Calif. Car Insurance Cos. to Get Bills for Sacramento Crash Responses

The Sacramento, Calif., City Council narrowly approved an ordinance yesterday that will allow a third-party billing company to recover some of their fire department’s cost of responding to car accidents involving out-of-town motorists.crash aftermath

Fines will range from $435 to $2,275, and they will be doled out regardless of fault.

At the low end of the scale, the $435 fee will be charged for “scene stabilization and hazardous materials assessment” and will be levied every time the fire department responds to an accident. The $2,275 fee will be levied only when a helicopter is used to transport injured patients.

The fees, which were approved by the council in a 5-4 vote, were first proposed in order to maintain the city’s fire department.

As with many other public services throughout the state and the nation, the department’s budget has been under serious strain in recent years. The fees are looked at as a way to recover the cost of local services used by non-residents who do not pay local taxes.

It has been noted by a state senator who has drafted legislation to ban the fees, though, that many non-residents commute to Sacramento regularly and contribute to the tax base in the form of sales taxes.

Approximately 3,600 car accidents receive a response from the city’s fire department each year. The city has estimated that about one-third of those involve non-residents.

Once a billing company is chosen, insurance carriers for non-Sacramento residents will begin receiving notices of the fees.

Whether auto insurance companies will end up paying the fees — which many in the industry refer to as “crash taxes” — is a matter that has helped fuel intense debate over their implementation.

“The typical auto insurance policy was never intended to cover these fees,” according to Sam Sorich, the president of the Association of California Insurance Companies. “A typical policy pays for injuries and property damage. It does not pay for a fire department’s response to an accident.”

While statistics on the number of insurers that do pay the fees vary widely depending on the source, opponents assert that even if they were to be covered regularly under a policy, this would still impact consumers negatively. That’s because the added cost of the fees would drive the average claim cost higher, which would hamper the availability of low cost car insurance in the long run.

But despite the controversial nature of the fees, their use has been spreading.

Already 60 California municipalities have implemented “cost recovery ordinances,” and they are already in place in other cities across the country.

The largest city to consider the practice is New York, which floated the idea last month.

About 10 states have already created laws banning the fees. Many of them, though, have proved ineffective because they only apply to law enforcement response, not response from fire departments.

Another large issue with the recovery programs has been the gap between their expected and actual revenues.

Sacramento City Council staff project that the program could bring in between $300,000 and $500,000.

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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