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Law Offices of Ronald W. Rutz
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March 1, 2003: No-fault Auto Insurance

Q: I was in an accident and really cannot understand this no-fault insurance. Even my attorney seems to give contradictory answers to my questions. Can you help?

A: I have started and stopped this kind of column a number of times because it is hard to squeeze into a limited space all of the relevant alternative fact patterns. But since no-fault is a topic so frequently asked about, here it goes.

There are two parts to Colorado's law—medical expenses and liability. Your own insurance will pay the medical bills for yourself and any of your passengers during a 5-year period following the accident for up to $50,000 of such expenses resulting from the accident and up to $50,000 for rehabilitation expenses during a 10-year period.

Even if medical bills exceed the $50,000 limit, the insurance company may be willing to classify certain bills as "rehabilitation" because often there is a fine line between medical bills and rehabilitation expenses.

Expenses over these limits fall back into the liability arena and are the responsibility of the person deemed liable for the accident. But even here, if the negligent party carries inadequate coverage or no insurance protection, then the first person's insurance could still pick up these kinds of expenses under his or her uninsured or "underinsured" portion of that person's own policy. Keep in mind your personal health policy is secondary coverage and could also pick up excess medical bills.

Apparently, under the old legal system assessing fault, insurance companies would fight for years, leaving the medical bills unpaid. Often the "innocent victims" would be sued during the interim since those owed money wanted to be paid.

Liability is the second issue. The minimum coverage required by the state of Colorado is $25,000 per person or a total of $50,000 per accident, not a lot of protection as compared to the average jury award in Colorado in 1999 (the latest figures I could find) of $300,000. Although it is true that probably 90% of the accident claims never make it to a jury in the court system, there could be a large difference between the minimum state mandated coverage and what might actually be awarded.

Now before an "injured" person can sue, there must be a least $2500 in medical bills but after that, there is no cap (such as the $250,000 in other legal areas) that will block judgement amounts. And note it is not "the lawyers" that determine these amounts but juries (or judges) made up of ordinary Coloraodans who decide what amount to be awarded.

Finally, the state requires a minimum of $15,000 for property damage. But in this day and age, such amounts may not cover such damages.

Now, I am not an insurance agent, nor do I practice in this area, but I have consulted with Ken Hettinger, a district manager for Farmers Insurance, who suggests the minimum level of coverage that should be considered is $100,000 per person, $300,000 per accident, and $50,000 for property damage. If you have considerable assets, then you should think about purchasing higher limits. Remember that you purchase your insurance as armor to protect yourself.

And remember that the owner of the vehicle, even if he or she is not driving, can also be held responsible for an accident, so it might be prudent for those not wanting that liability exposure to at least stay off the car title but yet be covered by the auto policy.

I hope this helped to give you a quick overview. Sorry that I could not be more detailed.

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