encourage victims to inflate their claims to exceed the threshold for bringing a lawsuit. • No-Fault systems provide greater bargaining power to plaintiffs in Bodily Injury cases.

  12. Three states have already repealed their No-Fault laws, Nevada in 1980, Georgia in 1991 and Connecticut at the beginning of 1994

  13. The results of repealing No-Fault • Both the Georgia and Connecticut repeals of No-Fault led to significant improvement of injury costs. • In the three years following the Georgia repeal, overall injury costs were reduced by 14%. Tort states showed a 5% increase over the comparable period. • Connecticut showed a 19% drop in injury costs three years after its repeal. This was significantly better than the 3% drop experienced in the tort states. • In subsequent years, both Georgia and Connecticut have continued to perform like other tort states, showing additional improvements in injury costs.

  14. Impact to Injury Costs Following Removal of No-Fault Coverage Source: IRC: Trends in Auto Injury Claims

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