Local crash fees make drivers pay for causing accidents

Marcus Pickett

After serious accidents, injured motorists depend on the local police and fire departments to come to the rescue. But deploying these first responders costs money -- a bill that some cash-strapped localities now are passing on to auto insurance companies and drivers in the form of accident response fees.

What are accident response fees?

Accident response fees are charged to motorists who are at fault in an accident (or their insurance companies). They are designated to help pay for the cost of police, fire and other emergency responders. Opponents have dubbed the fees "crash taxes."

The amount of the fee varies by location. According to the Insurance Information Institute, fees can range from $100 to $2,000. The institute says more than 25 states have municipalities that have imposed accident response fees. In January 2011, New York City became one of the most recent to propose them.

Localities that charge the fees justify them by arguing that, because accident reports benefit auto insurance companies, insurers should help pay for the costs of sending law enforcement officials to accident scenes.

The insurance consequences

Just like a bad driving record, accident response fees are likely to increase the cost of your auto insurance policy. According to the Property Casualty Insurers Association of America, police and fire response costs have not been traditionally covered by auto insurance. If insurers are forced to start covering them, they will raise premiums to compensate for the losses.

Some motorists may even have to foot the bill themselves. According to the Insurance Information Institute, when insurers refuse to cooperate, municipalities rely on collection agencies to get drivers to pay up.

In Radcliff, Ky., for example, insurance companies' refusal to pay the fees led to an administrative mess that eventually led the city to drop its program. When insurance companies balked at the fees, the city's collection agency went after drivers, according to Louisville TV station WHAS11. When they, too, refused to pay, the city was left with a program that brought in less money than it cost to enforce.

The "crash tax" controversy

Charging residents for services they use is nothing new -- take sewer and trash collection fees, for example. If you use more of a certain service or resource, you pay more. Accident response fees seek to apply that same philosophy to the costs associated with auto crashes, and fill the gap when local taxes aren't enough to cover them.

Yet the idea that cities should charge for life-saving accident response services is being hotly debated. While accident response fees are gaining momentum in some municipalities, they are being beaten back in others.

Responding to constituent complaints, many state governments have voiced their opposition to the fees, even outlawing them statewide. Alabama, Arizona, Arkansas, Florida, Georgia, Indiana, Kansas, Louisiana, Missouri, Oklahoma, Pennsylvania and Tennessee now ban accident response fees.

Utah, meanwhile, has enacted a partial ban on these fees, allowing municipalities to charge only for actual costs associated with the accident, so-called hard costs, as opposed to general department and administrative costs. Michigan is taking another approach by charging the fees only to out-of-towners (who don't pay local taxes), according to the Insurance Journal.

The insurance industry is not a fan of the fees. The Property Casualty Insurers Association of America has even started a website, AccidentTax.com, dedicated to opposing accident fees. The American Insurance Association (AIA), a trade group, issued a statement in January 2011 that criticized localities for putting a price tag on "some of the most fundamental and important of all public services." Moreover, according to AIA, the fees result in "double taxation" for those who pay their local taxes -- and then get hit with a municipal response fee or higher auto insurance premiums after an accident.

See how much you could save today on your car insurance. Get your free auto insurance quotes today!