Over the last few years municipalities have been introducing "accident response fees" as another means to help finance routine police and fire runs to auto accident scenes, whether someone is injured or not. Just ask Cary Feldman of suburban Chicago, who was billed $200 by the Chicago Heights Fire Department for a very minor accident. Neither party in the accident actually called the department; no one was hurt, nor was any service provided. As Feldman describes it, the fire department came, looked around and left. Yet he was stuck with a bill.
Unfortunately, stories like these are becoming all too common.
In light of the struggling economy, more municipalities are considering accident response fees to address mounting pressure to keep budgets balanced without having to formally increase taxes. Part of the impetus for these fees also stems from certain third-party collection agencies that have encouraged jurisdictions to implement charge-back programs whenever police or fire departments are called to duty.
Related: Read September's Legislative Roundup, "The OFC that wouldn't die."
In some cases, local governments impose an accident response fee, which can be $2,000 or more, on all accident victims. Other cities just charge out-of-town drivers. Still others target at-fault drivers or motorists involved in accidents that involve fires or spill cleanups. However these programs are constructed, they amount to being a "crash tax."
There are many fundamental problems with these crash tax programs, but the underlying thinking behind the scheme is that there is a pool of "free money" out there for the taking, if a municipality simply bills the insurance company for the accident response. But there is no free lunch.
By billing insurers for these services, local government is actually imposing a hidden tax on consumers that ultimately could increase the cost of insurance. In return for higher premiums, consumers would have the privilege of receiving a service for which they have already paid through their taxes. However, residents clearly see this for what it is--a form of double taxation.
But even the notion that insurance should cover the crash tax is flawed. These fees do not fit the standard definition of either property damage or bodily injury coverage. While some insurers cover the fees, many do not. A survey by the Ohio Insurance Institute found that insurers representing at least 85 percent of Ohio's auto insurance market don't typically cover accident response fees that are non-medical in nature. When these costs are not covered by insurance, the accident victim could end up with the bill, as Mr. Feldman did.
The Property Casualty Insurers Assn. of America's (PCI) website www.accidenttax.com, which tracks developments on this issue, has found that at least 40 cities or towns across the U.S. have been in the news during the last 12 months for considering or adopting crash tax programs. The exact number of municipalities that have taken this action is unknown because often these programs are often put in place without a lot of news media attention.
Read Robert Passmore's previous Legislative Roundup, "Pay as you drive."
Recently the city of Quincy, Mass., in the Boston area, and Huntington Beach near Los Angeles adopted crash tax ordinances. Several suburban Chicago communities have also adopted such programs. Debates surrounding the issue have swirled in major cities such as Denver, Sacramento, Tempe and Tulsa, as well as smaller communities like Napoleon township in Michigan, Salina, Kansas and Cherokee County, S.C.
Generally speaking, whenever these proposals are exposed to public scrutiny, they generate a significant amount of opposition. Editorial writers for the Denver Post, Los Angeles Times and Sacramento Bee have all blasted the crash tax as being unfair to motorists. Divergent organizations, including taxpayer groups, motorcycle associations and business groups, have spoken out against crash taxes. But even with the opposition, there is no end in sight to the growing trend of local governments charging crash taxes.
For the insurance industry, two basic strategies exist for countering this growing cash grab. The first way is to monitor the deliberations of local governments, and when a proposed ordinance surfaces, lobby that governmental body directly, especially through the use of local grassroots and media. PCI proved that this strategy could be successful by defeating Florida proposals in the cities of Davie and Tampa. Unfortunately, the fact that there are 412 municipalities in Florida created the potential for an expensive, neverending fight.
The other approach is to ban these fees entirely at the legislative level. PCI has made significant progress with this approach around the nation. Today, 10 states have restricted local governments from charging accident response fees. Legislation is already in effect in Alabama, Arkansas, Florida, Georgia, Indiana, Louisiana, Missouri, Oklahoma, Pennsylvania and Tennessee.
The solution for combating this wave of special interests will require motorists, auto insurers and state and local lawmakers to work together to put an end to the practice of accident taxes. The obstacles are high, though, as police and fire unions and chiefs, city officials and the many vendors fight any attempt to reverse the trend.
However, during this time of economic hardship, the public should not be burdened with having to pay additional charges for emergency responses to traffic accidents when property taxes and local income taxes are already paying for these services. Drivers are grateful when police officers and firefighting professionals respond to the scene of an accident, and while we understand budgets are tight and local officials are looking for ways to increase revenue, charging for emergency services is not the right approach.
