Under no-fault insurance, your own insurer pays your medical expenses and a portion of lost wages after a motor accident — regardless of who caused it. In exchange, your right to sue the at-fault driver is restricted to injuries that exceed a statutory threshold. Twelve US states, several Canadian provinces, and New Zealand operate no-fault or modified-no-fault systems. Each works differently.
No-fault means your insurer pays first-party benefits (PIP) regardless of fault. To sue for pain and suffering, your injury must exceed the tort threshold — either a verbal test (e.g. “serious injury” in New York) or a monetary test (e.g. $2,000+ medical costs). Canadian systems vary by province. New Zealand's ACC eliminates tort claims for personal injury entirely.
How no-fault insurance works
In a traditional tort (at-fault) system, the injured party claims against the at-fault driver's liability insurer. In a no-fault system, the injured party claims against their own insurer for first-party benefits — typically called Personal Injury Protection (PIP). PIP covers medical expenses, a percentage of lost wages (usually 60–80%), and sometimes funeral expenses and essential services.
The trade-off: in exchange for guaranteed, no-fault benefits, the injured party's right to sue the at-fault driver for non-economic damages (pain and suffering) is restricted. The restriction is enforced through a tort threshold — a minimum severity or cost level the injury must reach before a tort claim is permitted.
US no-fault states
| State | PIP minimum | Threshold type | Key note |
|---|---|---|---|
| Florida | $10,000 | Verbal | Must show significant/permanent injury per §627.737 |
| Michigan | $50K–unlimited (tiered post-2019) | Verbal | Serious impairment of body function or disfigurement |
| New York | $50,000 | Verbal | Insurance Law §5102(d) — “serious injury” definition |
| New Jersey | $15,000–$250,000 | Verbal (default) or choice | Limitation-on-lawsuit vs zero threshold option |
| Massachusetts | $8,000 | Monetary ($2,000) | Reasonable medical expenses must exceed $2,000 |
| Hawaii | $10,000 | Monetary ($5,000+) | Or serious injury per HRS §431:10C-306 |
| Minnesota | $40,000 | Monetary ($4,000) | Or 60+ days disability, permanent injury, or disfigurement |
| Pennsylvania | $5,000 | Choice | Full tort or limited tort election at policy purchase |
| Kentucky | $10,000 | Choice | No-fault or tort election |
| Utah | $3,000 | Monetary ($3,000) | Or permanent disability/disfigurement |
Tort thresholds: verbal vs monetary
| Type | How it works | Example |
|---|---|---|
| Verbal threshold | Injury must meet a statutory definition (e.g. “serious injury,” “significant and permanent”) | New York: fracture, dismemberment, significant disfigurement, permanent loss of organ/function, 90/180-day rule |
| Monetary threshold | Medical costs must exceed a specified dollar amount | Massachusetts: $2,000 in reasonable medical expenses |
| Choice | Policyholder selects full tort or limited tort at purchase | Pennsylvania, New Jersey, Kentucky |
Canadian no-fault schemes
| Province | Scheme | Tort right preserved? |
|---|---|---|
| Ontario | SABS (O. Reg. 34/10) — statutory accident benefits | Yes — for injuries exceeding the threshold |
| British Columbia | ICBC Enhanced Care (May 2021) | Mostly eliminated — very narrow tort exceptions |
| Manitoba | MPIC no-fault | No tort right (pure no-fault) |
| Saskatchewan | SGI no-fault (with tort add-back option) | Optional — can purchase tort coverage |
| Quebec | SAAQ — public no-fault scheme | No tort right for auto injuries (pure no-fault) |
New Zealand ACC
New Zealand's Accident Compensation Corporation (ACC) operates the most comprehensive no-fault system in the common-law world. ACC covers all personal injuries — not just motor accidents — and in exchange, the right to sue for personal injury is abolished entirely (with narrow exceptions for exemplary damages). ACC is funded by levies on employers, employees, motorists, and general taxation.
Impact on settlement value
No-fault systems fundamentally change claim dynamics:
- Below threshold: If your injury does not exceed the tort threshold, you receive PIP benefits only — no pain-and-suffering claim.
- Above threshold: If your injury exceeds the threshold, you can pursue a tort claim for non-economic damages in addition to PIP benefits. PIP medical payments may create a lien against your tort recovery.
- Pure no-fault (Quebec, Manitoba, NZ): No tort claim is available regardless of severity. All compensation comes from the statutory scheme.
Frequently asked questions
What is no-fault insurance?
Which US states have no-fault auto insurance?
Can I still sue under no-fault insurance?
What is PIP coverage?
How does no-fault work in Canada?
Sources
- Insurance Information Institute — no-fault auto insurance overview
- New York Insurance Law §5102(d) — serious injury definition
- Florida Statutes §627.736–.737 — PIP and tort threshold
- Michigan No-Fault Reform (2019) — PIP coverage tiers
- Ontario Regulation 34/10 — Statutory Accident Benefits Schedule
- Insurance (Vehicle) Act, RSBC 1996 — ICBC Enhanced Care amendments
- Accident Compensation Act 2001 (New Zealand)