We just discussed n0-fault insurance coverage or personal injury protection (PIP) as it is often known. Personal injury protection is first-party insurance.
When we refer to PIP, personal injury protection, the car insurance is specific to you and does not cover the person or entity with which you had the collision. This type of insurance will generally cover (based on state laws) you, passengers in your car, or members of the household. But, unlike collision and comprehensive coverage, personal injury protection pays only a portion of the medical bills and lost wages of people who are insured under the policy. PIP insurance does not cover physical damage to the car.
PIP insurance is not required in all jurisdictions, but it may be an available option that can be added to an automobile insurance policy.
What Else Does Personal Injury Protection Do?
When a jurisdiction has an automobile insurance system that includes PIP, it usually also has limitations on the circumstances under which an injured person can sue the owner or driver of the other car for “pain and suffering” damages. Those are also called non-economic damages because they do not directly relate to out-of-pocket expenses like medical bills and lost wages. Those damages are not subject to easy measure and take into account many factors. They are the kind of damages that may be awarded by a jury in a lawsuit.
Depending on the jurisdiction, limitations on this kind of lawsuit can be based on these factors:
- Monetary thresholds: A lawsuit for “pain and suffering” damages may only be brought of the economic damages exceed a stated amount.
- Injury severity thresholds: A lawsuit for “pain and suffering” damages may only be brought when the individual has sustained an injury that a treating physician deems serious or permanent. Naturally, this is relative. The treating physician must conclude that the injury is permanent “within a reasonable degree of medical certainty.”
- He or she also normally assigns a “disability rating” to the injured person. This may be stated in terms of, for example,“X% permanent disability to the left lower extremity” (in the case of an injury to a person’s left leg). Naturally, the person defending the lawsuit can contest both liability for causing it or the nature and extent of the injury.
Don’t get confused by the term “no fault.” It does not mean that there is no potential liability on the person who was careless (negligent) and caused an auto collision As long as the threshold for a lawsuit is met, the negligent person(s) is/are fair game. I’m not advocating lawsuits; I just want you to understand how no-fault insurance or personal injury protection insurance works.