Funds of last resort: assigned claims plans and judgment funds

A few states run a safety net for people hurt in crashes who have no insurance of their own and no solvent driver to claim against. There are two kinds. An assigned claims plan, found in no-fault states such as Michigan and Minnesota, assigns an injured person's no-fault benefits claim to a private insurer when no policy can be found. A judgment or uninsured claims fund, such as those in New Jersey, Maryland and New York, pays part of the damages caused by an uninsured or hit-and-run driver. Both pay only after every private option has failed, both have short notice deadlines, and both come with caps and exclusions.

The deadlines decide most outcomes: a person with a valid claim who waits months to see how treatment goes can lose it entirely. This article explains how the main funds work, who pays for them, and the mistakes that sink claims.

Why states built these funds

In a no-fault state, the injured person's own personal injury protection (PIP) pays medical bills and lost income regardless of who caused the crash. The system works when everyone in the crash has a policy to turn to. A pedestrian with no car, a passenger from out of state, or a driver whose insurer cannot be identified has no PIP policy at all, and without a backstop would have no benefits. Assigned claims plans solve that by giving the claim to an insurer chosen by the plan, which pays it as if it had written the coverage.

In an at-fault state, the problem looks different. The injured person may sue the driver who hurt them, but a judgment against an uninsured driver is often worth little. Judgment funds were created to pay at least part of that judgment, or in some states to handle the claim directly.

A third concept sits nearby but is separate: an assigned risk plan or other residual market mechanism, which provides liability insurance to drivers who cannot find it. Those plans help a driver buy a policy; the funds in this article help a victim collect. For the first, see assigned risk plans: insurance of last resort.

Assigned claims plans

Michigan

Michigan's plan is run through the Michigan Automobile Insurance Placement Facility. Under MCL 500.3172, a person with an accidental bodily injury arising from the use of a motor vehicle in Michigan can claim PIP benefits through the plan if any of four things is true:

1. No PIP coverage applies to the injury.
2. No applicable PIP coverage can be identified.
3. Coverage cannot be ascertained because two or more insurers are disputing which of them owes it.
4. The only identifiable coverage is inadequate because an insurer is financially unable to meet its obligations.

The claimant files a completed application on the facility's form with reasonable proof of loss. The statute requires the facility, or the insurer it assigns, to specify in writing within 60 days what materials make up reasonable proof of loss. When insurers fight over who owes coverage, the claimant may notify the facility, which assigns the claim to an insurer that must pay immediately and then sues the other insurers to sort out reimbursement.

Three rules limit what the plan pays:

• A one-year notice deadline. MCL 500.3174 says a person claiming through the plan must notify the facility of the claim within 1 year after the date of the accident.
• The same disqualifications as an ordinary policy. Under MCL 500.3173, a person who would be disqualified from PIP benefits under a policy because of limitations or exclusions in the no-fault act is also disqualified from the plan.
• Offsets for other sources. Under section 3172, benefits are reduced to the extent benefits for the same loss are available from other sources, in the situations where no coverage applies, none can be identified, or an insurer is insolvent. The statute says Medicaid and Medicare are not counted as those other sources.

The insurer that receives an assigned claim is reimbursed by the facility. Under MCL 500.3171, the facility's assigned claims plan is financed by costs allocated fairly among insurers and self-insurers, and section 3175 says assignment must fairly allocate the burden among insurers based on the volume of liability and PIP insurance they write. Section 3172 caps what the plan must pay at the limit in section 3107c(1)(b), with a $2,000,000 figure for two specified categories of claimant; see Michigan PIP: the fee schedule, attendant care limits and the MCCA and michigan's no-fault reform explained for how those limits work.

Minnesota

Minnesota requires insurers that provide basic economic loss coverage to organize and maintain an assigned claims bureau and plan, according to Minnesota Statutes section 65B.63, with costs allocated fairly and equitably among them. The statute directs the bureau to assign each claim promptly so as to minimize inconvenience to claimants, and the assignee has the rights and obligations of an insurer that had issued a compliant basic economic loss policy. Eligibility rules and deadlines for a claimant are found elsewhere in the chapter, so a Minnesota claimant should read the rest of the no-fault act or ask the Department of Commerce.

Other no-fault and add-on states have similar plans, with different names and rules. For the structure of those systems, see no-fault vs at-fault states.

New York's MVAIC

The Motor Vehicle Accident Indemnification Corporation is the best-known example of a fund that does both jobs. According to MVAIC's own site, it was created in 1958 by the New York legislature under what is now Article 52 of the Insurance Law, operates as a non-profit organization, and provides no-fault and bodily injury coverage to eligible claimants.

Who is a qualified person

Insurance Law section 5202 defines a "qualified person" as a resident of New York, other than an insured or the owner of an uninsured motor vehicle (and that owner's spouse when a passenger in the vehicle), or a resident of another state or country that gives New York residents substantially similar recourse. The people MVAIC is meant to help are those without an "insured" status under a New York auto policy.

