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When it comes to car accidents, states generally fall into two legal categories: tort states and no-fault states. Tort states are the more common variety (there are 38), and mean that injured citizens have the right to sue at-fault drivers in the event of an accident, and as such follows the legal paradigm for most accident settlements. Auto drivers in tort states typically carry medical reimbursement coverage, and insurance companies covering the injured may have the right to charge at-fault parties for damages.
Twelve states, (Florida, Michigan, New Jersey, New York, Pennsylvania, Hawaii, Kansas, Kentucky, Massachusetts, Minnesota, North Dakota and Utah) follow what is called a no-fault system. In a no-fault system, the parties at fault are legally indemnified, with all of their legal responsibility transferred to their insurance company, allowing for very direct car insurance reimbursement.
This system has benefits and disadvantages. The benefits of a no-fault state are that less time and money is spent in litigation; plaintiffs are simply required to settle their problems with the direct car insurance companies (naturally, these states tend to have stricter rules on liability coverage). Critics of this system, however, claim that it creates incentives for reckless driving, prevents benefits that would otherwise be provided by through a jury-based court system. Counter arguments claim that these incentives are weak as the accidents are typically very involuntary, and that the intrinsic complications of accidents are sufficient disincentives. In any event, no-fault states are limited by the degree of the accident. In any no-fault state, if the damages exceed certain criteria, torts may be filed against reckless drivers in a typical fashion. The criteria for these may be monetary (determined by the amount of damage done) or qualitative (determined by the type of injury or damage that was done).
Three states, New Jersey, Pennsylvania and Kentucky, offer an option between the two. A driver can direct car insurance companies as to whether whether he wishes to register as though in a tort system or as a no-fault system prior to taking out and insurance policy. These decisions remain in effect throughout the duration of the policy, and can only be changed with the creation of a new one. The default choice for Pennsylvanians is full tort, while the default choice in Kentucky and New Jersey is no-fault.