(July 2020)
Homeowners policies provide some coverage for the expense of
fire department response in rural areas. Policyholders who live outside the
boundaries of a fire protection district have a valuable asset in the fire
department service charge clause included in their property insurance. The
rationale for the coverage is simple. It is urban residents who, through their
tax dollars, support fire departments. The use of firefighters and equipment is
costly and when that protection is extended for outlying runs, the expense should
be handled without furthering burdening local taxpayers.
It is justifiable that a fire department service charge is
recognized as an insurance obligation. Professional firefighters with sophisticated
modern equipment are the best guarantee that damage from a hostile fire will be
held to a minimum. It is important to know what qualifies for payment under a
fire department service charge clause. The provisions are clear and similar in
ISO and AAIS homeowners forms. They can be summarized as follows:
The insurer will pay charges up to
$500 (or other specified amount) toward the cost for a city, municipality or
district furnishing fire-fighting
service to insured property located beyond
that responding unit’s limits.
The coverage also requires that
the insured has a contract or agreement with the fire department to pay a
service charge when the fire department is called.
It also is a condition that the insurance policy will pay
charges only for calls to save or protect property from a covered peril.
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Example: Tom
Outlander lives a mile outside the city limits. He makes a call to the
Inlander Fire Department for the following: |
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A grease-filled pan fell over and his kitchen is on fire |
Accompanying service charge qualifies |
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A gas explosion occurs in his garage |
Accompanying service charge qualifies |
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His family’s dog tumbled down an abandoned well. |
Accompanying service charge does NOT qualify |
This is additional insurance and there is no deductible.
Property owners in rural areas who are without fire
department facilities should make certain that they are included by the nearest
fire protection district on its list of those who have contracted for service
outside the district boundaries. Special records are made of the location of
such property so that an emergency call will bring immediate response.
Agents should be familiar with local arrangements for making
runs to outlying areas in order to share the information with property owners.
Perhaps the building contractor, real estate developer or local authority has
made certain that a particular fire district will service the outlying
property. Nevertheless, the property owner or insurance representative should
verify that this is the case, and that the location is known to the fire
department.
Fire districts generally have reciprocal agreements with
neighboring districts. This is important to small-town or rural area
firefighters whose equipment is limited. However, payment made under the fire
department charge clause would be limited to the department with which the
property owner has an agreement. Cooperating officials generally have a
reimbursement or other-expense handling arrangement in place.
Increasingly, more cities and towns have budgets that are
being stressed by a poor economy. Many local governments are looking for ways
to supplement cuts necessitated by reduced property tax flows. One answer has
been to charge for emergency responses. Depending upon circumstances, amounts
range from the modest to the extreme. Some fire departments are even using
third party billing and collection services to pursue payment. This is becoming
a problem where responsible homeowners pay premiums for insurance protection
and taxes for city services are caught in a financial snare: having to pay an
additional, unanticipated expense.
Governments that decide to use fees point out that taxes may
be inadequate to handle the high cost of paying for labor, training and the
purchase and maintenance of very expensive equipment. Some claim that,
regardless the amount, it should be a cost that could be handled by insurance
companies. Insurers point out that fire department services within fire
districts should be a part of basic services handled by taxes. Such costs are
not contemplated by insurance premiums and, if forced to pay, would mean
premium increases or reduced coverage.
Related Article: Rescue Costs, Not Property Damage
- Although this concerns an automobile policy, it demonstrates the issue of
public entities claiming reimbursement for services.
The coverage provided by the Fire Department Charge
provision, as it currently stands, is of no help in this situation. It is not
written to respond to fees levied by property owners that live within a
reporting fire district. Further, the amount of coverage is too low to handle
fees that are typically being charged. If this situation continues, insurance
companies may need to consider various options such as:
In any event, this is a new area of concern for both
insurance professionals and their policyholders.