No-fault compensation systems are designed to overcome alleged deficiencies in the tort system as a means of compensation

“No-fault compensation systems are designed to overcome alleged deficiencies in the tort system as a means of compensation”-illustrate &explain


Tort Law

A tort, in common law jurisdictions, is a civil wrong. Tort law deals with situations where a person’s behavior has unfairly caused someone else to suffer loss or harm. A tort is not necessarily an illegal act but causes harm. The law allows anyone who is harmed to recover their loss. Tort law is different from criminal law, which deals with situations where a person’s actions cause harm to society in general. A claim in tort may be brought by anyone who has suffered loss after suing a civil law suit. Criminal cases tend to be brought by the state, although private prosecutions are possible.

Absolute Liability

In law, strict liability is a standard for liability which may exist in either a criminal or civil context. A rule specifying strict liability makes a person legally responsible for the damage and loss caused by his or her acts and omissions regardless of culpability (including fault in criminal law terms, typically the presence of mens rea). Strict liability is prominent in tort law (especially product liability), corporations’ law, and criminal law. For analysis of the pros and cons of strict liability as applied to product liability, the most important strict liability regime, see product liability.

Compensation on No- Fault

Legal rule in some jurisdictions that an aggrieved party is entitled to compensation without having to prove any other party was at fault in an accident. Workmen’s compensation is also a type of no-fault compensation.

No Fault Law

Legal rule in some jurisdictions that every individual is responsible for own injuries received in an auto accident, regardless of who is at fault. Its objective is to reduce the number of damage claims and, therefore, the cost of insurance coverage.

Tort & No Fault Compensation

Proponents of a no fault compensation scheme believe that in contrast to an ineffective and inconsistent tort liability based system, it is practical and more egalitarian.

This view is highlighted by the statement that “no person rationally eschews accident insurance on the ground that she or he already has sufficient protection through the tort system”. Not all damages can be compensated by liability in tort as by its very nature it is restrictive in requiring fulfillment of the criteria of fault and causation. This is compounded by the lack of successful claims and a recent British survey found that only 12 per cent of accident victims are awarded damages for tort. Notwithstanding the consideration given to insurance, some types of accident damage cannot be insured against. The present social security system provides for payment in respect of certain injuries however payments are based more on subsistence than loss suffered by a claimant and as such are significantly lower than what would be awarded in a tort compensation claim.

In the medical context, Danzon[1] estimates the figure at one in twenty five, succeeding in a claim for medical malpractice. In terms of moral justification, some argue that “recovery for personal injury is crucial to the protection of individual bodily security” and that “differentiating victims of personal injury between those who are victims as a result of human-caused fault and those who are not is not consistent with our moral intuitions”.

Dissatisfaction with the tort based liability led to the introduction of no-fault compensation schemes in Sweden, Norway, Finland and New Zealand and do not require proof of any negligence. The New Zealand system replaces the victim’s earnings at 80 per cent of pre-accident earnings, subject to a maximum ceiling. In addition, a lump sum can be awarded in respect of permanent disability, but payments for pain, suffering and loss of amenity are minimal.

The New Zealand scheme[2] is however linked to its economy, which is largely agricultural. Accordingly, it is questionable whether such a system would translate effectively to an industrialized economy where the injuries often occur in the industrial context. Moreover, there still remains the political problem that public schemes have to be paid for out of public funds, which tends to make them less popular with those who have resources to make private claims.

Furthermore, many proponents of fault based liability in tort argue that no-fault schemes undermine corrective justice in depreciating the value of personal accountability. They further argue that “fault compensation schemes do not send a message not to act in harmful ways”.

For example, In the USA in relation to negligent driving about 30% of states now operates a no-fault system of motor insurance. In a no-fault system of motor insurance a motorist has to complain against his own insurers if suffer damage and cannot sue a motorist. Since insurance is compulsory for driving, this would support the argument that it doesn’t matter where the money comes from. However, this obvious advantage provides no financial incentive to drive carefully as any claim will be met by each driver’s own insurers. Economist Michael Trebilcock’s statistical research also demonstrates that implementing no fault compensation schemes does have a correlation with an increase in physical injuries and fatalities. In fact Colorado recently switched back to a fault based system of motor insurance after twelve years of no-fault policies.

Conversely, it is also arguable that in a fault based system, the level of insurance is not related to personal qualities as insurance premiums are often influenced by other factors such as age, profession, employment and location. In fact, in any system we effectively all pay for incompetence.

In the medical context, Danzon observes the fundamental difference of Sweden, Norway, Finland and New Zealand’s no fault compensation schemes with no requirement for proof of medical negligence and the imposition of strict liability. It is highlighted that the Swedish model “eliminates all reference or enquiry into fault, requires no proof of negligence by an individual provider, and entails neither financial nor reputational consequences for the provider”.

Under such no-fault schemes, “normal risks” of medical practices and pre-existing injuries are excluded. Severity of injury is relevant only to the size of compensation with structured periodic payments. Deterrence measures are then directed at institutions rather than individuals and distinct from the compensation claim, which expedites the processing of a claim.

