Minnesota No-Fault – Explained

There’s an oft-quoted line (and an oft-watched scene) in a popular movie about a princess, in which one of the good guys says to one of the bad guys, “You keep using that word; I do not think it means what you think it means.”

The word? “Inconceivable.” Even if you’ve never seen the movie, you probably just said that word in your head exactly the way it’s said by the bad guy in the movie.

Here in Minnesota, a word (hyphenated, so we’re calling it one word) that is often misused and misunderstood is “no-fault.”

“No-fault” does NOT mean that no one is ever found to be at fault for anything, ever. Fault is frequently found – and can be a critical factor in determining financial liability for accidents.

So what exactly is no-fault? 

First of all, in Minnesota, it’s only applicable to vehicle policies. There’s no such thing as no-fault homeowner’s insurance. The core tenet of the Minnesota No-Fault law is that certain out-of-pocket expenses or damages related to auto insurance claims will be paid by YOUR OWN insurance company, regardless of who caused the situation to occur. The law was enacted to ease the burden on courts – keeping smaller claims out of litigation and thus out of our local courtrooms – and to ease the burden on insured parties in an accident.

For example – you’re in a fender-bender on the highway. You each suffer only minor injuries and some minor damage to both vehicles. You exchange insurance information with the other driver, of course. In this hypothetical, your auto insurance will cover your visit to your chiropractor to help with the whiplash you got, and the other driver’s insurance will cover their visit to the emergency room to get their chin stitched up, regardless of which of you caused the incident.

For a simple fender-bender, it’s generally a simple answer. There’s no argument between the parties or between the insurance companies about who caused the accident, because it doesn’t matter. There generally is no need for litigation, court cases, or attorney fees… everyone wins.

Sometimes, though, fault DOES matter.

No-Fault - But Who Is At Fault?

However, for more significant accidents, it’s possible that the damages incurred by either party (or both parties) may exceed the no-fault threshold. When that happens, the parties may look at other sources of coverage for those losses.

That may mean that YOUR insurance may have to pay for the other person’s damages, up to your policy limits or that the other person’s insurance will pay for your damages, up to their policy limits. The insurance companies would look at which party actually caused the accident in determining who will be responsible for covering those losses.

Where the Confusion Comes In

Many drivers believe that their insurance company will pay for ALL expenses or damages in an accident, regardless of who is at fault. That’s simply not the case. 

Generally speaking, no-fault coverage applies to a limited amount of expenses or damages from injuries which have arisen from the use or maintenance of a motor vehicle.  Those coverages often have limits of up to $20,000 of medical and $20,000 of non-medical expenses. 

Imagine this hypothetical: You run a red light and crash into a car, causing injuries that result in $50,000 of medical expenses to the driver of the other car.  That driver’s no-fault coverage covered the first $20,000 of his medical bills.  However, because that driver was able to prove you were at fault, they would likely look to your insurance policy to cover the additional $30,000 of medical expenses as well as general damages arising from the motor vehicle accident. 

In this example, in which you were at fault for the accident, causing significant medical bills and totaling the other party’s expensive car, the losses could exceed your liability coverage. (That’s where an umbrella policy could be useful, which we discuss here.)

The Bottom Line

Work proactively with your auto insurance agent to fully understand what Minnesota No-Fault will cover for you in the event you’re in an accident – and be very clear on what it will not cover. Ensure any gaps are filled with an auto policy with the proper protections and limits of insurance, and consider an umbrella policy if it’s appropriate for your specific situation.

If you get into an accident and feel that it’s the other driver’s fault, consult with your agent. There may be options available to you that you would not ordinarily think of. 

Start a Quote Online or Contact Us. We look forward to hearing from you.

This article is for general information only and should not be considered an offer of insurance or legal or other expert advice.  The recommendations herein may help reduce, but are not guaranteed to eliminate, any or all risk of loss.  Claims illustrations herein are hypothetical and for discussion purposes only.  Coverage will be determined based on the facts of the claim and the terms of your policy, if approved for issue.  Policy limits, deductibles, conditions, and exclusions may apply.  Your eligibility and premium will depend on the application of Federated’s underwriting guidelines to your unique circumstances including, but not limited to, your personal information, loss history, location, driving record, and coverage.  Some of the information herein may be subject to, and is not a substitute for, any laws or regulations that may apply.  The information herein is current as of September 2022 and is subject to change.  Coverage not available in all states.  Qualified counsel should be sought with questions specific to your circumstances.   Policies are underwritten by Federated Mutual Insurance which is licensed in Minnesota.