Recently, several local governments in South Carolina have begun to consider accident response fees as a way to increase revenue for districts providing emergency response services. These fees typically range from $300 to $1,000.
Many ordinances have been drafted with the intent to charge only non-resident drivers and for the cost to be borne exclusively by auto insurance companies.
However, accident response fees and their relationship with auto insurance often are misunderstood, which can lead to unintended consequences.
Before your local government considers implementing accident response fees, they may want to consider the following.
Only insurance companies, not individuals, will be billed for accident response.
Insurance policies are a contract between an individual and the company. Third party vendors lack the legal standing to require such fees directly from insurance companies.
The cost of accident response fees will be borne exclusively by insurance companies.
Fire truck response to the scene of a vehicle accident does not automatically fall under the typical definition of property damage or bodily injury, and therefore, is often not a covered loss under an auto insurance policy. Insurers are not contractually obligated to cover fees that are not spelled out in the auto insurance policy.
Insurance companies have always, and will continue to pay for losses that are covered by the policy. This includes necessary ambulance service that responds to vehicle accidents and fire fighters responding to structure or house fires.
Accident response fees will not cause insurance rates to increase.
Actual losses and claims are a major factor in determining rates. If insurance companies were required to cover these fees, they would include the cost of such fees in future rate requests. In addition, increases would not necessarily be limited to non-residents of any specific jurisdiction.
It’s fair to charge auto insurers for the cost of emergency response to accidents instead of relying on taxes.
A portion of gross premium taxes collected by insurers statewide is remitted to local jurisdictions to help provide emergency response not covered by insurance.
If accident response fees are popular in other areas, they must be a good idea.
A Harris Interactive Poll (2011) about accident response fees confirms that a vast majority of South Carolinians (81%) think the taxes they already pay should cover the costs associated with public safety services provided by police and fire departments responding to a motor vehicle accident.
The poll found that 61 percent of South Carolinians oppose accidents response fees even if the ordinance charges only non-residents. The poll also found that about two-thirds of the public are opposed to accident response fees, if the fees would increase the cost of automobile insurance.
This practice is so unpopular that accident response fees have been banned by 14 states, including several in the Southeast (Georgia, Florida, and Tennessee).
In addition to the common misunderstandings outlined above, these proposed ordinances often do not establish provisions for handling a number of other possible scenarios. For example, most ordinances do not include provisions to collect these fees from uninsured drivers. Is it fair to charge only drivers who follow state law and carry insurance? In accidents involving residents and non-residents, will there be any consideration given to which driver(s) is at fault? Would there be any consideration for comparative fault? In cases where the driver is not the owner of the vehicle involved in the incident, will the vehicle’s owner’s insurer be billed, or will the driver’s insurer be billed? What if an individual owns property (pays taxes) in the local jurisdiction, but is driving a vehicle that is registered elsewhere?
In conclusion, automatic aid and accident response fees do not regularly fit under an auto policy’s coverage, could impact future insurance rates, and are essentially dedicated to cover services that are already paid for by local taxes.
For more information, contact the South Carolina Insurance News Service at 803-252-3455 or use our contact form.