Response: Accident Victims Increasingly Being Hit Again -- With 'Crash Taxes
The follow story is a response to a Fox News article published Sept. 7, 2010. Our response is in blue.
By Ed Barnes
Cary Feldman was astride his motor scooter, three cars back at a stoplight in Chicago Heights, Ill., last June when a car bumped him from behind. “It was nothing,” the 71-year old said. “I fell off and got right back up. As I was getting up I noticed a fire truck slow, look at me, and pull away. It never stopped and I didn’t think anything of it.”
Fox News was extremely selective in choosing this case to “report”. Mr. Feldman’s case is the exception, not the rule. The following are actual facts*: 99.99% of the accidents have fatal, incapacitating injuries, non-incapacitating injuries and potential of fire needing assistance. Of the 6,397,000 crashes, fire departments (which 73% are volunteer departments relying on chicken dinners, donations and $75 annual resident fees to survive) respond to 1,663,280 crashes. However, 42,398 are fatal, 355,548 have incapacitating injuries, 917,593 have injuries and 347,741 property damage accidents that have the potential of fire or possible injuries.
*Source(s): National Highway Traffic Safety Administration, Insurance Information Institute, International Association of Fire Chief’s and EMS Section IAFC
But five months later, Feldman received a bill for $200, to cover the cost of the fire truck showing up at the scene of his accident. For months, he argued the charge with the fire department while he fought with his and the other driver’s insurance companies to pay it.
This particular case was not our client, nor do we have specific detail regarding this incident. However, if indeed, Mr. Feldman was not guilty of negligence and not at-fault in the incident he should absolutely not have been billed. If there was a reporting error, then Mr. Feldman should be refunded.
He gave up when a collection agency called. "There was no way to fight it. No court to appeal to," he complained. "It was extortion."
Assessing a “user-fee” does not preclude any person from due process when they believe they are not at fault.
Feldman paid the bill, but he is still angry. "They are despicable thieves,” he says.
Cost Recovery Corp. (CRC) does not support the notion of billing or assessing a fee to everyone involved in a traffic crash. Only the at-fault party and their insurance should be responsible for reimbursing the community for services provided to them because of their negligence.
As local governments strain against declining revenues, many have turned to a controversial –
and legally dubious -- way to raise money.
It is not simply the shrinking tax base perpetuating the need. Keep in mind that originally taxes and budgets were based on core services. This was prior to the increase in population, increase in service demands, increased insurance investigation and increased insurance reporting. Furthermore, this program has attracted attention simply because it is “new”. It has become controversial largely due to the lobbying by the insurance industry. The lobbying is done in order to protect their double profits…meaning they receive mandated premiums while expecting taxpayers to subsidize for their required investigation and reporting costs, as well as, their client’s negligence. Additionally, most media coverage has been from the insurance industry’s perspective,providing more entertainment than education, thus misleading citizens. We are working to focus on the message, not the messengers. In order to do that the vendors (billing companies and insurance companies) should not be the story. Safety service providers and the dangerous cuts to public safety should be the focus!
Local governments must pass an ordinance or resolution in order to begin recovering their expended costs. The rhetoric in calling this service “legally dubious” is an attempt to malign Safety Services in recovering for services rendered to an entity that has been receiving these services free for years.
Every time a local public safety service (police, fire, ambulance, hazmat) responds to an emergency call, a bill gets sent to the person who receives aid. In most places, only non-residents get a bill; but in others, everyone does. And in a few places, only those found to be at fault are billed.
Obviously municipalities must be careful to implement a forthright, integrity-based program which charges actual costs as opposed to flat or tiered rates and only charge the at-fault party. Cost Recovery Corp.’s program mirrors exactly what the Federal Government and Office of Inspector General has in place as it relates to EMS billing protocol.
The idea is to make up for lost tax revenues by turning municipal workers into on-call contractors. But as often as not, these taxpayer-paid public servants wind up adding to the grief of accident victims by charging for their services at the scene.
The fact of the matter is that the insurance industry had turned police officers and firefighters into “on-call” contractors for their own disposal decades ago. While insurance enjoys legally mandated premiums, they balk at the idea of reimbursing these “on-call” safety service providers, the taxpayers or the community that is tasked with servicing their negligent policy holder.
The bills can be huge. A simple response to an accident usually costs just less than $500, but the bottom line can quickly soar. In Florida, if a fire chief shows up at your accident, it'll cost you an extra $200 an hour. Need a Jaws of Life rescue in Sacramento, Calif.? Add $1,875. In Chico, Calif., going into a ditch could cost as much as your car, because a complex rescue goes for $2,000 an hour, plus $50 per hour for each rescue worker. And if there is gas or oil to clean up, the hazmat team will bill another $100 per hour per team member. In San Francisco an ambulance ride will cost $1,642 under a new proposal there. A Pennsylvania man recently complained that his bill for an accident on his motorcycle included charges for “mops and brooms.”
