Fire dept. service fees not covered by all insurers

FOR RELEASE:  April 24, 2009
Proposed Toledo Fire Department Service Fees Not Covered by All Insurers

COLUMBUS-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 take note.

According to an April survey by the Ohio Insurance Institute (OII), some insurance companies providing homeowners insurance to homeowners 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% of Ohio’s homeowners market, the OII study found that 41.4% 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% 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.

“Since many insurers don’t cover fire department service fees or limit coverage – typically to $500 – we believe the City of Toledo is unrealistic in its revenue expectations if they are planning to just bill insurance companies,” said Kelso. “Even for those carriers who provide some coverage, the $500 limit would preclude payment for many of the services outlined in Toledo’s ordinance proposal and its attached fee charge schedule.”

Local news reports also quote city officials on intentions to “soft bill” insurance companies solely.

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.

“What could be more devastating than losing your home, belongings and perhaps even loved ones to a fire and then be slapped with a bill for fire department service charges? Fire protection is a city service that local taxpayers expect and pay for through the city’s present city tax structure,” said Kelso.

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.

“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.

“We just want to make sure that local voters and city officials have all facts and weigh them cautiously before proceeding with such a consequential ordinance,” he said.

The Ohio Insurance Institute is a trade association representing insurance companies and agent groups for the property/casualty industry. Its main objective is to increase understanding of insurance and related safety issues.
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