| Today's Feature Emergency
Services Fee Stirs Questions.
The propose ordinance that
would establish fees for Fire Department services
is scheduled to be voted on by the Council at its
next regular meeting on November 9 in City Hall.
The practice of billing nonresidents for
emergency services has become more popular over
the last several years, especially for those
communities that have a major highway nearby.
During the last Public Safety
Committee meeting, according to official minutes,
"Mr. Greninger made a motion to allow the
fire department to move forward, with the
adoption of a City Ordinance that would allow
Fire Recovery USA to file claims against the
responsible party for the costs the fire
department incurs to mitigate an emergency
incident and be sent to full council for their
approval. All were in favor, motion
carried."
City Administrator Tom Short
says that any money recovered by the program
would be placed in the Public Safety account and
used for Fire Department equipment. This
stipulation is not in the proposed ordinance.
Fire Recovery USA is not
mentioned in the actual ordinance as proposed and
no contract for services is included.
Missouri law (see below)
prohibits police departments from charging for
emergency services, but fire departments are not
included in the prohibition.
The Mornin’ Mail
published the entire ordinance as presented to
the Council in last Tuesday’s edition. Since
that time, there have been inquiries to this
paper concerning the implications of the
ordinance.
After looking for more
information on the subject, today’s paper
presents several different views of the practice
of charging for emergency services.
Questions of fairness,
legality, and double-taxation have been raised by
communities across the country. Some communities
have reported some success while others have
implemented the program and then abandoned the
process all together.
Insurance companies in general
don’t seem to like the program and may be
the loudest voice against the practice.
Several editorials can be found
that fear tourism will be affected or shopping
centers will be avoided by non-residents if the
practice is enforced.
Several responses to these and
other questions are also presented inside that
are provided by Fire Recovery USA to fire
departments.
From a
California Insurance
Company Association.
"However, if you are
unfortunate enough to be in a crash, drivers
should be aware that there is a growing trend
around the country, and particularly in
California, for local governments to impose fees
when police or fire department personnel respond
to a traffic accident.
"These fees for people
traveling from out of town are akin to a speed
trap, except the costs can be much greater and
hit drivers at a time when they are suffering the
consequences of an accident away from their
homes," said Sorich. "Imposing these
fees creates a hidden tax - we call the Crash
Tax. It is just another way for local governments
to tap into a potential cash cow at the expense
of the motoring public."
It is estimated that there are
between 40 and 60 cities, counties and special
districts that have imposed or are about to
impose the crash tax.
In some cases, local
governments impose a tax which can be $2,000 or
more on just out-of-town drivers involved in
accidents within their jurisdictions. Some local
governments levy the fee on all accident victims.
Still others target just at-fault drivers or
accidents that involve fires or spill cleanups.
These fees are often charged to insurance
companies. But often these costs are not covered
by insurance, which could leave the accident
victim facing a bill.
"This crash tax for
emergency response services is in addition to
what citizens already pay through local
taxes," said Sorich. "And even when an
auto insurance policy covers the tax, the
additional charges could result in higher
premiums for all drivers. If the practice
continues to spread among local governments, all
drivers ultimately could be affected."
Not withstanding any
other provision of law to the contrary, no person
or entity shall impose an accident response
service fee on or from an insurance company, the
driver or owner of a motor vehicle, or any other
person. As used in this section, the term
"accident response service fee" means a
fee imposed for the response or investigation by
a local law enforcement
agency of a motor vehicle accident.
Missouri Statute
The Cost?
"The vendor, Fire Recovery
USA of California, will collect 20 percent of
each insurance payout as compensation."
or
"In the last few years
third party cost recovery vendors (Fire Recovery
USA, LLC for example) have gone out and marketed
to municipalities and public agencies such as the
city of Chula Vista, raking in an average of
10-15 percent commission, 17 percent in the case
of Chula Vista if approved."
The Florida Senate Issue
Brief 2009-303 October 2008 Committee on Banking
and Insurance
"States That Prohibit
Accident Response Fees: Five states have
banned their local governments from imposing
accident response fees primarily because
lawmakers view such assessments as invalid or
inappropriate user fees. In 2007, Missouri
outlawed this practice by prohibiting local
entities from imposing such fees on insurers,
vehicle owners or drivers for law enforcement
agencies responding or investigating motor
vehicle accidents. That same year, Pennsylvania
prohibited its cities from charging these fees
incurred as a result of police responding to a
motor vehicle accident. In 2008, Tennessee
prohibited local entities from imposing law
enforcement accident response fees on insurers,
drivers or owners of motor vehicles, but made an
exception for ambulance services provided in
conjunction with emergency response to accidents.
Indiana also banned its political subdivisions
from collecting accident fees from drivers or
other persons for police agencies responding to
or investigating auto accidents. Georgia’s
ban was much broader in that it outlawed counties
and cities from imposing fees on insurance
companies for "any" kind of service
provided by local governments for auto accidents,
but provided for three exceptions: 1) where
coverage for services was provided by the insurer
to the policyholder and services were lawfully
billed to the policyholder; 2) where the
policyholder’s medical insurance covered
emergency medical services and the policyholder
made an assignment to the service provider; or 3)
where other services are provided to the
policyholder by the local government which are
expressly authorized by state or federal law to
be billed directly to the insurer."
