Police and fire departments often are on the scene within minutes of a crash. Yet this rapid response costs money -- money that some cash-strapped cities are attempting to get back in the form of accident response fees. These fees are called "crash taxes" by those who oppose them.
Response fees target those who cause accidents, as well as their insurance companies. After an accident, the driver or insurer receives a bill for the cost of police and fire response. Fees vary by area; according to the Insurance Information Institute, they can be as high as $2,000. In many cases, municipalities are contracting with third-party bill collection services to make sure the fees are paid.
The insurance industry has been outspoken in its criticism of the fees. In many cases, these fees aren't covered by auto insurance, leaving the driver to pay. Even if insurers do pay the fees, policyholders won't get off free, according to the American Insurance Association (AIA). When faced with higher costs, insurers will recoup them by raising premiums. This would result in double taxation for residents who will find themselves paying taxes that support local police and fire departments, as well as increased premiums on top of that. Moreover, the AIA argues in a January 2011 news release that crash taxes give drivers less of an incentive to call the police after an accident.
The Property Casualty Insurers Association of America, meanwhile, has created a website, AccidentTax.com, to protest response fees. Police and fire departments already are paid for through local taxes, the group argues, and the fees are just an excuse to bill insurers rather than raise taxes. "The role of the police and fire department should be to serve and protect," the group claims on its website. "Not serve and collect."
Localities that have enacted the fees argue that because accident reports are created for insurers' benefit, insurers should have to pay the costs associated with them, according to the Insurance Information Institute. Moreover, by charging the party at fault in an accident, supporters argue, municipalities are simply making sure those who use rapid response services are the ones who pay for them.
New York City is one of the most recent municipalities to propose crash taxes, and municipalities in more than 25 states already have them, according to the Insurance Information Institute. Some areas, including several cities in Michigan, charge only out-of-town drivers. Meanwhile, more than a dozen states ban accident response fees; Kansas, Utah and Arizona all outlawed accident response fees in 2011.