Crash Cost-recovery Fees Could Boost Premiums, Mich. Insurers Say

November 21, 2006

Insurers and municipalities in Michigan are squaring off over who should pay for rescue and cleanup crews and heavy equipment used in certain car crashes, and the result could be higher insurance rates for motorists.

The dispute centers over whether drivers who get into car accidents outside of their hometowns should have to pay more for the public services they receive. Local tax dollars were generally sufficient to cover the costs of accidents by nonresidents until about five years ago.

At least two dozen communities in Michigan now charge extra for police and fire services used by nonresidents, and the numbers may grow as cities become more strapped for cash. The Detroit suburbs of Utica and St. Clair Shores have both passed ordinances recently that would bill insurance companies of nonresidents an average of $400 to $800 when they have to send out firefighters or use heavy equipment such as the Jaws of Life.

Woodhaven Fire Chief Janet Sikes supports the practice. The community southwest of Detroit charges for safety services provided to nonresidents in car crashes, and Sikes estimates the fees have generated about $180,000 in the past four years.

“We have I-75 that runs through our city. Most of those accidents do not pertain to our city, and these outsiders are costing our city dollars,” Sikes told the Detroit Free Press for a Sunday story.

But insurance companies are balking at the extra costs and warn that if the trend persists, they’ll be forced to pass along rate increases to policyholders. And even some of the cities charging the extra fees question whether the paperwork and effort required to collect them is worth it given the small returns.

“I think a lot of municipalities are under the impression that these fees are covered under the policy, and generally they’re not,” said Lori Conarton, spokeswoman for the Insurance Institute of Michigan. Companies represented by the trade association already cover ambulance transport fees, but additional costs related to accidents could prompt providers to increase premiums, she said.

In St. Clair Shores, nonresidents will be billed only if they are involved in accidents along Interstate 94. Fire Chief Matt Kovalcik said the city has yet to collect on the first dozen claims it has filed. He said that over a two-month period, about 87 percent of the vehicles involved in accidents in the city belonged to nonresidents “who don’t pay any taxes.”

“Ultimately, we’re looking for someone to pay,” he said.

Was this article valuable?

Here are more articles you may enjoy.