Ethics of Calif. Auto Insurance Crash Taxes Debated

This week, Larry Mantle — host of Southern California public radio show AirTalk — posed a hypothetical situation to listeners.

“So picture this: You’re cruising down the street and a cat crosses your path. You swerve, lose control of the car and take out a stop sign,” Mantle said. “You’re wondering whether it was a good deed or not to avoid hitting the cat. In the meantime, you’re responsible for taking out that stop sign. Emergency crews arrive, clean up the mess, and a month later you’re hit with a bill for that public response. Is that fair or not?”
Car in road after accident

The question of whether it’s fair to bill motorists for the emergency response to accidents that they’ve caused is being asked more and more frequently across the country.

As the wiggle room in municipal budgets continues to shrink, local fire departments are looking for new ways to collect revenue. And, since the mid 2000s, one form of revenue collection that has seen increased popularity is the accident response fee — known as a “crash tax” by opponents.

Supporters of the fees say they are a valid way of keeping local services running by simply collecting what is due from responsible parties.

According to Chief Bill Soqui — of the Cathedral City Fire Department, which does levy fees for cleanup of hazardous materials that leak onto the street after a crash — the fire department services funded by property taxes are limited to basic fire protection, so responding to car accidents is outside the scope of standard department services and require etxra funding.

Soqui also says that the majority of insurers will pay for the fees.

“It’s just like the ambulance transport. If you have health insurance, they pay for the transport to the hospital,” he said. “Auto insurance companies pay for the cleanup of fluids and the like that are spilled during an accident.”

But opponents contend that billing drivers for taxpayer-funded services amounts to double taxation, and they note that insurance providers do not always pay for the fees.

The percentage of insurers that do cover the fees is a statistic that has been heavily disputed.

Insurers themselves have not stated publicly how often they cover the fees, and the sources that do provide numbers usually have strong stances on the ethics of emergency response fees.

An employee of one of the companies that handles third-party billing for fire departments told the Florida Legislature in 2008 that approximately 56 percent of insurers nationwide pay the extra charges. But a survey conducted by the Ohio Insurance Institute — which ardently opposes the fees — showed that the vast majority of providers in the state did not typically pay for policyholders’ accident response bills.

Another common argument that was reiterated by State Senator Tony Strickland on AirTalk is that, since accidents affect auto insurance premium prices because of the cost to insurers to pay the claims, the added cost of paying for emergency response will only drive average premiums higher. So, even if insurers soften the blow to motorists, drivers still end up losing in the end by getting higher bills for coverage.

Strickland has introduced a bill to the California Legislature that would ban municipalities from collecting fees for accident response.

About ten states have already passed similar bans. However, many of these have proved ineffective, since they apply only to responses from law enforcement officers and not from fire department personnel.

About Ben Zitney
Benjamin Zitney has been covering the auto insurance industry for the past 2.5 years. Before coming to Online Auto Insurance News, he produced an extensive company history of the 30-year-old California Joint Powers Insurance Authority and worked at the Cal State Long Beach Daily Forty-Niner as a reporter, copy editor and news editor.

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