Insurer Group Sees Tennessee Legislation as Victory for Insured Drivers

April 4, 2008

Tennessee drivers scored a major legislative victory with the passage of a new law that stops cities from imposing hidden taxes on motorists, according to the Property Casualty Insurers Association of America.

The legislation (HB 2547) prohibits local governments from charging fees for responding to traffic accidents. These fees increase insurance costs for consumers when they are wrongly billed to insurers.

HB 2547 was passed by the Tennessee General Assembly and became effective with Gov. Bredesen’s signature on March 28. The law prohibits a local government entity or any person from assessing an accident response service fee on an insurance company, the driver or owner of a motor vehicle, or any other person for the response or investigation by a law enforcement agency of a motor vehicle accident.

“We commend Governor Bredesen and the Tennessee General Assembly for putting consumers in the driver’s seat,” said Robert Herlong, vice president and regional manager for PCI. “This new law will stop local governments from imposing a hidden double tax on consumers that ultimately increases the cost of auto insurance.”

As this issue continues to garner attention at the local level in many states, PCI is working with lawmakers across the country to ban fees for routine accident response services. Similar legislation has been signed into law in Pennsylvania, Missouri, and Indiana. Proposals are currently being heard in South Carolina, Florida and Georgia that would put an end to this practice of double taxation.

This has become an important debate for state legislatures as some third-party collection services have recently attempted to capitalize on the strong pressures many local governments face to balance their budgets without increasing taxes. Local officials are promised large windfalls if they enact a service fee charge back program when their police or fire departments are called upon to respond to an automobile accident. Insurers pay all appropriate bills and charges associated with an accident based on the language in the policyholder contract. However, the services provided by the local police and fire departments are already paid for through property and other local taxes.

“Public safety is a basic role of government and Tennessee residents should not have to pay twice for emergency response services,” said Herlong. “These accident response fees add unnecessary costs to insurance coverage that ultimately affect the premiums consumers pay. With this law, unsuspecting motorists in Tennessee will not have to worry about getting hit with these fees.”

Source: Property Casualty Insurers Association of America

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