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Concept
No-fault insurance
Summary
In its broadest sense, no-fault insurance is any type of insurance contract under which the insured party is indemnified by their own insurance company for losses, regardless of the source of the cause of loss. In this sense, it is similar to first-party coverage. The term "no-fault" is most commonly used in the United States, Australia, and Canada when referring to state or provincial automobile insurance laws where a policyholder and their passengers are reimbursed by the policyholder's own insurance company without proof of fault, and are restricted in their right to seek recovery through the civil-justice system for losses caused by other parties. No-fault insurance has the goal of lowering premium costs by avoiding expensive litigation over the causes of the collision, while providing quick payments for injuries or loss of property.
However, there are other forms of no-fault insurance. For example, in the United States, most workers' compensation funds typically are run as no-fault systems. This is supposed to simplify the injured worker's claim, since they do not need to prove that someone's negligence caused their illness or injuries.
No-fault systems generally exempt individuals from the usual liability for causing bodily injury if they do so in a car collision; when individuals purchase "liability" insurance under those regimes, the insurance covers bodily injury to the insured party and their passengers in a car collision, regardless of which party would be liable under ordinary legal tort rules. Some no-fault systems often grant "set" or "fixed" compensation for certain injuries regardless of the unique aspects of the injury or the injured party, but this is not universally true.
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