Insurer Association Urges Calif. Legislators to Ban ‘Crash Taxes’

May 4, 2011

California’s Senate Public Safety Committee held a hearing yesterday, evaluating the need to ban local governments from charging accident response fees or “crash taxes” for emergency responses to vehicle accidents.

SB 49 (Strickland) would prohibit a city from charging a fee to any person regardless of residency for the expense of an emergency response, except where a fee is otherwise authorized. This bill would not apply to a special district unless the district receives revenue from transaction and use taxes.

“As local governments grapple with shrinking budgets, over 60 cities turned to charging for emergency response services in the form of accident fees or “crash taxes,” said Mark Sektnan, president of the Association of California Insurance Companies, which supports a ban. “However these new fees have not been a magic potion for cash-strapped cities. Several communities including, Roseville, Vista, Oceanside and Sacramento repealed their local ordinances because the projected revenue did not materialize, while their reputations with visitors and businesses were tarnished.”

Each city designs their ordinance in a different way, Sektnan explained. Most cities contracted with a third-party vendor that would bill residents or non-residents involved in an auto accident. The vendor would retain 17 percent of what is collected. Some ordinances target those that follow the law and have auto insurance, the at-fault driver and others just target out-of-town drivers.

“These ordinances are very confusing for drivers who just experienced a car accident and then have to face a second blow when an unexpected bill arrives,” Sektnan said. “The fees charged range from $100 to over $2,000 for different services; the average bill is $200.” He said if insurers are forced to cover the bills, the costs would affect consumers’ premiums.

A Harris Interactive poll found that three out of four consumers believe their taxes cover the time and services provided by emergency response providers following a traffic accident. As a result, most drivers believe additional accident response fees charged by local governments are inappropriate. Arizona and Utah are among the states approving legislation to ban these fees during 2011 legislative sessions. A similar bill is awaiting action on the governor’s desk in Kansas.

The Association of California Insurance Companies (ACIC) is an affiliate of the Property Casualty Insurers Association of America (PCI) and represents more than 300 property/casualty insurance companies doing business in California.

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