Debate Resumes Over Billing Auto Insurance Cos. for Accident Response

Dec 14, 2010, 08:00 ET from Online Auto Insurance, LLC

NEWARK, N.J., Dec. 14, 2010 /PRNewswire/ -- The debate over accident-response fees has been rekindled after it was announced last week that the fire departments of two cities — Salem, N.J., and New York, N.Y. — will be requiring drivers who cause serious accidents within their borders to reimburse local governments for the cost of responding to those accidents. Online Auto Insurance recommends that policyholders contact their insurers or agents if they would like to know whether they are covered for such fees.

Imposing fees on drivers and their car insurance companies to recoup the cost of emergency response is nothing new. Although the issue has gained wider visibility in the last year with cities and counties struggling to make budgetary ends meet, states have been investigating the practice and have even been passing bans on it since 2008.

The basic idea behind the accident-response fee — called the "crash tax" by some — is that the at-fault driver who has caused the accident is responsible for all resulting damages and that it is the driver, not local taxpayers, that should be billed for any expensive emergency response.

But opponents of the fees say that it amounts to double taxation: residents pay for emergency services through local taxes, and then they are charged again for those emergency services if they cause a serious accident.

The debates in these two cities may take different courses, though, due to a divide on one key aspect. In New York City, the at-fault drivers — not to their insurance providers — will be delivered the bill directly, and they may then submit it to the insurer on their own for claims payment. If the insurer refuses to pay, it remains the at-fault motorist's responsibility. In Salem, on the other hand, the bill will go directly to the coverage provider, and if the coverage provider refuses to pay, the policyholder is not responsible for coming up with the money.

According to a 2008 report to the Florida State Senate, it has been estimated that 56 percent of car insurers nationwide view the fees as valid and pay them on behalf of their policyholders.


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SOURCE Online Auto Insurance, LLC