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Rear-ended by the “crash tax”

By Jay MacDonald · Bankrate.com
Friday, September 10, 2010
Posted: 7 am ET

It's an increasingly common scenario around the country: a driver causes an accident, their auto insurance pays the claim, and weeks later, the motorist receives a bill for hundreds, perhaps thousands of dollars for local emergency police and fire responders called to the scene.

An accident response fee, nicknamed the "crash tax" by irate auto insurance customers who've been blindsided by one, is an extra fee charged by jurisdictions to at-fault drivers for a variety of emergency response services, from jaws-of-life vehicle extraction and hazardous materials cleanup to traffic direction.

As cash-strapped counties and municipalities search for ways to keep their flashing lights on (see also my recent blog on traffic cameras), some have hired third-party collection agencies to harvest these accident response fees. Where you reside may determine whether you receive a bill, as some jurisdictions exclusively target out-of-town or out-of-state at-fault drivers.

Although accident response fees are typically billed to the at-fault driver's auto insurance company, many insurers decline to pay them. Some insurers maintain that local taxes already provide for those public services; others say they cannot legally pay for services not covered under the driver's policy. The auto insurance industry claims that paying such fees would ultimately result in higher rates for all drivers.

The "crash tax" has sparked its own version of road rage as irate citizens, consumer groups and auto insurance associations put the heat on city councils and state legislatures to end the practice.

According to AccidentResponseFees.com, a Web site operated by the Ohio Insurance Institute trade group, 10 states have banned accident response fees to date: Alabama, Arkansas, Florida, Georgia, Indiana, Louisiana, Missouri, Oklahoma, Pennsylvania and Tennessee. The site offers sound advice on what to do should you receive an accident response bill. Short of moving to one of the above-mentioned states, of course.

Have you ever been rear-ended by the "crash tax"? Did you and/or your auto insurance company pay or fight it? I’d love to share the details with readers who might not see it coming!

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3 Comments
Lana Jones
September 29, 2010 at 4:19 pm

I don't think my taxes should be used for at-fault drivers or the reporting needed by their insurance. A user fee is fair and far more reasonable than raising taxes. I see this similar to EMS billing...which eventually the federal government forced health insurance companies to make payment on those claims. Perhaps the feds should step in again.

Kay Bell
September 10, 2010 at 11:50 am

Jay, I think these fees stink, as I discussed in my Sept. 1 Bankrate Taxes Blog post, "Drivers, look out for crash taxes."