Several years ago, I was driving to work and was rear-ended at a stop light—yep, it happens to insurance agents, too! We pulled over to a safe place and called 911 to report the accident. (Modeling good behavior for you right there!) The officer that happened to work the incident was someone I knew. The person that hit me was more worried about what her husband would say than what damage was done. She asked the officer if he was writing the incident up as her fault. The officer replied that Kansas was a no-fault state. Not entirely shocked at his response, I replied, “You realize that term only applies to medical, right?” I got no response, just a glare. Because I already knew the answer: he did NOT understand it or he wouldn’t have said it in the first place.
“No-Fault” is probably one of the most misunderstood concepts in the insurance industry (right behind Business Interruption, but that’s a different blog!) And it’s because of the name. It’s a stupid name. But I guess the name “If-you-have-to-go-to-the-hospital-we-don’t-want-to-figure-out-who-is-supposed-to-pay” was too long. Because that is exactly what “No Fault” is. It has absolutely ZERO to do with who actually caused the accident. It is only applied if you are in an accident and you need medical services. Each person with an auto insurance policy has a coverage called “Personal Injury Protection” We refer to it as “PIP.” (Because we are clever like that.) Most people looking at their policies would see $4500 in that line, but you can purchase more. If you need medical attention due to the accident, that first amount in your PIP line would be paid out of your policy FIRST. And then any excess would be paid by the party that the insurance adjusters deem responsible for the accident. The hospitals need to be able to proceed with treatment immediately, regardless of fault. That is where the No-Fault clause comes in: when you go to the ER or Urgent Care, or your physician’s office, they don’t have to worry about whose fault it is, your auto insurance will be paying for the first PIP amount.
Now some of you might say that it’s not fair for your insurance to pay anything if the accident wasn’t your fault. We get that. But the industry set this up many, many years ago—most likely at the request of the medical field that needed an easier way to make sure that emergent treatment was paid for. And it’s equal for everyone because it’s a required piece of your insurance coverage.
In the rear-end incident I mentioned earlier, neither myself or the other driver was injured, so the “No-Fault” clause didn’t even apply in this case and should never have been mentioned. And, in the end, the lady that hit me only had her damage to take care of, because her mini-van front bumper was no match for my big pickup bumper with a drop hitch attached!