In the U.S., laws and regulations can vary from one jurisdiction to another, and insurance law is no exception. Generally, states are divided between two major types of insurance law, “fault states” and “no-fault states”.
A few states even allow for citizens to choose one of the two systems. Like a majority of states, Texas adopts a fault-based system of personal injury recovery and auto insurance. While this article will discuss the basics of what this means, it is always important to seek legal assistance if you are personally injured by the negligence of another person or entity.
What does it mean to be a “Fault State”?
While the name “fault state” might sound ominous, the application of this system has little to do with an actual court case. In reality, a state’s status as a “fault state” has greater impact on the responsibilities of insurance companies.
In a “fault state,” the party that is found to be at fault for an auto accident will be responsible for compensating the injured party for the amount he or she is responsible for.
Payment is generally made through insurance agencies, with each state mandating a minimum coverage amount through a financial responsibility law. Damages that are covered by the at-fault driver’s insurance in a fault state include personal damages such as medical bills or lost wages, as well as property damages such as auto repairs.
Because fault states require the at-fault driver to compensate the injured party, each fault state has its own requisite minimum coverage amount. Generally, these coverage amounts are separated into three (3) basic categories:
- The coverage amount for each injured person.
- The coverage amount per accident.
- The coverage amount for property damage per accident.
In Texas, the current minimum liability limits are listed as 30/60/25 coverage, which means that the limits are:
- $30,000 for each injured person;
- Up to $60,000 per accident; and
- $25,000 for property damage per accident
It is important to keep in mind that this is just the bare minimum, and depending on the extent of damage to property, or injuries sustained by a person in an accident, the minimum might not cover the whole recovery amount. If the injured driver’s injuries or damages exceed the coverage amount of the at-fault driver’s insurance, then the injured driver would be able to sue the at-fault driver to collect the difference. In this situation, because Texas follows a Modified Comparative Negligence rule, an injured party would not be able to recover anything in court if it is found that he or she is at least 51% at fault regarding the accident.
What is a “No-Fault” State?
In contrast to the fault state system, a no-fault state requires each party to cover their own costs and generally requires a citizen to own personal injury protection (PIP). This means that if two people get into an accident, their own insurance companies will be responsible for their injuries or damages. While the PIP coverage will only deal with personal injuries to each insurance company’s client, collision coverage can be obtained to cover any property damage incurred.