Insurance Institute of Indiana Brings Halt to Municipal Accident Report Surcharge

January 17, 2005

The Insurance Institute of Indiana has received word the city of Mount Vernon, Indiana has agreed to indefinitely table a proposed ordinance calling for a surcharge, on insurers of “at fault” drivers, for accident investigations by city police officers. City attorney, Scott Funkhauser informed the Institute of the city council’s decision.

The Institute first became aware of the proposed ordinance in early December. On Dec. 27, Institute Assistant Vice President of Government Affairs, Mike Chrysler, testified before the Mount Vernon City Council to ask for reconsideration of the proposal. He suggested the ordinance would be in violation of Indiana’s premium tax statute prohibiting municipalities from imposing any license fee or tax upon an insurance company.

At the meeting, Funkhauser maintained his initial interpretation that the ordinance was not in violation of the statute. However, the council agreed to give the Institute time to provide further arguments.

The defense firm of Riley, Bennett & Egloff LLP agreed to volunteer their service to assist in deflecting the proposal. Attorney Mark McKinzie drafted and provided a response to the proposal, outlining the unconstitutionality of the ordinance.

McKinzie noted the following regarding the proposed ordinance:

Specifically, the proposal is:

• unconstitutional because it allows a law enforcement officer to make an administrative adjudication, which usurps the role of the judicial process and which results in the taking of property (i.e., money), without due process of law (in Indiana constitutional terms, “due course of law”);
• void and unenforceable because passing this ordinance would constitute an unauthorized, ultra vires act of Mt. Vernon’s City Council;
• arbitrary and capricious because of a lack of a rational basis for the proposed remedy advanced by the ordinance and the fiscal problem faced by the City of Mt. Vernon; and
• contrary to public policy, because it provides for the arbitrary assessment of a fee for the services of a public servant who voluntarily undertakes an automobile accident investigation and unilaterally decides to what extent or degree the investigation is carried out.

On Monday, Jan. 17, McKinzie received word from Funkhauser that he agreed with the statements and that the council tabled the ordinance indefinitely.

Institute President Stephen Williams said the outcome was critical because such an ordinance could have set a bad precedent for other municipalities.

“As various municipalities struggle with budget problems, they are searching for any means to obtain fiscal relief for the services they must provide,” Williams said. “However, this is one area where cities and towns have no legal basis to assess fees.

“We know other municipalities have considered looking at these very type of surcharges,” Williams continued. “Therefore, we will make sure the association representing Indiana cities and towns understand why such a proposal should not be pursued.”

Indiana municipalities are represented by the Association of Cities and Towns. The Institute will be providing the association with a copy of the response crafted by Riley, Bennett & Egloff.

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