Legislative Roundup: To serve and collect

A new political storm is churning that could soon spell choppy waters for auto policyholders, agents and insurers. This one takes aim at unsuspecting drivers at their most vulnerable time: immediately after an auto accident. Across the country, more and more local governments are implementing a hidden fee on motorists and their insurers for providing emergency response services. Many local governments face historic budget crunches. In response, some have decided to charge a fee when the police or fire department is called to respond to an auto accident. This is in addition to property and other local taxes already paid by residents. Elected officials see these accident fees as an opportunity to increase revenues. PCI sees these so-called fees as an “accident tax.” From California to Florida, Texas to Maine, local governments are being approached by private collection companies that promise a cash windfall in exchange for a simple ordinance that charges accident victims for the deployment of police and fire emergency response vehicles and services. In fact, an entire industry has emerged to service this growing trend. The vendor bills the driver’s insurer or the driver directly 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 rewarded for prosecuting accident victims. Supporters of this proposal say, “Don’t worry, insurance will pay it,” but these fees do not fit under the standard definition of either property damage or bodily injury coverage. While some insurers do pay–just to make the customer happy–most 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. Accident response fee charges are not paid because coverage is not part of the auto insurance policy. Even more troubling, a lot of regular folks don’t even buy the collision coverage that local officials think will pay these fees. So if someone who can’t afford collision coverage gets hit with the fee, who do the officials think is going to pay? The driver. Where does a working man or woman who doesn’t have collision coverage find the money to pay these fees, especially in these tough times? Agents, insurers and policyholders are confused and frustrated. Drivers have been billed for everything from setting out cones, directing traffic and completing a police report; to dousing an engine fire and extricating severely injured accident victims. Bills have ranged from less than $100 to more than $4,000, according to the Pensacola News-Journal. Officers in one Kentucky town set the meter running when they arrive on the scene of an accident and bill victims in quarter-hour increments. 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 already are paid with 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. 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 attempt to 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. It is important to remember that the accident tax violates 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. 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 Florida proposals in the cities of Davie and Tampa. Unfortunately, the fact that there are 412 municipalities in Florida creates the potential for an expensive, never-ending fight, making this approach 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 2007 and 2008, insurers led successful legislative initiatives to ban the practice of imposing accident taxes in Missouri, Pennsylvania, Indiana, Georgia and Tennessee. The solution for combating this powerful tidal 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 turn back the clock. In 2009, PCI is urging lawmakers to pass legislation prohibiting local governments from imposing an accident response service fee on any person or insurer. This year Alabama, Arkansas, Florida, Montana and Texas have considered legislation on this issue. In April, Arkansas became the first state this year to enact a statewide ban on the practice. In February, the Montana House Local Government Committee unanimously voted down a bill that would have allowed municipalities in the state to charge accident fees for emergency response services. Texas has a similar bill that allows volunteer fire departments to charge a fee, but it has not advanced through the legislative process. Alabama and Florida lawmakers are currently considering legislation to ban the tax. 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. After all, police and fire departments should “serve and protect,” not “serve and collect.” Visit www.accidenttax.com to read more on accident taxes.