Tort-law scholar Guido Calabresi (1985, p. 1) once asked his readers to imagine an evil deity who demanded 55,000 lives every year in exchange for providing amazing powers of individual transportation without precedent in human history. The personal automobile is the evil deity to which he referred, and we have accepted the bargain but still struggle to allocate the overwhelming costs. In 2006 alone, a staggering 2,575,000 people were injured in automobile accidents in the United States, and 42,642 people were killed (NHTSA, 2008). This enormous toll has long represented the largest single source of accidental injury in the United...

To understand the rise and partial decline of the popularity of no-fault and understand the changing patterns of costs discussed in Chapters Four and Five, one must first understand the different kinds of automobile-insurance regimes used by different states. These can be roughly divided into tort and no-fault. Under a conventional tort regime, a victim recovers compensation from another party (or, almost invariably, the other party’s insurer) if the victim can show that the other party was at fault for the accident. Under a tort system, a consumer purchases automobile insurance primarily to protect himself or herself from having to...

To understand the history of no-fault automobile insurance and political arguments over its desirability, one must understand the emergence of the fault-based system of tort law itself. This chapter briefly sketches the intellectual and political history of no-fault automobile insurance, beginning with the emergence of fault-based liability.

Following the growth in automobile accidents, reformers proposed an alternative to the tort system that would promise quicker, fairer, less-expensive compensation to victims of the increasingly frequent automobile accident. After decades of rising accidents and tort costs, the first no-fault law went into effect in the United States in 1971 in Massachusetts (Mass....

Many no-fault proponents claimed that no-fault would reduce claim costs. These proponents argued that no-fault would reduce litigation, limit third-party claims (particularly for noneconomic damages), and simplify the process of determining who was at fault, reducing administrative costs enough to offset the cost of the more-generous first-party benefits available under no-fault. However, a number of researchers have argued that no-fault has actuallyincreasedinsurance costs (Johnson, Flanigan, and Winkler, 1992; Rosenfield, 1998; Cole et al., 2008). And, as was discussed in the last chapter, the continuing high cost of no-fault was used as a key argument against it in California,...

As explained in Chapter Three, cost reduction was one of several arguments raised by proponents of no-fault automobile insurance. Over time, however, the political debate over no-fault focused on consumer cost. As we saw in Chapter Four, the perception that a no-fault regime was often more expensive than tort is confirmed by the data. In this chapter, we investigate possible reasons for this counterintuitive finding: Why would a system whose goal was to simplify the claim process and reduce costs end up being more expensive?

We begin with some simple math: The total cost of claims equals the number of...

Almost from the time that automobile accidents emerged as a serious problem, critics of the tort approach to compensating victims for automobile accidents sought an alternative system. After more than 40 years of study, no-fault emerged in the early 1970s as a long-awaited solution to the problems identified with the tort system. At first, it appeared as though no-fault would prove to be a genuinely superior policy tool. Over time, however, the debate over automobile insurance shifted away from the problems with the tort system to focus on consumer premium cost and the right to sue dangerous drivers. Insurer and...