‘Crash Tax’ Ban Advances in Alabama

Insurers are calling on Alabama Gov. Bob Riley to sign a bill blocking municipal and county governments from assessing fees when police and fire personnel respond to the scene of an accident.

Riley's signature would make Alabama the 10th state to bar the imposition of accident-response fees -- known to opponents as "crash taxes." States with bans in place are Arkansas, Florida, Georgia, Indiana, Louisiana, Missouri, Oklahoma, Pennsylvania and Tennessee.

The legislation. H.B. 306, passed the state House of Representatives 95-0 and the Senate in a 26-0 vote. While barring the establishment of most fees, it carves out exemptions for volunteer fire departments and rescue squads.

Municipalities in 26 states have imposed such fees, including those where fees are now banned, said Robert Passmore, senior director of claims at the Property Casualty Insurers Association of America. He said the practice is often encouraged by third-party vendors who promise significant returns in exchange for a percentage of what is collected.

"There are vendors out there driving this, selling this as a way ... to plug some budget holes," Passmore said.

Opponents of the practice say they are a form of double taxation for core, essential government services (BestWire, June 17, 2009). Such fees can encourage inappropriate behavior by first responders, Passmore said.

"There's nothing but a garden-variety fender-bender, and here comes a police car, a hook-and-ladder truck and fire engines," he said.

A handful of local governments in the state have adopted accident-response fees, Alabama Insurance Department spokesman Ragan Ingram said.

Some insurance companies pay the bills generated by these fees, but many do not. "A lot of this depends on what the individual policy offers," Passmore said.

The top five writers of private passenger automobile insurance in Alabama in 2008, according to BestLink, which provides online access to A.M. Best's Global Insurance & Banking Database, were: State Farm Group, with a 24.0% market share; Alfa Insurance Group, 17.6%; Allstate Insurance Group, 10.6%; Progressive Insurance Group, 6.5%; and Berkshire Hathaway Insurance Group, 6.1%.

(By Sean P. Carr, Washington Correspondent: [email protected])