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Your car insurance is really six separate policies—some are required, others optional—carefully weigh your risks when buying protection for you and your family.
Carole Walker, RMIIA

Tort Auto Insurance Basics

On July 1, 2003, Colorado switched from a no-fault auto insurance system (enacted in 1974) and joined 37 other states in operating under a fault-based or tort system. It is important to understand what coverage is available under a tort system and make some informed decisions about what is right for you and your family.

Tort Q&A

Q. What is a tort auto insurance system?

A. This is a system where the driver who is at fault for causing a traffic crash is responsible for paying the victim's medical expenses and compensating for additional damages, such as loss of wages and "pain and suffering."

Q. Do other states operate under a tort system?

A. Fault-based systems are the most common form of auto insurance in the United States. 38 states, including Colorado, operate under a tort system, while 12 states have some form of no-fault auto insurance.

Q. What coverage do I need to buy under a tort system? What are my options?

A. The greatest difference from a no-fault system is that you don't have to purchase extra coverage (PIP) from your own auto insurance company to pay for medical bills. Much of the coverage you buy remains the same. Also visit: Colorado Requirements.

Q. Under a tort system, if I already have health insurance do I need to buy extra medical coverage to pay for injuries from an auto accident?

A. Colorado's no-fault law (expired July 1, 2003) required you to purchase what was often duplicate coverage to pay for medical bills and other related expenses.

As of January 1, 2009, Colorado insurers are required to offer you $5,000 in Medical Payments (Med Pay) coverage. You must opt out or the coverage and premium will automatically be added—whether you're buying a new policy or renewing one. You can choose not to buy med pay or purchase a different amount. But, if you don't want it you must reject it in writing or in the same way you buy insurance, for example, over the Internet or telephone. The new law also requires your insurer to hold $5,000 of your medical payments coverage for 30 days to pay for trauma bills first.

Some people would rather rely on their family's health insurance to cover potential injuries to themselves in a car crash rather than purchase extra medical payments coverage. Read your health insurance policy or contact your health insurance company if you are unsure about your coverage.

Q. How do my medical bills get paid under a tort system?

A. Drivers are required to carry liability coverage to pay for injuries and damages, so the insurance company of the driver who causes the accident will be responsible for paying the medical bills. Most drivers in tort states also carry some medical payments coverage, which pays for the medical expenses of the injured person regardless of who is at fault. Most drivers carry health insurance of some kind, so they could rely on their health insurance after the medical payments coverage, if needed. Then, if it becomes clear that someone else was at fault, the health insurer can seek reimbursement from the at-fault driver.

Q. Do I have to get a lawyer and file a lawsuit to get my damages paid for?

A. Very rarely. In fact, more than 90% of all cases settle without suit being filed. Of the less than 10% where suit is filed, most cases are settled out of court. You will likely just work with the at-fault party's insurance company to settle your claim.

Q. What if there is a dispute over who caused the accident - or worse yet, if the driver does not have auto insurance?

A. After a thorough investigation by the insurance companies, in most cases fault is determined and the claim is settled. You would follow the process spelled out in the answer above, plus you have several other options to seek payment for damages:

  • If the at-fault driver has no insurance, the injured person may still access his or her own health insurance.

  • Many drivers also carry "uninsured or underinsured motorist" coverage, which means their own insurance company pays for damages that result from an accident caused by an uninsured driver.

Q. Are there any restrictions on my right to collect for "pain and suffering?"

A. Not under a tort system. The only requirements to file a claim or sue for damages above and beyond your medical bills are that you must receive injuries as a result of the accident and another driver must be at fault. Unlike no-fault, there is no dollar figure or threshold that you have to reach on your medical damages. You can make a claim for "pain and suffering" damages from dollar one.

Q. Are there any restrictions on the kinds of treatments that I use? Can I seek treatment from alternative providers?

A. A tort system does not have any limitations on the type of treatment reimbursement you seek from the at-fault driver. If you use your health insurance or medical payments coverage you are bound by the terms of your own insurance policy.

Also visit: Auto Insurance Worksheet

Background on Colorado's No-Fault Repeal

Q. Why did Colorado repeal its 30-year old no-fault auto insurance law on July 1, 2003?

A. In 2001, Colorado's legislature put a "sunset" provision on the auto insurance law that would result in a repeal of the system if no legislative action were taken to reform no-fault or replace it. The deadline was extended through two sessions, but in 2002 Governor Bill Owens said he would not extend the sunset of no-fault past the 2003 Legislative Session. The Governor called for either an aggressive reform to the "broken no-fault system" or a return to a fault-based or tort auto insurance system. The General Assembly rejected several no-fault reform measures, but ultimately passed HB-1188 which returned Colorado to a tort system on July 1, 2003.

Q. Why was Colorado's no-fault system considered broken?

A. No-fault auto insurance meant that if you were in an accident each person involved collected injury damages from his or her own insurance company. It wasn't necessary to establish fault in order to get your medical bills taken care of because you were required to buy an additional medical coverage called Personal Injury Protection (PIP) to pay for your medical bills regardless of who caused the accident.

In theory, No-fault was designed to be a simple answer to controlling the cost of auto insurance by discouraging lawsuits and speeding up the process of paying claims. In practice it resulted in sky-high premiums, claims abuses and had little impact on the number of claims and lawsuits being filed. In 2002, Colorado had the 8th highest auto insurance premiums in the nation. Rates for PIP coverage went up as much as 80% in the eighteen months prior to the conversion from no-fault to tort.

Expensive & Broad Required Medical Coverage
One of the major factors that resulted in a cost crisis in Colorado was that policyholders were required by law to buy $130,000 in no-fault coverage (PIP) to pay for their own medical, rehabilitation, lost wages and essential services resulting from an accident. This was the third most expensive medical benefits package in the country and people were paying for coverage that they may not have wanted, needed, or could afford. The average PIP claim was about $7,800 and 96% of claims were under $25,000.

The no-fault law also required that any "reasonable" treatment for pain be covered by a standard policy, resulting in payments for expensive, non-traditional treatments and claims for hot tubs, treadmills and fish tanks for vision therapy.

No-Fault System Encouraged Double Dipping
People were also able to collect from their own insurance company for medical/rehabilitation expenses and make another claim or sue the at-fault driver's insurance company for non-economic damages ("pain and suffering"). All you had to do to "double dip" the Colorado system was meet a dollar threshold of medical expenses that amounted to at least $2,500.

Also visit: Colorado Consumer Poll | 2008 Colorado Governor's Study | Colorado Premium Survey

Additional Information