Executive Summary
Fire departments in South Carolina, like fire departments across the nation are facing significant budget pressure due to a host of factors: declining tax receipts and property values exacerbated by increasing number of emergency responses and escalating apparatus and equipment cost.
Their choices are raise taxes, cut services or implement a fee for service, commonly referred to as cost recovery. Cost recovery allows fire departments to bill at-fault driver’s’ insurance for the fire department services they incur, i.e. the cost of responding to the accident.
In most states the governing body of the fire department must pass an ordinance or resolution authorizing the terms of the cost recovery program.
The three issues most often faced current and potential users of cost recovery are:
-Is it legal?
-Is it a form of double taxation?
-Will it cause insurance rates to rise?
IS IT LEGAL?
YES. Case law supports the principle that – where a fee is authorized by statute – issued pursuant to statutory prescription, and proportional to the cost of the service rendered, it has and will be upheld. South Carolina law gives political subdivisions the right (assuming they have passed an ordinance or resolution) to recover their fire department response costs.
IS IT DOUBLE TAXATION?
NO. Tax dollars pay for the infrastructure and ability of the fire department to respond, not the actual cost of the response.
If residents were given a choice between having the at- fault drivers, whose negligence caused the accident pay, or raising taxes on all to pay for emergency responses, the outcome would be clear.
WILL COST RECOVERY CAUSE INSURANCE PREMIUMS TO RISE?
NO. If a driver is negligent and causes an accident (speeding, running red light or stop signs, DUI)the drivers premium will go up whether the fire department sends his insurance company a bill or not.
Furthermore a typical cost recovery invoice is typically less than 3% of the total cost of a multi-vehicle accident, hardly enough to impact rates.