The modern auto insurance system dates back one hundred years to the introduction of the motor vehicle itself.1
Policymakers considered that operating a motor vehicle on public property was a privilege. It was proper to require that motorists purchase auto insurance coverage to protect innocent third parties against injury and property damage. Of course, such insurance also protects the at-fault motorist against potentially enormous liability. The first compulsory insurance law went into effect in Massachusetts in 1927.2 Since then, most states have adopted a requirement that motorists carry insurance coverage, although the specifics of that obligation vary widely from state to state.3 In promoting an auto accident compensation system based on personal responsibility, policymakers were simply extending traditional American legal principles, embodied in the tort system, to a new technology: the automobile.
Under the personal responsibility system, the motorist who caused the accident is liable for any injuries or property damage that ensues, and accident victims seek compensation for their property and bodily injury losses from the person “at fault” (or his insurance company).4 Only the innocent victim is paid compensation. The motorist who caused the accident is not entitled to any benefits if he is hurt, unless he had purchased his own “automobile medical payment” coverage or is covered by a health insurance policy. The traditional personal responsibility system imposes no arbitrary limits on the victim’s right to seek compensation for the losses sustained; the kind and amount of compensation is decided by arbitrators, courts, or the parties themselves.
1.The first known motor vehicle accident occurred in New York City in 1896. See Auto Insurance Nears 100th Anniversary, Underwriters’ Rep., Sept. 19, 1996, at 19.
2. See U.S. Gen. Accounting Offiice, No. 86-2, Auto Insurance: State Regulation Affects Cost and Availability 67 (1986).
3. Typically, states require motorists to purchase minimum coverage for bodily injury liability to one person, with a ceiling on bodily injury coverage for all persons involved in any single accident, and modest property damage liability coverage. For example, California presently requires motorists to carry a minimum of $15,000 liability coverage for one person, with a total limit of $30,000 for all persons per accident, and $5,000 in property damage liability coverage. See Cal. Veh. Code sec.167; 16056 (West 1971 & Supp. 1998).
4. Virtually all modern health insurance policies accord the health insurer subrogation rights against the at-fault motorist to recoup benefits paid to the accident victim.