Supporters of this approach argue that the mismatch between injuries and claims would be reduced, “Because, a) coverage extends to medical injuries caused by medical acts or omissions that are not demonstrably negligence, and b) the cost of bringing a claim in time, dollars and adversarial tension is reduced.”

Furthermore the lack of litigation reduces overhead costs, ensures a quicker procedure and more funds for distribution due to reduction of administration costs. In context of medical claims, it is argued that no-fault compensation schemes in fact operate as superior deterrence measures on the basis that as more claims are processed, a greater body of knowledge becomes available in relation to the cause of accidents, which can be utilized to implement effective preventative measures, which is preferable to the risk of defensive medicine. Conversely, the potential problems of such a scheme is that due to the higher number of cases being processed, the scheme could become a “victim of its own success” as the higher case load may in fact result in higher administration fees. Furthermore, although such a scheme would address the current haphazard system of determining fault and negligence, it may be equally difficult to distinguish between “free-riders” and genuine complaints and as “long as a line is to be drawn between compensable and no compensable cases, litigation over borderline cases will remain”.

Other criticisms of a no-fault scheme highlight the inability to claim for pain and suffering as a weakness and that “justice” is not served due to the lack of investigation into claims. Outside the medical context, Professor Fleming argues that “punishment is justified on a moral basis and …….rests primarily on the idea of retribution,” which is not the purpose of no-fault compensation schemes.


Proponents of no fault compensation schemes argue that essential benefits are the equality of access to justice in distribution, along with quicker processing of claims by virtue of reduced overheads. Additionally, there is less risk of mismatch of injuries to the level of compensation, with structured payments addressing the actual needs of the claimant.

However, this system is not without its limitations. The funds available are dependent on public contribution and schemes available will inherently be limited and shaped by public opinion and policy. In any event, there is always a risk of limited funds to account for all potential claims. Additionally, no fault compensation schemes also risk floodgate claims perpetuated by the fact that there is no requirement to prove loss.

It is also submitted that perhaps it is unrealistic to ever have tort liability without fault. Even under a no-fault compensation scheme, surely a claimant would still have to show that the defendant had some obligation to him and that his behavior in respect of that obligation caused the defendant to suffer loss or injury? If not, then it has been argued that it may then be difficult to distinguish these types of actions with other torts due to lack of fault. The distinction between these torts would then entirely be on the basis of the obligations between individuals, which would by its very nature limit the scope of no fault compensation and obfuscate the matter by the potentially widening the ambit of tort to contractual considerations. It is again submitted that perhaps reform in this area needs to focus on reform of the traditional requirements for liability in tort as opposed to a complete substitution in the form of a no-fault compensation scheme.


The tensions between fault based liability in tort and no-fault compensation schemes also raise the issues as to whether the law can “reconcile the justifications of distributive justice and corrective justice” within an effective legal framework. Hassan El Menyawi argues that one possible solution is to introduce a new “public liability tort”.

Under this concept, the claimant would be compensated independently by a compensation scheme however a defendant would still be accountable on a finding of fault or wrongdoing by the defendant. The basis of this “public liability tort” is that “the system is characterized by the disassociation of the defendant and the plaintiff. The disassociation is replaced with the interposition of the state98”. On this basis, the compensation of the victim is independent of fault however a defendant is still accountable, thereby preserving the deterrence element of corrective justice.

In theory, the public tort liability concept “ensures that both corrective and distributive justice justifications can be realized without compromising the other”. However, the imposition of the state’s role requires extensive procedural changes with significant cost implications. Furthermore, despite the meritorious intentions of such a “public liability tort”, it is submitted that this approach still fails to address the intrinsic uncertainty in relation to legal fault and culpability, which will still have a significant role to play in the proposed new tort.


In any event, whilst the merits of a no-fault scheme are undeniable, the inherent deficiencies highlight that introduction of such schemes will not act as a panacea to the current inconsistencies in fault based liability per se. Perhaps (as suggested above) a less radical approach to a public liability tort would be to undertake a detailed review of the current legal test for negligence liability.

The fundamental problem is the arbitrary nature of the current application of fault. Accordingly any review of this area must consider change specific to certain claims and it is submitted that any proposed legislative reform should consider implementing separate guidelines in relation to concepts of fault in specific cases, particularly medical negligence. If this approach is to be adopted, an initial recommendation would be a detailed official review of the current legal framework for negligence with effective communication and consultation with relevant bodies such as the medical profession in addressing the realities of malpractice cases for example. Only when a detailed and effective review of the current tort of negligence is undertaken at an official level can deficiencies in the current system as well as a considered approach to implementing a workable no fault scheme be addressed in any meaningful way to reconcile the balance between corrective and distributive justice going forward.


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Online Links

[1] Danzon, P., (1985). Medical Malpractice, Theory, Evidence and Public Policy”. Harvard University Press.