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Understanding No-Fault Insurance in Pennsylvania and New Jersey

Residents of Pennsylvania and New Jersey have probably heard the terms: Full Tort, Limited Tort, Verbal Threshold, and Limitation on Lawsuit Option. Few, however, likely understand what these terms mean and how the selection affects them.

In Pennsylvania, auto insurers are required by law to give consumers the option of selecting Full Tort or Limited Tort coverage. Full Tort coverage provides you and the members of your household with an unlimited right to make a claim for compensation if you are injured in a car crash. This coverage allows a person injured in a car accident to make a claim for economic damages (i.e. lost wages, medical bills) and non-economic damages (i.e. pain and suffering, inconvenience, loss of enjoyment of life) irrespective of the severity of the injury and impact that the crash may have. Limited Tort coverage restricts a person’s right to make a claim for accident-related injuries and damages. A person with limited tort coverage can still make a claim for all economic damages (i.e. lost wages), but can only make a claim for non-economic damages (i.e. pain and suffering) if the injuries result in a serious impairment of bodily function or permanent disfigurement. For all intents and purposes, the injury must be very serious or permanent, and significantly impact the person’s ability to attend to work or activities of daily living.

New Jersey has a similar dichotomy referred to as Limitation on Lawsuit and Non-Limitation on Lawsuit coverage. Previously known as the Verbal Threshold, the Limitation on Lawsuit option does exactly what is says: limits a person’s right to sue. Like limited tort coverage in Pennsylvania, the Limitation on Lawsuit option does not limit a person’s right to recover lost wages and medical bills, but does place limits on the ability to recover for non-economic damages like pain and suffering. A person can recover non-economic damages if the injury suffered is permanent or results in a permanent disfigurement. The No Limitation on Lawsuit option places no restrictions on the right to recovery much like full tort coverage in Pennsylvania.

Insurance companies and agents routinely encourage consumers to select Limited Tort and Limitation on Lawsuit coverage because of the cost savings. Consumers are rarely told about the rights they are giving up in exchange for nominal cost savings. Consumers need to understand that insurance companies have a vested interest in selling inferior coverage because it limits their exposure. Don’t do the insurance companies any favors: select Full Tort or No Limitation on Lawsuit coverage. Your family will thank you in the event you are in an accident.

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