Abstract

http://ssrn.com/abstract=239005
 
 

Citations



 


 



Auto No-Fault and First-Party Insurance: Advantages and Problems


Gary T. Schwartz


Deceased


Southern California Law Review, Vol. 73, P. 611, 2000

Abstract:     
Auto no-fault replaces liability (and liability insurance) with compulsory first-party insurance. However, American no-fault plans take the form of a hybrid of tort and no-fault (unlike no-fault plans in several jurisdictions outside the United States, which are no-fault all the way). In reviewing the advantages of no-fault - by way of effectively compensating accident victims and also reducing the overhead of the legal system - this Article concludes that hybrid plans are so compromised as to prompt little enthusiasm. Accordingly, those who favor no-fault should insist on pure no-fault.

The heart of the Article considers the relevant objections to auto no-fault. A standard objection is that no-fault is unfair, or fails to provide appropriate deterrence, insofar as it removes liability from the shoulders of the negligent driver. This objection fails to appreciate a basic point. Bad driving that imperils third parties imperils motorists as well. Accordingly, no-fault insurers - in this regard resembling liability insurers - will raise premiums to take the motorist's bad driving into account. In light of this, the standard objection to no-fault is significantly overstated.

The Article goes on to identify what it regards as the most important objection to auto no-fault. Under no-fault, the insurance premiums assigned to heavier passenger vehicles (both full-size cars and light trucks) will decline sharply, while the premiums assigned to lighter vehicles (compacts and subcompacts) will increase sharply. This is not due to the inherent safety of heavy vehicles or the inherent unsafety of lighter vehicles, but rather to the interaction between the two: when a heavier vehicle and a lighter vehicle collide, it is the latter's occupants that suffer the more severe injuries. In these circumstances, to reallocate insurance premiums away from heavier vehicles towards lighter vehicles would be unfair, and would produce inappropriate incentives for the purchase of passenger vehicles. To be sure, the problem can evidently be dealt with by regulatory controls on no-fault insurance practices, but such controls would inevitably be awkward.

Accepted Paper Series


Not Available For Download

Date posted: June 9, 2010  

Suggested Citation

Schwartz , Gary T., Auto No-Fault and First-Party Insurance: Advantages and Problems. Southern California Law Review, Vol. 73, P. 611, 2000. Available at SSRN: http://ssrn.com/abstract=239005

Contact Information

Gary T. Schwartz (Contact Author)
Deceased
N/A
Feedback to SSRN


Paper statistics
Abstract Views: 1,390

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo5 in 0.312 seconds