Adding Insult to Injury: California Cities Charging "Crash Tax" to Car Accident Victims

May 13, 2011

If you've never been in a car accident count perhaps you should count yourself lucky. Motor vehicle accident statistics suggest that one in four people will be involved in a car accident at least once during their lifetimes. If you are one of those four people already, you know the inconvenience that even a minor fender-bender can bring. Between police reports, conversations with insurance companies, body shop estimates and medical bills, being involved in a car accident is not a simple or cheap matter.

And expenses stemming from car accidents are not just limited to medical and insurance bills, but also can cost local communities who often send police, firefighters and other emergency responders to the crash scene. Local cities and municipalities usually pay for these expenses out of tax money, but an alarming trend started in California a few years ago when local governments facing budget crises started charging nonresident accident victims a fee for emergency services following a motor vehicle accident.

This "crash tax" basically resulted in drivers not only having to deal with an unfortunate car accident, but also having to re-live it once they received a bill. It may have also caused tourists to think twice before returning to the municipality that essentially charged them money for getting into a motor vehicle accident.

While, in most cases, the bills for accident response fees were simply passed onto motorists' insurance companies, cities found that the auto insurance companies did not make it easy to collect on the bills, often balking at paying the fee. And for some auto insurance companies, it simply meant that the costs were passed onto policyholders through increased premiums.

Slowly, California cities that have enacted crash taxes are starting to see that they are a bad idea. They not bringing the city the kind of revenue initially projected, and are also proving to be an administrative burden. Many fire departments and emergency personnel found that they spend increased time at the accident scene, filling out paperwork for insurance purposes. In the last few months alone, Roseville and Oceanside both overturned their local accident taxes. And Sacramento's recently passed crash tax was actually overturned before it was implemented.

Even though cities are starting to overturn these crash taxes, California does not have a statewide law restricting accident response fees. To this end, a northern California interest group, the Moderlode Taxpayers Association, has proposed that California enact a statewide ban on crash taxes. If California were to do so, it would follow Arizona (which banned accident response fees in April 2011) as the 13th state to limit crash taxes.

Article provided by Corsiglia McMahon & Allard, LLP
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