Most states use the at-fault system when addressing vehicular accidents, but Minnesota remains in the minority by using a no-fault insurance system. 

Many drivers misunderstand the meaning of no-fault insurance, but knowing the difference between these two legal doctrines for insurance can help drivers better plan a response to an accident. 

At-fault insurance states

According to the Insurance Information Institute, at-fault systems for insurance place the financial burden for injuries or medical expenses primarily on the company insuring the at-fault party. For example, if a man runs a stop sign and hits a woman in her car, his insurance company will probably be liable for her medical bills as well as his. 

When there is a dispute about fault under an at-fault system, drivers or insurance carriers may sue the other party for compensation and have a court adjudicate the case. 

No-fault insurance states

As the Minnesota Department of Public Safety explains, the no-fault insurance system dictates that each driver’s insurance company cover their insured’s medical expenses regardless of who caused the accident. This insurance covers not only medical costs, but also lost wages and other related expenses, but drivers must file their own claims with their insurance company. 

If any dispute arises between a driver and the insurance company, the driver must first bring a lawsuit against the company before seeking damages from the other party’s insurer. 

Only once drivers have exhausted personal insurance funds or met certain minimums may they seek compensation from the at-fault driver. 

Benefits and drawbacks

Minnesota originally implemented the no-fault system to help injured parties receive financial compensation more quickly and to minimize the number of claims for the courts. While these are indeed benefits of the system, its adversaries argue that it causes higher premiums and increased fraud as parties strain to reach the minimums to sue the other driver’s insurance company.