STATE DECISIONS TO LIMIT TORT-LIABILITY - AN EMPIRICAL-ANALYSIS OF NO-FAULT AUTOMOBILE INSURANCE LAWS

This article considers the decision by state legislatures to enact auto insurance no-fault laws during the 1970s. The possible influences of levels and growth rates in insurance costs and the effects of no-fault on low-income households, medical care providers, insurers, and attorneys are analyzed. A probit model of decisions to adopt no-fault auto insurance from 1971 through 1976 is developed and estimated using cross-state data from 1970. Separate equations are estimated for restrictions on tort liability and the enactment of compulsory personal injury protection coverage. Holding other variables constant, the estimation results suggest: (1) the probability of adopting no-fault was higher in states with more rapid growth in auto liability insurance costs; (2) states with greater numbers of physicians per capita, a measure of the strength of the medical care community, were more likely to adopt no-fault; and (3) states with greater numbers of attorneys per capita were less likely to adopt no-fault laws with restrictions on tort liability.