No-pay, no-play automobile insurance laws gaining momentum in state legislatures

Written by Ryan Hurlbert on May 16, 2011 & Posted in Auto Insurance

If an uninsured driver is involved in an accident, should they be entitled to recover non-economic damages? The argument against awarding damages to the uninsured is simple: If they don't participate in the auto insurance pool, why should they garner protection from it?

States clamping down on uninsured

Montana, Oklahoma, and Minnesota are all considering bills to eliminate claims for an uninsured driver's non-economic losses. Known as "no-pay, no-play" laws, eight other states already have some limits on claims uninsured drivers can make. They are: Alaska, California, Iowa, Louisiana, Michigan, New Jersey, North Dakota and Oregon.

Most state versions of no-pay, no-play laws allow the uninsured to make claims for such economic losses as medical bills, repairs to their car and lost wages; They are barred from collecting for non-economic losses, which includes pain and suffering.

Proponents of no-pay, no-play laws point to some obvious benefits. By limiting the size of claims, car insurance premiums could be reduced for drivers who carry liability insurance. And, it does play to a basic sense of fairness: If I pay for auto insurance to protect you but you don't buy insurance to protect me, why should I have to pay more for your losses?

Uninsured coverage remains a must

No-pay, no-play laws are not going to reduce or eliminate the need for uninsured/underinsured motorist coverage on your auto insurance policy. It is in fact your liability insurance that pays for damages to others when you are at-fault in an accident. The primary benefit of no-pay, no-play laws are limits to the amount and type of claim an uninsured driver can collect against liability insurance.

Uninsured/underinsured motorist protection pays for your claims when you are not at fault and the other driver does not have adequate coverage to meet their obligations. Since this type of coverage is not impacted by no-pay, no-play legislation, you do not want to limit your ability to collect for your losses in the event you are in a not-at-fault accident with an uninsured driver. Dropping uninsured/underinsured motorist protection coverage is just not a very good way to get cheaper car insurance.

The overall impact of no-pay, no-play laws remains to be seen. The expectation is no-pay, no-play laws could reduce auto liability insurance premiums a little, while also encouraging some uninsured drivers to obtain auto insurance of their own. I just don't think they are likely to have a major impact in either area. No-pay, no-play laws do make the average, law-abiding citizen feel that the system is fair. Sometimes, that is good enough.

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