On behalf of our clients,Cost Recovery Corp. charges actual cost of providing the service.
Though variations of the plan have been around for a long time, the recession has given it new life. More than 40 towns and cities in California alone are currently considering adopting crash tax measures, according to Property Casualty Insurers Association of America. And 33 other states have begun adopting or studying accident response fees, according to Mary Bonelli of the Ohio Insurance Institute, who has studied the growth of the accident fee industry for the past seven years. That is a 600 percent increase from when she began looking at the industry six years ago.
While the popularity of "crash taxes" is rapidly growing in cash-starved city council chambers, the fees have sparked strenuous opposition from insurance companies, small businessmen, tourism associations and outraged citizens, who see the bills as a double tax.
Again, a “crash tax” is what we have without recovering costs. Recovering costs is not a double tax, however does prevent insurance from receiving double profits.
Many also see an unholy alliance between local governments and the chief backers of the practice: debt collection companies, who they say often try to collect on debts in a heavy-handed and threatening manner -- even though most of the enabling statutes involving accident fees make them uncollectible from all but insurance companies.
The aggressive or non-aggressive posturing is unique to each municipality. An ordinance is a law and absolutely enforceable. The language in an ordinance is important and should allow for collection from Insurance carriers or the responsible negligent party.
According to Bonelli, the current surge of interest started “six or seven years ago,” when an Ohio bill collection company, Cost Recovery Corporation, began approaching government agencies with a “one-stop shopping plan" that would generate a great stream of income at no cost by billing out-of-town accident victims. Their take: 10 percent.
Actually in 1999, Dr. Terry Henley, Founder of Cost Recovery Corp., was approached by Chief Joe Schutte from Hamilton Ohio. Hamilton was preparing to close one of its fire stations, which would have resulted in double the response time in that part of the community and endangered citizens living in that neighborhood. Shortly thereafter, Dr. Henley was contacted by the City of Fairborn, Ohio whose budget was frozen. They were attempting to operate with a 30 year old ladder truck that would continually break down, placing both the firefighters’ and citizens’ safety at risk. There was a serious need at that time and the need is rapidly growing. Cost Recovery Corp. is simply responding to the current safety concerns that communities across the Country are experiencing.
Today dozens of companies are competing for business in places like Tempe, Ariz.; Quincy Mass, and Huntington Beach, Calif.
Cost Recovery Corp. encourages municipalities to research companies carefully. Cost Recovery Corp. uses actual cost studies for any requested pricing, which demonstrates our superiority and why we are referred to as the national leader in traffic crash billing. Many EMS billing companies attempt to bill for these services, but EMS health Insurance billing has no similarity to the rigors of crash billing to Property and Casualty insurance companies. EMS billing is electronic and all health insurance companies pay. The Property and Casualty Insurance system is an archaic manual payer system that requires extensive follow-up by the billing companies and payments are spaced out over several months or longer, with some payers refusing to pay.
“They would come into a town and promise to do everything," Bonelli explained. "It was free money. The collection companies would do a simple calculation that promised thousands of dollars a year in extra revenue.”
The integrity of our program is priority one. The fact is that Cost Recovery Corp. spends a great deal of time educating community leaders so that if they are going to implement a cost recovery program, it is done appropriately to avoid charging arbitrary rates and innocent victims. Regardless of the company a community chooses to do their billing, we at Cost Recovery Corp. want them to understand the ethical process needed to recover costs to assist the community, not detract from it.
But there's a catch, Bonelli said: Most of that money does not get collected. Insurance companies refuse to pay the bills, claiming the charges aren't a covered expense. That means the bill winds up in the driver's hands -- and that, Bonelli says, is where the practice goes from repugnant to indefensible.
Many insurance companies are paying these claims in full. Either they are interested in internal market competition, or they truly recognize the cost benefit of this program to themselves and their policyholders. The practice of collecting legally mandated premiums and denying coverage based on vague policy language of such claims is indeed repugnant. The insurance industry’s posturing to deny supplementing for services their negligent policyholder receives is indefensible. Cost Recovery Corp. encourages consumers to shop for insurance that recognizes the value of this program, the value of Safety Services’ work to keep all citizens safe, Safety Services’ work that aids insurances’ adjudication of claims, and the value of you, as a consumer.
Drivers do not realize that they almost never have to pay the bills, she said, because most ordinances that create these programs do not provide for the collection of fees from drivers. The ordinances provide for billing the insurance companies only -- but collection agencies, after getting rejection letters from insurance companies, pursue the drivers anyway. They are allowed to ask, but drivers generally do not have to pay. It is called "soft billing," and it is not legally enforceable.
