Sacramento is the latest local government in California to consider imposing a tax on out-of-town motorists who are involved in local auto accidents, which many insurers oppose, according to Sam Sorich, president of the Association of California Insurance Companies (ACIC).
The Sacramento City Council’s Law and Legislation Committee is scheduled to consider an ordinance imposing the tax at its July 20 meeting. ACIC intends to testify against the tax proposal.
The proposed Sacramento ordinance anticipates the city contracting with a third-party vendor that will bill non-residents who are involved in motor vehicle accidents in Sacramento. Sorich noted that vendors have been hired by several other California local governments.
In most cases, the vendor sends bills that are supposed to cover accident response costs to the victims’ auto insurers. Some insurers pay the bill, others do not. Therefore, some policyholders can get stuck with the bill. When the bills are covered by insurance policies, the cost of the bills drive up auto insurance rates for all motorists, according to ACIC.
“It is unfortunate that local governments are adversely affected by the deep recession. But charging accident victims is unwise public policy and unfair,” Sorich said. “ACIC opposes these billing schemes because they impose unfair crash taxes on insurance customers and could confront insurance company customers with higher premiums.”
Sorich pointed out that concerns already have been raised in one municipality – Woodland near Sacramento. The Woodland City Council adopted a similar tax in June 2009. Since then the Yolo County Grand Jury has raised questions about the legality of the tax and has found that the tax does not appear to be producing its projected revenue, according to ACIC.