Tort Insurance Explained: What is it? How does it work?

The tort auto insurance system is the most common type of auto insurance system in the country. Currently 38 states operate under a tort system compared with only 12 states that operate under some form of no-fault insurance. Under a tort auto insurance system, if you are involved in an auto accident, the person who is at fault for causing the accident is responsible for paying the other party’s medical expenses. The at-fault person may have to pay for additional damages for pain and suffering as well as lost wages.

The 38 states currently operating under the tort system include: Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Mexico, New York, North Carolina, Ohio, Oklahoma, Oregon, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Vermont, Virginia, Washington, West Virginia, Wisconsin, and Wyoming.

There are two types of options within the tort system including: full tort and limited tort. Full tort means the injured party retains unrestricted rights to bring suit against the negligent party. Limited tort means that the injured party can only recover very limited sums to cover injuries sustained in the accident. Under the limited tort option, the injured party cannot recover damages on injuries that the court does not consider “serious.” It is important to keep in mind that the law defines serious injury very narrowly, meaning, serious injury refers to personal injury resulting in death, permanent disfigurement, or serious impairment of a bodily function. In some cases, broken bones, head injuries, and whiplash do not qualify as serious injury under the law, especially if these injuries have healed and no longer cause pain. The court will consider these injuries “resolved” in a limited tort cases. 

Some states allow policyholders to choose the limited or full-tort option. If you choose the full tort option, expect to pay higher premiums for more coverage. But, in case of an accident, you will be able to recover damages from the at-fault person for all injuries and other damages. If you choose the limited tort option, your premium will be somewhat less, but it will be difficult to win a claim under this option. With the limited tort option, you are essentially signing away your rights and your family’s rights in case of an accident or injury.

Under the limited tort option, insurers can collect premium dollars on limited tort policies that have a reduced risk of loss for the company. The insurers risk of paying on claims is reduced at a significantly higher rate than the minor rate reduction passed onto the policyholder that chooses the limited tort option. Experts agree that it is well worth the extra cost and it is safer to choose the full tort option. This way, you will have the right to sue for any and all injuries and damages resulting from an automobile accident that was not your fault.

If you live in any of the 38 states currently operating under a tort insurance system, you should check with your local division of insurance to find out about specific tort laws in your state, meaning, which tort options are available to you and to what extent. Each state is different, so before you choose limited or full tort, it is important to get the facts first. To locate your state insurance department website, please visit the official website for The National Association of Insurance Commissioners (NAIC) at www.naic.org.