Deadlines for notice

Section 5208 sets three tracks. Each requires the claimant to file an affidavit with MVAIC as a condition of applying for payment:

• An identified driver with no insurance: within 180 days of the accrual of the cause of action.
• An unidentified driver (hit-and-run): the accident must be reported within 24 hours to a police, peace or judicial officer in the vicinity or to the commissioner, and the affidavit filed within 90 days of accrual. Failure to report within 24 hours does not prejudice the claim if it was not reasonably possible, or if the report was made as soon as reasonably possible. Section 5217 adds that for an unidentified driver the injury must have arisen from physical contact with the claimant or with a vehicle the claimant was occupying.
• An insurer that disclaims or denies coverage: within 180 days of receiving notice of the disclaimer or denial, provided timely, reasonable efforts were made to find coverage.

Subsection (b) lets a claimant who missed a deadline ask for relief in specific circumstances, such as infancy, incapacity, death, or erroneous information from the state's motor vehicle department or a police report. The exceptions are narrow, so do not count on them.

What MVAIC pays

For a claim against an uninsured driver, MVAIC does not pay at the start. Under section 5210, a qualified person who obtains a final judgment against a financially irresponsible motorist, and cannot collect it, may petition the court for an order directing MVAIC to pay the unpaid amount. As published, the statute caps a judgment, excluding interest and costs, at $25,000 for injury to one person in one accident, $50,000 for death of one person, $50,000 for injury to more than one person, and $100,000 for death of more than one person, reduced by any collectible insurance and the motorist's available assets. The text shown on the publishing site was last modified in 2014, so confirm current limits with MVAIC or the Department of Financial Services before relying on those numbers.

Separately, section 5221 has MVAIC pay first-party benefits for basic economic loss to a qualified person injured by an uninsured motor vehicle, on the same terms as an insurer under the no-fault law. Non-economic loss requires a "serious injury" as defined in that law. MVAIC may investigate and defend claims, and a defendant it defends must cooperate (section 5209). For how no-fault claims then proceed, see New York no-fault: claim forms, IME cutoffs and arbitration.

Who pays for MVAIC

"Members" of MVAIC are insurers authorized to write motor vehicle liability insurance in New York and self-insurers subject to the Vehicle and Traffic Law. Vehicle and Traffic Law section 316 also requires a self-insurer, as a condition of its certificate, to pay MVAIC a per-vehicle amount determined under Insurance Law section 5207; see surety bonds, cash deposits and self-insurance instead of a policy for how self-insurance works.

Judgment and uninsured claims funds

New Jersey's Unsatisfied Claim and Judgment Fund

New Jersey's fund, created under the Unsatisfied Claim and Judgment Fund Law (N.J.S.A. 39:6-61 and following), has its claims page on the website of the New Jersey Property-Liability Insurance Guaranty Association. It handles two types of claim: uninsured motorist claims by people injured in an accident with an uninsured vehicle who have no other coverage, and personal injury protection claims by pedestrians struck by a private passenger automobile with no other coverage available.

The association states that the process begins with a Notice of Intention to Make a Claim filed within 180 days as required by N.J.S.A. 39:6-65, and it lists the circumstances that bar a claim:

• Failure to give notice within 180 days.
• Injuries covered by workers' compensation.
• The claimant is the spouse, parent or child of the judgment debtor.
• The claimant was in a vehicle they stole or helped steal, or one used without the owner's permission.
• The claimant was the owner or registrant of an uninsured vehicle.

The notice itself must contain eight items under N.J.A.C. 11:3-26.1: the claimant's identifying information, the time and place of the loss, the vehicles and drivers involved, known witnesses, a short description of the accident, a description of injuries with a medical certificate when available, a description of property damage, and the policy number and insurer of any applicable insurance. A notice missing any of those eight items is returned to the sender, deemed not filed, and does not toll the statute of limitations.

The fund is paid for by assessments on insurers. Rules on the annual statement describe assessments under N.J.S.A. 39:6-63 that are based on an insurer's private passenger and commercial automobile liability premiums (including PIP). The fund also reimburses insurers for PIP medical expenses above $75,000 for a single person in a single accident, which is a separate role. The fund's rules also contemplate repayment by the uninsured person in installments: the Board can ask the state to suspend the license and registrations of an uninsured person who fails to provide a statement of current financial status.

Maryland's Uninsured Division

Maryland's version sits inside the Maryland Automobile Insurance Fund, which now operates under the name Maryland Auto Insurance. Its Uninsured Division assists eligible residents who have no access to insurance coverage and were injured in accidents caused by uninsured drivers. To qualify, a claimant must:

• Be a Maryland resident injured in a crash in Maryland.
• File within 180 days of the accident, or 30 days from the date of a disclaimer letter from an insurance carrier.
• Have no available insurance coverage.
• Not be at fault.
• Not own a vehicle and not live with someone who owns one, insured or not.
• Have held a valid driver's license if driving.

