How Does Tort Insurance Work? Full vs. Limited

The costs associated with a car accident can be stressful, not just because of the injuries you’ve suffered but also due to the stress of determining who is going to pay your medical bills. Tort insurance laws are designed to help determine exactly who is responsible for paying the cost of any medical or property damage expenses that arise from being involved in a car accident.

In the simplest terms, the word “tort” means that someone who did something wrong is held liable for the damage they caused. When applied to the car insurance industry, “tort insurance” means that a driver who is at fault for an accident is responsible for paying the costs associated with that accident. This is referred to as full tort insurance.

Most states have tort or at-fault laws in place to determine who is responsible for paying the costs associated with a car accident. However, a handful of states have no-fault laws that require drivers to purchase personal injury protection, also known as PIP, to pay their own medical bills if they are injured in an accident. This is referred to as limited tort insurance.

States that follow the tort insurance system do not restrict the rights of individuals to sue an at-fault driver for things like medical expenses, lost income, and pain and suffering. If the at-fault party’s insurance doesn’t completely cover the damages you’ve suffered in an accident, you can sue the other driver to make up the difference or file a claim under your own policy if you have uninsured/underinsured motorist coverage.

If you successfully make an underinsured motorist claim, your insurance company will likely take the other driver (and their insurance company) to court to recoup the money they paid toward your claim. This process is called subrogation, and it allows the insurer to hold the at-fault driver accountable for losses that go beyond the limits of their insurance.

In no-fault states, the law limits the right of drivers to sue for their medical injuries. Injured drivers are expected to carry PIP coverage and may not be able to sue for injuries unless they are severe and the cost of treatment goes beyond the limits of their PIP coverage.

Although you are required to use your PIP coverage to pay for your own medical bills in a no-fault state, at-fault drivers are still responsible for paying the cost of any property damage, including damages to the other driver’s vehicle. And it doesn’t matter if you live in a full tort state or a no-fault state – the law requires drivers to purchase at least the state minimum levels of property damage liability coverage.

Pain and suffering refers to non-economic losses after a car accident. In states where tort insurance is available, you can sue for damages that go beyond simple medical bills. This could include things like anxiety, depression, or even loss of consortium, which is a legal way of describing changes in your relationships that wouldn’t have happened if you had never been in an accident.

This may also include pain and discomfort. For example, if your injuries from a car accident led to damage that makes it painful to sit or stand for long periods of time, that could be considered a type of pain and discomfort.

There are two ways to calculate pain and suffering damages. One is the multiplier method, which uses any economic compensation you receive and multiplies it by a number between 1.5 and 5 based on the severity of your perceived damages. Pain and suffering are subjective, which means your attorney will work with you to determine an amount of compensation that is fair based on your personal situation.

The other is called the per diem method, which pays you a daily rate for your pain and suffering. This daily rate could be based on your working wage and the number of days you expect your pain and suffering to last, but it could also be based on other factors, especially if you are unemployed. Either method can be used as part of your legal case, but it’s up to the court to decide whether you receive an award.

Because laws can vary by state, it’s important to work with your attorney to determine which approach is the best one for you.

Most states have a tort system in place to determine fault after a car accident, including:

Three of the no-fault states give drivers a choice between the restrictions of no-fault insurance and full tort liability, including:

In these states, you can choose to have a full-tort policy, giving you the right to sue for damages, or you can choose a no-fault policy, which limits your ability to sue another driver after an accident. Choosing a full-tort policy comes with higher premiums and, in Kentucky, you lose access to PIP coverage if you choose full-tort coverage.

However, choosing a no-fault policy means you lose the ability to sue for pain, suffering and other damages after an accident. Thus, if you are hit by a driver who only has state minimum levels of liability coverage, you could be responsible for paying thousands of dollars in out-of-pocket costs, even if the other driver caused the accident.

If you live in Pennsylvania, Kentucky or New Jersey, contact your insurance agent or company to discuss your options.

Along with the 12 no-fault states, 10 states allow drivers to add PIP to their insurance coverage. Unlike no-fault states, PIP coverage is not required in add-on states, but it can be beneficial for drivers who don’t have access to health insurance, or don’t want to deal with the hassle of filing a claim through it. These states include:

If you live in an add-on state and you want to add PIP coverage to your car insurance, contact your insurance agent or company to discuss your options.

The process of filing a claim is essentially the same across the country, but processing your claim can be very different, depending on the laws in your state.

How you file a claim in a tort insurance state is similar to doing so in a no-fault state. But determining who is legally at fault can be more complicated since insurance companies have more funds at stake, and the payout is dependent on the specific state’s negligence laws.

In a tort state, you and the other driver each file a claim with your insurance company, and the insurers go to work determining who is responsible for the accident. Typically, the insurance company of whoever is determined to be at fault will pay for damages to the other driver and their vehicle, while the at-fault driver will be responsible for their own expenses.

If the at-fault driver has health insurance along with comprehensive and collision coverage, their expenses may also end up being covered by insurance. Someone without these types of coverage will be expected to pay those costs out of pocket.

In a no-fault state, drivers still file a claim with their own insurance company, but the difference is that each insurance company pays its own customers’ claims, up to the limit of their insurance policy. Claims in no-fault states are generally processed much faster than at-fault claims, but keep in mind that PIP coverage only applies to bodily injury claims, not property damage. The driver who caused the damage to your car still has to pay for repairs or replacement and those claims are processed the same way as in a tort state.

Some procedures are the same with every insurance claim, no matter which state you’re in:

Once the insurance companies have the information they need, they will begin determining negligence and fault. Negligence could be careless actions, such as speeding, or failure to take reasonable action, such as failing to yield, all of which can make someone partially or completely at-fault for an accident.

For more information about auto insurance, see the following guides: