Amidst the ongoing saber-rattling over the future of the state's homeowners' insurance system, auto insurers last year watched the sunset — and then the confused return — of no-fault and mandatory PIP after years of hard-fought battles to try and reform the system. Now a new storm is churning that could soon spell more choppy waters for auto insurers in the Sunshine State, and this one takes aim at unsuspecting drivers and their insurers at their most vulnerable time — immediately after an auto accident.
Throughout Florida, more and more local governments are implementing a hidden fee for providing emergency response services. Everything from setting out cones, directing traffic, and completing a police report, to dousing an engine fire and extricating severely injured accident victims using the Jaws of Life could soon become a billable service.
As lawmakers in Tallahassee slash property taxes, local governments are faced with historic budget crunches. In order to avoid the difficult work of prioritizing and cutting spending, some cities have decided to charge a fee when the police or fire department is called to respond. Some elected officials see these accident fees as an opportunity to increase revenues without formally raising taxes. The Property Casualty Insurers Association of American (PCI) sees these so-called fees as an Accident Tax.
Pay Me Now or Pay Me Later
To make matters worse, this fast-spreading practice is vendor-driven. Across the nation, local governments are approached by private collection companies that promise a cash windfall in exchange for a simple ordinance. An entire industry has emerged to service this growing trend.
The vendor bills the insurer on behalf of the local government. If the insurer doesn't pay, the vendor goes after the driver, even to the point of affecting the driver's credit score. In return, the vendor takes a fee of 10 percent or more off the top. Thus, the local government gets "free money" while the vendor is incentivized to prosecute accident victims.
The problem is that these programs amount to a form of double taxation. Public safety is the primary duty of local government, or at least it should be. Police and firefighting services are already paid for through property and other local taxes. By billing for these services, government imposes a hidden, double tax on consumers that ultimately increases the cost of insurance. If this practice spreads, first responders may have to change their motto from "To Serve and Protect" to "To Serve and Collect."
Some folks have figured this out, and in a few cities that have considered passing these ordinances, local citizens have responded with outrage. In response, some of these same cities seemingly solve the problem by choosing to charge only non-residents. Other cities say they will only charge drivers who have insurance. This course of action is offensive and dangerous.
First, charging only some people clearly violates Article 1, Section 2, of Florida's Constitution, which states that "All natural persons… are equal before the law…," as well as Section 2 of the 14th Amendment to the U.S. Constitution, which states that "No state shall make or enforce any law which shall abridge the privileges or immunities of citizens…nor deny to any person within its jurisdiction the equal protection of the law." The fact is, government cannot arbitrarily choose to charge one person but not another for identical services.
Secondly, Florida counts tourism as one of the three "legs on the stool" of the state's economy, along with construction and agriculture. Floridians have previously seen examples of local policies–such as aggressive ticket traps in rural areas–detrimentally affect local tourism. For the people of Florida, given the real estate crash and the resulting tough economic times, anything that might negatively affect tourism is unwise.
There Ought to Be a Law
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 via the use of local grassroots and media. In 2007, PCI proved that this strategy could be successful by defeating proposals in both the City of Davie and the City of Tampa. Unfortunately, the fact that there are 412 municipalities in Florida creates the potential for an expensive, never-ending fight, making this approach somewhat scattershot.
The other approach is to ban these fees entirely at the legislative level. PCI has made significant progress with this approach around the nation. In 2008, PCI lead successful legislative initiatives to ban the practice of imposing accident taxes in Indiana, Georgia and Tennessee, joining previously successful PCI efforts in Pennsylvania and Missouri.
The Florida Senate Banking and Insurance Committee staff is currently studying this issue to help provide state lawmakers with information regarding the scope of the problem. The committee will report back to legislators in time for the 2009 Legislative Session. This will provide Florida lawmakers with the opportunity to stand with their citizens and support legislation that prohibits municipalities from charging these unfair accident taxes. The obstacles are high, though, as PCI expects the police and fire unions and chiefs, the cities, and the many vendors with their mouths in the trough to fight any attempt to turn back the clock.
The solution for combating this powerful tidal wave of special interests will require motorists, auto insurers, and state and local lawmakers to work together and put an end to the practice of accident taxes. In 2009, PCI will urge lawmakers to pass a bill to prohibit local governments from imposing an accident response service fee on any person or insurance company.
Drivers are grateful when police and firefighting professionals respond to the scene of an accident. But PCI believes that public safety is a basic role of government, and drivers and their insurers should not have to pay twice for emergency response services.
Readers wishing to learn more about this issue can access www.accidenttax.com for further information.
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