UPDATED March 2009 (original release Feb. 14, 2008)
COLUMBUS– Cities and municipalities considering additional revenue by charging insurers and drivers for routine police or fire department responses to accidents may want to take note.
According to a survey updated in March 2009, (original survey-January 2008) by the Ohio Insurance Institute (OII), insurers representing at least 85.3% 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.
“The main reason for conducting this survey is to provide factual information to city officials on revenue expectations” said Daniel J. Kelso, OII president. “Since many insurance companies aren’t paying accident response fees billed by third party collection vendors, it may help officials decide whether this is a viable, worthwhile revenue stream for their community.”
OII contends that companies don’t deny legitimate auto accident claims and provide coverage when policyholders are either liable or negligent. They have good reason for not paying accident response fees.
“Most insurers don’t pay response fees because they are not covered under companies’ auto insurance policy language,” said Kelso. “Paying for losses that are not part of the coverage is not in the best interest of policyholders.”
OII noted that such services are paid for by the taxes of local residents.
“Residents pay property and other taxes and in return anticipate police and fire protection, including assistance at a crash scene,” he added. “Even nonresidents may be helping to defray the cost of local police and fire services through income taxes if they are a nonresident working in a municipality with these fees in place.“
Collection companies typically bill the insurance company of the at-fault driver, using police reports as the basis of liability. In some communities, depending on the ordinance, when an insurance company denies the claim, the collection company will attempt to recover payment from the at-fault driver cited in the police report.
“There’s a two-fold problem with this approach,” said Kelso. “First, we’ve yet to find a collection company that bills uninsured drivers. If there’s no insurance company, there’s no bill. Secondly, the courts determine legal liability, which may differ from indications on a police report. Most of our members find accident fees to be both discriminatory and discretionary, punishing Ohio’s law-abiding motorists who carry insurance.”
Many of the companies responding to the survey indicated that before such claims are denied, they are reviewed for potential coverage especially under the property damage portion of the policy. Some noted that if their policyholder is found to be legally liable for a crash that caused a hazardous spill or major debris removal, they cover clean-up costs. Additionally, if medical assistance or medical transport was provided, there may be coverage under the Medical Payments (Med Pay) portion of the auto policy. Coverage may also apply in situations involving an emergency extrication (i.e. use of “jaws of life) to rescue a crash victim.
“OII’s survey is based on non-medical runs,” said Kelso. “Most accident response fee bills are of this nature.”
OII surveyed members and non-members, which are insurance companies writing home, auto and business insurance in Ohio. 20 companies responded. All 20, representing 85.3% of Ohio’s personal lines auto insurance market based on 2007 data from the Ohio Department of Insurance, said they don’t cover non-medical accident response run payments for either police or fire, when coverage doesn’t apply.
According to the OII, accident fees are typically billed by third party collection companies on behalf of city or municipal police and fire departments. The vendor takes a percentage (usually 10%) off the top.
To help educate local officials and consumers on accident response fees, OII has an informational Web site, www.accidentresponsefees.com.
“We want to help local officials separate fact from fiction when it comes to accident fees,” said Kelso. “There’s a lot of misinformation floating around about them.”
Based on newspaper accounts across the country, revenue generated through these charges is typically 10-15% of what’s actually billed. Some communities cite even lower rates of return. Many states have passed bans either prohibiting or limiting municipal billing fees for accidents. A list of states with current legislative restrictions in effect can be found on the accident response fee site.
The Ohio Insurance Institute is a trade association representing insurance companies and agent groups for the property/casualty industry. Its main objective is to increase understanding of insurance and related safety issues.