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Motorist’s Choice. The bill would give each motorist a choice between the new "personal injury protection system" and the "tort maintenance system," which is similar to the existing system in one’s state.

Personal Injury Protection (PIP) System. The bill authorizes motorists to choose PIP coverage that protects them and the members of their family for personal injury up to the amounts they select. As with health insurance, PIP coverage pays benefits without regard to fault. It pays for all injuries, including those suffered in single car crashes where no one else is legally at fault. PIP insureds would be required to buy insurance in amounts equal to the level mandated by their state’s financial responsibility law for bodily injury. Typically, that amount is $20,000 - $25,000 for an injured person. In a no-fault state such as New York, motorists would have to purchase an amount equal to the required level of no-fault benefits (in New York, that would be $50,000). In either case, the insured could elect to purchase higher levels of economic benefits and even first party coverage for noneconomic loss.

A person who elects PIP coverage would relinquish the right to sue other drivers except for uncompensated economic loss. In turn, the PIP driver would be insulated from any lawsuits except for uncompensated economic loss. "Uncompensated economic loss" is defined as any economic loss in excess of all other benefits payable for the same injury, such as PIP and health insurance. While the PIP driver could not sue for any loss covered by health insurance, the health insurer could recover any amounts it had paid the PIP driver from the insurer of an at-fault driver.

As a general rule, auto insurance is "primary," with the exception of workers’ compensation benefits. This means that persons with PIP coverage are compensated first from their own auto insurance. If those benefits fully pay for the injury, then there is no need for further recourse. However, if the PIP policy limits are exhausted before one’s economic losses have been fully compensated, then the injured person may collect additional benefits from one’s health insurance.

PIP insurers are obligated to pay injured people promptly, within 30 days of submission of proof of loss. Late payments are subject to an interest penalty of 24 percent plus a reasonable attorney’s fee.

If two drivers who have chosen the PIP system are involved in an accident, each driver recovers to the limits of one’s own policy. If the loss exceeds the policy’s coverage plus any other coverage available to pay for the injury, the injured person may sue the other driver for uncompensated economic loss on a fault basis. Any person who prevails in such a suit is also is entitled to a reasonable attorney’s fee.

The RAND Institute for Civil Justice and the Joint Economic Committee estimate that persons who elect PIP would, on average, save about 56 percent on their bodily injury premiums. People who forgo the cost savings could purchase about $200,000 for the same cost as the old system.

Tort Maintenance System. Alternatively, motorists may elect to stay with a modified version of their existing state law. For 38 states, that is the lawsuit-based tort system. The person who elects the tort maintenance system must purchase "tort maintenance coverage" (TMC) in case one is involved in an accident with a PIP driver (see the discussion below for how TMC operates).

If two persons who have elected the tort maintenance system are involved in an accident in a tort state, they may sue each other on a fault basis, just as they do today.

RAND estimates that those who elect TMC will receive similar benefits for the same cost.

Accidents involving drivers from the different systems. If a PIP driver suffers economic loss that exceeds one’s policy limits and the limits of any other available insurance, that person may sue the tort maintenance system driver on a fault basis for any uncompensated economic loss. A PIP driver who prevails in a lawsuit is also entitled to a reasonable attorney’s fee. The PIP driver may not sue for pain and suffering.

When a person who elects to stay in the tort maintenance system is involved in an accident with a PIP driver in a tort state, that person must prove that the PIP driver was legally at fault in order to recover. Then, one recovers both economic and noneconomic damages from one’s own TMC first, to the extent of the TMC coverage, just as if the PIP driver were an uninsured motorist. The tort maintenance insured may sue the PIP driver on a fault basis for any uncompensated economic loss, plus a reasonable attorney’s fee, but not for noneconomic damages.

The Accident Chart on the left displays graphically how inter-system accidents are treated.

Accidents involving unlawfully uninsured motorists, intentional injury and people driving under the influence of alcohol or illegal drugs. The rules involving uninsured motorists do not change for people who elect the tort maintenance system. People who elect the PIP system may sue an uninsured motorist for both economic and noneconomic damages. As a penalty for driving unlawfully, the uninsured driver may sue the PIP driver for economic loss only. Drivers who intentionally injure others or drive under the influence of alcohol or illegal drugs may be sued for economic and noneconomic damages. Insurers may deny them PIP benefits but not third liability coverage for injuries they cause others.

Lawfully uninsured persons. Lawfully uninsured persons, those who do not own a car, remain under existing state tort law and may sue any at-fault driver for both economic and noneconomic damages.

The election of states to opt out of the PIP system. Each state has two ways to opt out initially. First, a state may, within one year of adoption of this legislation, pass a law providing that the new PIP choice system will not apply. Second, the law will not go into effect in a particular state if the state insurance commissioner certifies, within 120 days of adoption of this legislation, that the average driver’s premiums for bodily injury coverage will not decline by at least 30 percent. If a state fails to reject application of Auto Choice, the law goes into effect 270 days later. Thereafter, a state may choose to have the law not apply by passing a law to that effect.

If you have questions about the Auto Choice Reform Act, please contact
pkinzler@cox.net