The term "no-fault" is most commonly used in the United States, Australia, and Canada when referring to state or provincial automobile insurance laws where a policyholder and their passengers are reimbursed by the policyholder's own insurance company without proof of fault, and are restricted in their right to seek recovery through the civil-justice system for losses caused by other parties.
[citation needed] No-fault insurance has the goal of lowering premium costs by avoiding expensive litigation over the causes of the collision, while providing quick payments for injuries or loss of property.
Critics of no-fault argue that dangerous drivers not paying for the damage they cause encourages risky behavior, with only raised premiums and a higher risk rating as the potential consequence, and no jury awards or legal settlements.
The number of traffic collisions causing fatalities and debilitating injuries had become by the mid-1960s the source of a litigation explosion that was "straining (and in some areas overwhelming) the judicial machinery.
"[2] Much legal thinking in academia was devoted to the question of whether the tort system should be replaced with another method of allocating risks of loss from collisions.
The scheme was defended by the state attorney general and also Harvard Law School professors Archibald Cox and Philip Heymann in an amicus curiae brief.
[8] The decision opened the way for widespread adoption of no-fault automobile insurance schemes, a development that was encouraged by the federal Department of Transportation.
[7] Most U.S. states have a "traditional tort" liability system for auto insurance in which recovery is governed by principles of provable negligence.
No-fault systems focus solely on issues of compensation for bodily injury, and such policies pay the medical bills for drivers and their companions no matter whose fault the collision was.
[11] In 2019, the Michigan Legislature changed the state’s no-fault auto insurance law so that drivers will no longer be required to purchase unlimited medical coverage.
However, Michigan’s average annual auto insurance rates are still the highest in the country - and Detroit has the highest rates of any city in the U.S. [13] Additionally, Michigan's no-fault reforms reduced compensation to some caregivers, which made it difficult for some catastrophically injured crash victims to access care from their auto insurance policy.