Ohio Insurer Group: Proposed Fire Service Fees Not Always Covered

May 8, 2009

The Ohio Insurance Institute (OII) says the City of Toledo, and other cities and municipalities considering an additional revenue stream by charging insurers for fire department service runs to local residences should be aware that some personal lines insurers exclude such fees in their policies.

According to an April survey by the OII, some insurance companies providing homeowners insurance exclude this coverage when responding to a fire within the local municipality, city or jurisdiction.

“What this means is that the Toledo Fire Department cannot expect to collect all of the fees outlined in its proposed ordinance and in some cases will collect only a fraction of the fees that are billed to insurance companies for responding to local residential fires,” said OII President Daniel J. Kelso.

Based on responses of 32 insurance carriers representing 92.8 percent of Ohio’s homeowners market, the OII study found that 41.4 percent of insurance companies (based on market share of respondents) do not provide this coverage for fire departments when servicing local residential fires.

These companies use policy language similar to that found in the standard Insurance Services Office (ISO) homeowners policy form that is typically found in the “Additional Coverages” section of the policy.

The ISO language states:

“Fire Department Service Charge

We will pay up to $500 for your liability assumed by contract or agreement for fire department charges incurred when the fire department is called to save or protect covered property from a Peril Insured Against. We do not cover fire department service charges if the property is located within the limits of the city, municipality or protection district furnishing the fire department response. This coverage is additional insurance. No deductible applies to this coverage.”

For an extra premium, some insurance companies offer homeowners policy endorsements that increase coverage limits and/or remove the intra-city exclusion clause.

“It’s also important to note that companies (representing 51.4 percent of homeowners market) providing limited coverage for fire department service runs do so up to stated amounts, typically $500,” said Kelso. “Additionally, the coverage is limited to perils outlined in the homeowners policy and excludes intentional acts such as arson.”

OII conducted its survey to clarify that this is not universally covered by all homeowners insurance policies and to make city officials aware of potential shortfalls as a revenue generator. According to local reports, Toledo expects to generate $500,000 by charging insurers for residential fire department service runs.

In its review of Toledo ordinance proposal 222-09, Emergency Rescue Billing Fire and Rescue, OII found a statement that would impose fees on local residents. Section 6 of the ordinance as written states:

“Recipients of the services of the Toledo Fire Department shall be invoiced directly under the terms of this ordinance if they do not carry insurance sufficient to cover the impact to the City of Toledo’s loss of capital or material.”

According to the OII, regardless of intentions to not bill local residents, the Toledo ordinance language clearly provides that the city can bill residents for any charges not covered by an insurance policy.

In addition to property taxes for police and fire protection, Toledo residents approved the renewal of a 0.75-percent payroll tax in 2008 for additional funding to police, fire and other safety departments, the OII said.

“Toledo citizens should be concerned that local government considers its vital and necessary public safety services as a source for generating revenue. They already pay their fair share of taxes to ensure this protection,” said the OII president.

Source: Ohio Insurance Institute, www.ohioinsurance.org/

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