In an effort to raise revenue during trying economic times, some municipalities have turned to the practice of billing insurance companies for emergency services rendered to insureds at the scenes of motor vehicle accidents and fires. The municipalities typically employ private billing companies which send invoices directly to insurance companies seeking reimbursement for costs associated with emergency services such as clean-up costs and costs for materials and equipment. Generally, the invoices are vague and do not contain a detailed description of the reasons for the charges. Moreover, the invoices are usually sent directly to the insurance company rather than to the insured. Insurers should be wary of paying such charges without investigating and confirming their obligation to do so.
Although the issue has not been extensively litigated, several cases suggest that insurers may not be obligated to pay emergency service charges under certain circumstances. In Safe Auto Ins. Co. v. Berlin, 991 A.2d 327 (Pa. Super. Mar. 5, 2010), for example, the court affirmed the trial court’s entry of a declaratory judgment in favor of the insurer, Safe Auto, determining that Safe Auto had no obligation to reimburse a volunteer firefighting company for the cost of an emergency rescue conducted on behalf of the insured. There, the insured’s car skidded off the road, requiring emergency rescue. During the course of the rescue, the fire company used emergency equipment and supplies, including eight flares, two hand lights, one generator, one set of cribbing and a hose truck. One week after the rescue, the fire company attempted, through a third-party billing service, to obtain reimbursement of $1,194 from Safe Auto, billing the insurer for coverage under the insured’s automobile policy. Shortly thereafter, Safe Auto commenced a declaratory judgment action against its insured and the fire company.
The trial court granted summary judgment in favor of the insurer, and the appellate court affirmed. The court agreed with the insurer that the fire company’s use of emergency equipment and supplies to respond to the scene of an accident did not constitute “property damage”, “loss”, or “consequential damages” within the meaning of the insurance policy. “In fact, they are not losses or damages at all, but rather costs associated with rendering emergency services . . . . [A]lthough [the fire company] provided a valuable public service in this instance, that fact—although commendable—does not permit this [c]ourt to torture the contractual definitions to allow it to recover under the policy.” Id. at 333.
In Emergency Services Billing Corp., Inc. v. Allstate Ins. Co., 2010 U.S. Dist. LEXIS 26327 (N.D. Ind. Mar. 19, 2010), a billing company brought suit under federal law, 42 U.S.C. §§ 9601, et seq. (“CERCLA”), rather than state law, alleging that it was entitled to collect payment on behalf of a volunteer fire department for the removal of hazardous substances released by motor vehicles which were involved in accidents. Specifically, the billing company sought to recover payments from the drivers involved in the motor vehicle accidents and from the insurers of the involved drivers. The court began its analysis by noting that “CERCLA imposes liability for ‘response costs’ (the costs of eliminating an environmental hazard) on the ‘owner and operator of a . . . facility’ from which a hazardous substance has been released.” Id. at *8. Thus, the question before the court was whether the motor vehicles involved in the accidents constituted “facilities”, which CERCLA broadly defines to include “motor vehicles”. Id. at *10. However, the statutory definition of “facility” specifically excludes “any consumer product in consumer use”. Id. In granting judgment on the pleadings in favor of the insurers, the court held that the term “‘consumer product in consumer use’ refers to its ordinary meaning, which includes the private passenger motor vehicles specifically at issue in this case being used for personal purposes.” Id. at *24. Because the vehicles did not meet the statutory definition of “facility”, CERCLA did not authorize the recovery of emergency response costs.
Under certain circumstances, such as where the insured is at fault for a motor vehicle accident and fluid is spilled onto the roadway which may potentially damage the roadway, the insured’s liability coverage may apply. However, even if a claim for clean-up is payable under a policy’s liability coverage because the insured is at fault for the accident and because the potential for property damage exists, the charge for that clean-up should be invoiced to the insured rather than to the insurer. See Povroznik v. Rivercliff Fuel, Inc., 2001 Conn. Super. LEXIS 2987 (Conn. Super. Oct. 10, 2001). In addition, the invoice should detail the extent and nature of the clean-up and costs.
As municipalities continue to tighten their belts, the practice of charging insurance companies for emergency services will undoubtedly become a more common practice. Before paying those charges, however, insurers should confirm their obligation to do so. Specifically, at the outset, they should determine whether the municipality is authorized by local ordinance or by statute to charge for emergency services. As a creation of the State, a municipality “possesses only such powers that have been expressly granted to it by the state or that are necessary to discharge its duties and to carry out its objectives and purposes.” Blue Sky Bar, Inc. v. Town of Stratford, 203 Conn. 14, 19 (1987). Insurers should also analyze the invoice to determine whether it provides a proper description of the charges and whether it was issued directly to the insurance company in contravention of Povroznik, supra. Furthermore, insurers should review the policy language itself to determine whether there is any contractual basis to issue payment.