Maryland's history shows a different approach to funding. A 2012 legislative fiscal note says most of the Uninsured Division's income came from a portion of the uninsured-motorist fines levied by the Motor Vehicle Administration, about $2.7 million in fiscal 2011. It also records that the legislature moved $20 million out of the division in 2002 and $7 million in 2009 into the general fund, leaving a surplus of about $2.4 million at the end of 2010. A 2017 fiscal note put the balance at $1.3 million in December 2016. The 2012 note listed payment limits of $20,000 for injury to one person and $40,000 for more than one, and described a bill to raise them to $30,000 and $60,000; ask the fund for the current figures. A 2013 note reported 721 claims in 2012 and an average bodily injury claim of $5,100, which suggests these funds handle small and moderate claims far more often than large ones.

North Dakota: a fund that no longer exists

North Dakota is often listed among states with a judgment fund. Chapter 39-17 of the state's century code was titled the Unsatisfied Judgment Fund, but the published chapter is marked repealed by session law in 1983. A person injured in North Dakota should not assume that a fund is waiting, and should check with the Insurance Department about what exists today.

What the funds do not do

• They are last resort. Every fund requires the claimant to exhaust or be denied other sources first. Maryland asks for denial letters from all insurers, and New York has a separate track, with its own deadline, for claims where an insurer denies coverage.
• They do not reward the uninsured. Both New York and New Jersey exclude the owner of an uninsured vehicle, and Maryland excludes people who live with a vehicle owner.
• They pay less than a liability policy. Caps are modest, and in New York the fund pays a judgment only after the claimant has won one and failed to collect it.
• They do not erase the debt. For the driver's side, see caused a crash without insurance: personal liability and judgments.

How to apply, step by step

1. Get a police or crash report immediately, and get the report number. In New York a hit-and-run claim depends on a report within 24 hours.
2. Identify every insurer that might owe you, including the driver's, your household's, the car you were in, and your employer's. Send written notice to each.
3. Ask for written denials. Maryland requires denial letters, and in New York and Maryland a disclaimer starts its own clock.
4. Write the date of the accident in your calendar and count forward the shortest deadline that could apply: 24 hours for a New York hit-and-run report, 90 days for a New York unidentified driver affidavit, 180 days in New Jersey, New York (identified driver) and Maryland, and 1 year in Michigan.
5. File the notice or application on the fund's own form, complete, even if you do not yet have your medical records. Add them when you have them.
6. Keep copies and proof of delivery, and ask a licensed attorney or the fund about next steps.

A worked example shows how fast the deadlines arrive. Suppose a hypothetical crash on March 3. A New York hit-and-run claimant would need a police report by March 4 and an affidavit by about June 1. A New Jersey or Maryland claimant would need to file by about August 30. A Michigan claimant would have until March 3 of the next year. These dates are arithmetic only: the day a claim "accrues," weekends, and special rules for minors can change them.

What typically goes wrong

• Waiting for treatment to finish. The clock runs from the accident (or from the disclaimer), not from the end of treatment.
• Filing an incomplete notice. In New Jersey, a notice missing required information is deemed not filed.
• Negotiating while the clock runs. A claimant keeps talking to a driver's insurer that has not denied coverage, and the fund's deadline passes.
• Overlooking that you own a car. In several funds, owning an uninsured vehicle disqualifies the claim.
• Treating the fund as a lawsuit substitute. In New York the payment follows a judgment.

Common questions

Is a state fund the same as uninsured motorist coverage?

No. UM is a coverage you buy from an insurer, while a fund is a statutory program that responds only if no coverage applies. Check your own policy first; see Who UM coverage protects: passengers, pedestrians and cyclists for who counts as an insured.

Do these funds pay if I am the one who was uninsured?

Generally the opposite. Michigan carries over a policy's disqualifications, so check which apply to you; New York excludes the owner of an uninsured vehicle, New Jersey bars an uninsured owner or registrant, and Maryland requires that you not own a vehicle at all.

What if my state has no fund?

Then your options are your own UM coverage, health insurance, payments coverage, and a lawsuit against the at-fault driver. See what to do after an accident with an uninsured driver and hit-and-run and phantom vehicle claims: the physical contact rule for the steps. Rules vary, so use state car insurance requirements lookup to see what your state requires and ask the state insurance department what exists.

Who ends up paying for these funds?

Where insurers are assessed, the cost is part of what insurers collect in premiums, but how it shows up in rates is a pricing question; see Uninsured drivers and your premium: how UM costs are priced into rates. Maryland's fund is partly financed by fines on drivers who lapse in coverage.

Key takeaways

• Assigned claims plans give no-fault benefit claims to a private insurer when no policy applies; judgment and uninsured funds pay part of the damages from an uninsured or hit-and-run driver.
• Deadlines are short and strict: 24 hours and 90 days for a New York hit-and-run, 180 days in New Jersey and Maryland, and one year in Michigan.
• Funds are last resort. They require exhausting or being denied other coverage and generally exclude owners of uninsured vehicles.
• Funding differs: insurer assessments in Michigan, Minnesota, New York and New Jersey, and uninsured-driver fines in Maryland. North Dakota's fund was repealed in 1983.
• Read the statute or the fund's current forms. Limits and rules change, and a licensed attorney or the state insurance department can confirm what applies.