Proposed Vendor
Fire Recovery USA
Presentation
Here are answers to some
questions we have received from Fire Departments.
"Why bill for Motor
Vehicle Incidents?
In today’s economic
environment, governmental entities are facing two
conflicting stresses as they strive to
efficiently operate their Fire Departments. Most
areas are seeing a decrease in their tax base
while also a seeing consistent, if not
increasing, demand for emergency response calls.
They recognize the large tax burden that is
already being borne by their residents and
realize a tax increase isn’t the correct
course of action.
They also know incident victims
deserve the highest level of response to prevent
loss of life. They don’t want to enact
measures (brownouts, layoffs, etc.) that will
reduce the levels of service, i.e.: longer
response times. Therefore, Fire Departments are
searching for new ways to avoid increasing taxes
and/or decreasing levels of service. Fire
Departments are searching for
non-traditional answers to avoid the unacceptable
responses of increasing taxes and/or decreasing
levels of service. One such measure being adopted
to defray emergency response costs is the filing
of claims against the at fault responsible party
in vehicle incidents.
Is billing really
justifiable?
Many local governments see
their Fire Departments as infrastructure provided
by taxpayers, but believe the cost of mitigating
a various incidents should be borne by the
responsible party.
Adopting these widely accepted
mitigation rates as a basis, cities and counties
easily support filing claims against the at-fault
responsible party for the cost of mitigating the
emergency response resulting from their actions.
Also, in regards to motor
vehicle incidents, many Fire Departments provide
emergency services to non-resident drivers who
are not part of the Fire Department’s tax
base. For this reason, many cities and counties
adopt ordinances allowing them to file claims
against at-fault, non-resident drivers; however,
local residents remain uncharged. In this case,
this program is not double taxation because there
is no out of pocket expense to taxpayers. In
fact, all costs recovered are a direct benefit to
the taxpayer and the community in which their
safety service department is committed to protect
and serve.
Is this double taxation?
The short answer is no,
it’s not. Our service is simply the attempt
to recover a portion of the costs incurred to
mitigate an emergency incident.
The confusion lies in the
misunderstanding of the "Municipal Cost
Recovery Rule". This rule bans government
agencies from suing for some response costs. The
courts came to the conclusion that this was a
type of "taxation through litigation".
The court felt, however, that
if the local government agrees that the costs of
certain public services should be borne by the
parties whose conduct necessitates that service
(rather than the taxpayers in general), then it
has the right to enact a statute by ordinance or
resolution to expressly authorize recovery of
such cost.
Virtually all state
legislatures have passed laws stating that the
responsible party is liable for the mitigation
costs of those incidents, rather than the
taxpayers in general. Most municipalities need to
pass ordinances to specifically define what they
will hold the responsible party accountable for.
Is billing legal?
In all states it’s legal
to bill for some services a fire department
provides. Depending on the state and local laws,
most fire departments can recover many of their
costs for responding to emergencies like motor
vehicle incidents, hazmat calls, car fires, false
alarms, gas pipeline and power line incidents,
structure fires, water incidents, special rescue
calls, and more.
Some states are more
restrictive, but it is still legal to bill for
many services. There are websites saying
it’s illegal to bill in some states, but
that’s false and usually in regards to
police departments - the laws have nothing to do
with our fire departments. We have a database of
laws by state, so if a fire department wants to
know their options to bill, they can just email
or call us.
How long has fire department
billing been around?
Some fire departments have been
billing for services for over 15 years although
it has become much more common in recent years.
This is very similar to when ambulance billing
began a few decades ago. The reality is most fire
department’s funding is down while their
costs are steady or rising. Many fire departments
have only three choices; they can lower services,
increase taxes, or begin billing the at-fault
party for services rendered.
How much will your billing
service cost?
There is absolutely no charge
to you. We simply take a portion of only what we
collect as our fee.
What is the potential
revenue for billing Motor Vehicle Incidents?
Because we have the highest
collection rate in the industry, our clients
average about $500 per run!
How were these mitigation
rates established?
Fire Recovery USA surveyed
dozens of fire departments nationwide in order to
determine the average time-on-scene, type of
equipment, materials and supplies, and labor used
during the various types of responses that we
wanted to pursue for our clients. The mitigation
rates were determined by itemizing costs for a
typical run (from the time a fire apparatus
leaves the station until it returns to the
station).
Using these surveys we put
together various "billing levels" to
describe the typical responses a fire department
provides to various incidents. These levels are
based on a normal response for each category.
Being an average, some of the actual calls would
have justified a slightly higher billing level
while others would have justified a slightly
lower billing level.
These rates are based on actual
mitigation costs using amortized schedules for
apparatus (including useful life, equipment,
repairs, and maintenance). Labor rates include an
average department’s actual burdened costs
and not just a firefighter’s wage. These
true costs include wages, retirement benefits,
health benefits, workers comp, etc.
Have these rates been
accepted by the industry?
Using our current client base
as a sample, our actual collection rate of over
75% for several years is proof that these rates
have been justified to the satisfaction of the
insurance companies paying these claims.
And why wouldn’t they be?
These rates are real – they’re the
actual mitigation costs to provide the services
rendered. The small amount of claims not being
paid (less than 25%) are typically due to things
like an excluded driver on the policy, the
insurance policy’s limits being exceeded, a
lapse in the policy, or some other unusual
occurrence."
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