Many states have very clear Home Rule Laws in which an ordinance is a law. Each municipality may choose if, when and whatever legal method they wish to implement in order to collect from delinquent claims.
“If you get a bill, ask to see the ordinance and see if there is a 'soft billing' provision," Bonelli said. "If there is, you can throw the bill out.”
Ms. Bonelli should be careful in providing such broad legal advice without reviewing each ordinance herself.
The “soft billing” concept only applies to the at-fault party if you are a resident in which the crash occurred. Specifically, it means that the resident is exempt from any out of pocket cost not covered by insurance.
As an example, she cited the case of Stow, Ohio, which implemented crash taxes in 2006 after being told by a billing company that it would generate $95,000 a year in fees for police personnel and equipment. After a few months, she said, the city had collected only $3,000. And virtually all of it came from drivers, not from insurance companies.
Ms. Bonelli’s “reporting” is slanted and misleading. The fact is that Stow’s City Leaders fell victim to insurance lobbying and political pandering. Cost Recovery Corp. relays to each potential client the need for a three-month ramp up period in order to begin gathering insurance and billing data, prepping and sending claims. Stow began the billing program with Cost Recovery Corp., but halted the process after just five months due to the insurance companies’ backlash and media pressure. Because of the initial time it takes to get the Client’s billing established and the short amount of time Stow stayed with the program, Cost Recovery Corp. had approximately two full months of data flow and billing. Based on the amount of billings sent during that entire five-month period, the annual total that could have been billed would have amounted to approximately $50,000. The original projections by CRC were based on figures provided by city. The end result obviously would have been affected if those figures were significantly less than expected. When Stow was pressured into discontinuing the recovery program and made statements in the media alluding to that, it immediately halted CRC’s ability to perform. Based on the circumstances, billing volume, and time allowance, Cost Recovery stands by its performance levels. This was truly a loss for the citizens of Stow and a victory for insurance.
Swamped with citizen complaints and saying she was misled, Mayor Karen Fritschel canceled the program and refunded all the money the city had collected.
Mayor Fritschel had all of the facts presented honestly and accurately and was not only supportive, but completely on board with this program. However, the Mayor was not prepared for questioning by the media and simply opted out of the program due to political pressure not practical reasoning.
Backlash against the practice is building, as many communities lured by easy cash back out of the deals. Last year Radcliff, Ky., dropped the program after finding most insurance companies refused to pay the bills and harassed drivers complained and took legal action. By the time it was closed down, the city had actually lost money on the project.
The backlash is initiated by the insurance industry. The National Association of Mutual Insurance Companies (NAMIC) sends out Action Alerts instructing agents on how to write to city officials and complain to the media in an effort to intimidate community leaders from moving forward.
The City of Radcliff had an ordinance in place, allowing for the recovery of costs for their Safety Services’ department. There is no knowledge of legal action against Radcliff, Ky. There is serious question, however, of how the city could lose money on a project that they were never charged a fee.
In Cleveland, Ohio, the fire department has been accused of sending its biggest trucks to fender benders to increase fees.
We are not aware of the situation in Cleveland. Larger cities have large liability costs and often send specific equipment simply as a standard operating procedure.
And in April, Alabama became the 10th state to outlaw the practice completely.
Most states have only banned the billing of law enforcement, not fire services. Furthermore, those that have are not making the decision based on what is best for their citizens or their public safety. They are lobbied by big insurance, which provides another financial bailout for the insurance industry, forcing innocent taxpayers to continue subsidizing insurance investigation and insurance reporting. Meanwhile, insurance continues to collect legally mandated premiums and enjoy double profits!
But Regina Moore of Cost Recovery Corporation, which handled Stow, says the fee system is a public service that will benefit everyone because it allows tax dollars to be used more effectively and increases the proficiency of emergency services. She says the fees allow communities to decrease response time in emergencies and help a public sector that is being decimated by budget cuts.
She said, for example, that in Live Oak, Fla., the fees enabled the town to buy a new fire truck and cut response time in emergencies.
Fox News neglected to mention the fact that the purchased ladder truck afforded every Live Oak, Florida citizen a 15% discount on their Home Owners Insurance premiums. Why? Because a well-equipped, well-staffed, well-trained, well-funded safety service department equates to a safer community, thus minimizing insurance liability costs.
“Even if I wasn’t in the business I would still be supporting the fees because it is a public safety issue above all else,” she said.
Critics say they don't dispute that more money helps police and fire departments, they say the argument is over how the money is raised.
It is not a matter or “more” money. The tax dollars have already been spent, tending to the negligence of someone that caused a crash. The replenishing of those tax dollars to the budget allows for effective protection of the entire community.
The “critics’solution” to this problem is raising taxes on ALL innocent citizens, which ultimately protects the insurance industry’s record profits. Cost Recovery Corp. believes that taxpayers deserve the financial relief and a safer community.