Research & Commentary: Auto Accident Response Fees

Published February 1, 2011

Local governments around the nation continue to make new proposals to create accident response fees, or “crash” taxes. These tax proposals are likely to become more common as local governments struggle to balance their budgets.

Local officials who support accident fees frame them as “user fees” for emergency services delivered at the scene of an automobile accident. The fees, however, do not replace property and other taxes already paid by residents and businesses for such local services.

In some instances, these costs are being passed on to insurers, but in others motorists end up paying the accident fees. This can occur when the insurer refuses to pay the fees because accident response charges aren’t a covered expense under the driver’s insurance policy. Also, drivers who do not have collision coverage—who have bought only liability coverage or are uninsured—are stuck with the full bill.

Insurer groups, such as the Property Casualty Insurance Association of America, and some law enforcement organizations argue the fees are unfair, discriminatory, and possibly unconstitutional because they arbitrarily affect nonresidents. Officials in some locales have responded to citizen complaints by charging only nonresidents. Others charge only drivers who have collision insurance. Critics of the fees say such accommodations only make the policies more unfair and discriminatory.

In recent years, several states—including Arkansas, Georgia, Indiana, Missouri, Pennsylvania, and Tennessee—have passed legislation banning crash taxes.

The following articles examine accident response fees and the issues surrounding them.

Accident Response Fees: Say “No” to Double Taxation and Higher Insurance Premiums
This policy paper from the Property and Casualty Insurers Association of America, a leading critic of crash taxes, examines the issue from legal, political and economic perspectives.

Response: Accident Victims Increasingly Being Hit Again—With ‘Crash Taxes’
This paper from the Cost Recovery Corp., a company that works with municipalities to implement and collect accident response fees, responds to the insurance industry and discusses common arguments against accident fees.

Insurance Information Institute Issue Update: Municipal Accident Response Fees
This issue update from the Insurance Information Institute examines recent developments in accident response fee ordinances and their effect on auto insurers

Ohio Insurance Institute: Accident Response Fees, Fiction vs. Fact
This report from the Ohio Insurance Institute provides a sampling of what the organization identifies as erroneous information used by collection companies in explaining police and fire accident response fees to city officials, community residents, and news media.

Could the State Reduce Florida Car Accident Rates by Charging a “Crash Tax”?
This paper from the Flaxman Law Group examines both sides of the crash tax debate and cites fee supporters’ argument that the fees could reduce accidents by making drivers more cautious in communities where fees are enforced.

Cities and Counties Charging “Accident Response” Fees to Drivers and Insurers
This Issue Brief from the Florida Senate examines the implementation of accident response fees in several Florida communities, questions whether the communities have the authority to implement these fees, and addresses the potential problem of insurance polices not covering the fees.

Insurance Institute of Michigan Key Issues: Municipal Emergency Response Fees
This issue paper from the Insurance Institute of Michigan examines the emerging trend of municipal accident response fees in Michigan and nationwide. Questions and Answers
This question-and-answer item from the Property and Casualty Insurers Association of America addresses several common questions about accident fees.

Ominous Trend: Growth of Municipal Accident Response Fees
This National Association of Mutual Insurance Companies Issue Brief examines accident taxes and argues third-party vendors have misled communities looking for an easy cash grab.