It’s all right to admit it: Auto insurance is confusing and annoying at times. Only eclipsed by the built-in confusion of health insurance coverage, auto insurance policy language can tax the patience of even the most informed reader.

The difference between classic auto coverage (tort system) and no-fault insurance protection is a graphic example of this confusion. At first glance, the difference appears simple and straightforward. Reality, however, somewhat blurs these seemingly distinct differences.

No-fault system

People often believe that no-fault auto insurance describes a system whereby “blame” is disregarded and each driver’s coverage pays the cost of accidents. However, fault is never dismissed or forgotten. The no-fault auto insurance system primarily streamlines the claim process, not the determination of blame for an accident.

Those U.S. states enacting no-fault insurance statutes, particularly in the early 1970s, hoped to reduce the number of cases that were clogging their courts’ pipelines. In theory, the volume of lawsuits would decline, as would the cost of trying cases, reducing large attorney charges for filing suits or defending clients.

For example, a driver is injured in an auto accident and incurs large medical bills. Instead of waiting for a drawn-out lawsuit to be decided in court, the injured party could obtain funds to pay medical bills in a reasonable time frame. On paper, this process makes a strong argument for no-fault insurance coverage.

Those who compare auto insurance quotes were originally pleased to learn that, in many cases, insurance rates displayed significant savings versus standard tort-based auto coverage. Insurance companies projected savings in the cost to process claims, which reduced auto insurance rates. These savings were displayed in their insurance quotes.

Flash forward to the present and compare insurance rates. You will note little difference in auto insurance rates in both tort system and no-fault insurance states. Some states, considered leaders in implementing no-fault auto insurance, have eliminated this choice and returned to the classic tort system (see Colorado, 2003 and Florida, 2007).

Tort system

As veteran drivers and any first year law student knows, the tort system requires an injured party to sue the party alleged to have caused the injury. The court, via jury decision or judicial ruling, decides on the presence or absence of fault in each case.

While this method, on paper, is both fair and just, the number of cases and the cost to try these actions often leads to years of “limbo” for both plaintiff and defendant.

For every “simple” case of presumed fault, e.g., one auto striking another auto from behind, there are many situations with difficult blame determination. These cases require heavy research and preparation time for both the plaintiff and defense attorneys.

With typically over-loaded court calendars in most states, this logjam, when matched with the necessary preparation time, results in years of delay from inception of a suit to receiving a date to try the case. The court-based tort system also permits the plaintiff (injured party) to sue for “pain and suffering” and “lost income” in addition to direct reimbursement for medical bills.

This right has led to some of the high dollar awards in many cases that have caused anguish for insurance companies. The steep increase in auto insurance quotes reflects attempts to recoup some of the high cost of jury awards.

The real difference between tort and no-fault

In many jurisdictions, facing as many court cases with no-fault as with tort system insurance, the real difference between the systems is the speed and relative ease of settling claims. No-fault insurance, wherein you file claims with your insurance company regardless of who may be at fault, typically reimburses you for damages, auto or medical, faster than tort system coverage.

However, the U.S. legal system usually will not prohibit you from filing suit for damages even in a no-fault insurance jurisdiction. Also, many insurance companies (and states) believe the tort system is more equitable and may prevent some fraud and “double dipping” by plaintiffs, who at times receive not one, but two monetary awards for the same injury. This situation is not a concern with business insurance or home insurance quotes or coverage.

Supporters of the tort system even believe claims often are resolved faster than no-fault states because insurance companies would rather settle than pay the cost of a long court case, with no guarantees of victory.

Some states apparently agree since a number of formerly no-fault jurisdictions have offered motorists both options (New Jersey, Pennsylvania, and Kentucky) or have gone back to classic tort system insurance (35 states).

Only 12 states still mandate no-fault insurance and many of those (e.g., New York) have amended their rules to eliminate original provisions that were fully no-fault regulations.