Coppola Law Blog

Colorado’s At-Fault Car Insurance System

If you have been in a car accident, your ability to recover damages from an insurance company will depend on who was at fault for the accident. It wasn’t always this way in Colorado. In 2003, Colorado switched from a “no-fault” automobile insurance system to an “at-fault”, or tort system. This article will explain the difference between at-fault and no-fault laws, and how the difference impacts policyholders and people who have been injured in car accidents.

Colorado enacted a no-fault automobile insurance system in 1974 in the hopes of lowering the cost of auto insurance by keeping smaller claims out of the court system. In a no-fault system, each insurance company compensates its own policy holders for the cost of minor injuries, regardless of who was at fault for the accident. To ensure that only larger cases resulted in lawsuits, Colorado’s system imposed threshold requirements that had to be satisfied before a lawsuit could be filed. It required that the accident must have caused death, dismemberment, permanent disfigurement, a reasonable need for medical services in excess of $2,500, or the loss of earnings for over a year. Unless the injured person met one of these threshold requirements, no lawsuit could be brought against the responsible driver.

To ensure that everyone had the necessary insurance coverage, “personal injury protection insurance” (“PIP”) was mandatory. Under this insurance, an injured policyholder would receive compensation from his/her own automobile insurance for medical expenses, rehabilitation expenses, lost wages, and other out of pocket expenses.

By 2003, Colorado’s average auto insurance premiums were the 11th most expensive in the county. The insurance industry argued that high cost of automobile insurance was due to the relatively low threshold requirements, and because consumers could collect from their own insurance company for medical care and  treatment and then also go to court to recover for pain and suffering and other noneconomic damages. Insurance industry lobbyists asserted that returning to a fault-based system would lower insurance premiums for Colorado citizens.

Colorado’s legislature put a “sunset” provision on the auto insurance law in 2001 that would result in a repeal of the no-fault system if no legislative action was taken to reform no-fault or replace it with a new system. After failing to come to an agreement, the deadline was extended through two sessions, but in 2002 Governor Bill Owens refused to extend the sunset of no-fault past the 2003 Legislative Session. The Governor called for either an aggressive reform to the no-fault system or a return to a fault-based system. The General Assembly rejected several no-fault reform measures, but ultimately passed HB-1188 which returned Colorado to an at-fault system on July 1, 2003, and has been the law ever since.

Colorado’s at-fault system means that the at-fault driver’s insurance is responsible for all of the damages the victim sustains. This includes medical and rehabilitation bills, lost wages, and noneconomic damages such as pain and suffering and loss of enjoyment of life. Because the liability insurance fulfills the role previously covered by PIP insurance, the requirement to maintain PIP has since been eliminated.

Although Colorado no longer requires drivers to maintain PIP insurance, drivers are required to have liability insurance in minimum amounts of $25,000 per person for bodily injury, $50,000 per accident, and $15,000 for property damage. Insurance companies must offer uninsured/underinsured motorist coverage, but the policyholder may choose to decline it. (Check out our previous blog post for reasons why you should never decline uninsured/underinsured motorist coverage). Insurance companies are also required to offer at least $5,000 of medical payment coverage on all automobile insurance policies. Medical payment coverage provides insurance for the first $5,000 of medical expenses following an automobile accident, including costs associated with emergency services, such as ambulances, doctors, and trauma care. Policyholders can opt-out of this coverage is they so choose. Policy holders can also decide to purchase medical payment coverage with a higher limit of benefits.

Our firm has been helping people injured in motor vehicle accidents for over 30 years, so we practiced for many years under the old no-fault system until Colorado switched to the fault-based system. In our not so humble opinion, the no-fault system was a much better system for consumers. Under the old PIP laws, if you were injured in a motor vehicle accident, your own insurance was required to pay for up to $50,000.00 for medical expenses and $50,000.00 of rehabilitation expenses, regardless of who was at fault for causing the accident. It didn’t matter if you didn’t have any health insurance, because your PIP insurance was primary. As stated above, the insurance industry lobbyists sold our legislature on the fault-based system by assuring it that our auto insurance premiums would decrease dramatically if we went to a fault-based system. Don’t you remember when that happened after our legislature adopted a fault-based system in 2003? No? Neither do we. In any event, we’re stuck with a fault-based system now, and the chance that we will go back to a no-fault system seems very unlikely.

Because insurance coverage for an accident is now dependent on fault, the determination of liability is vitally important. Fault in an automobile accident lawsuit is decided under Colorado’s modified comparative negligence law. We have discussed comparative negligence in previous blog postings, but in short it means that a plaintiff’s negligence must be lower than that of the defendant’s negligence in order to recover damages. If the plaintiff is found to be partially at fault, then his/her damages are reduced according to the fault attributed to the plaintiff. Fault can be tricky to determine due to the often complex factors causing car accidents, so it is usually best to consult with an experienced attorney for help with any claim against an at-fault driver.

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