You may find fire department service charge coverage as a sub-limit, or exclusion, in a homeowner’s property or auto insurance policy.
What is fire department service charge coverage you ask? Well, imagine the fire department putting out a house fire or vehicle fire and then sending you a bill…
What's A Fire Department Service Charge?
No one likes to imagine the situation… You’ve been in a house fire or a car accident.
Luckily, the fire department arrives…! They put out the house fire or vehicle fire, or use the jaws of life to extricate you from a vehicle.
Hopefully no one is injured and everyone is OK…
But the house fire or car accident causes not only the loss of cherished personal physical property, but also pain, suffering and a major disruption in your life.
Imagine receiving a bill from the fire department after the emergency for thousands of dollars asking you to pay for their service.
You could owe thousands or even tens of thousands for fire department personnel, the water that was used, the hourly use of the fire trucks, etc.
Imagine getting this bill and then finding out that it is not covered by your insurance.
Municipal Finances Under Pressure
Municipalities are increasingly finding their financials in tatters.
The promises of politicians, intending to make prudent tax collections – while responsibly managing expenses – have strayed far from the mark.
Meanwhile, inflation is the highest it’s been in decades and no relief is on the horizon for spiraling cost of everything.
Our taxes pay for services including the local fire and police departments. And volunteer fire departments exist as a public benefit, staffed by individuals who just want to help their communities in need.
However, in some cases, to avoid filing Chapter 9 bankruptcy, cities and towns are looking for incremental revenue streams to help pay for the services that they provide.
If your tax dollars do not go as far as planned, you could find yourself with a bill for thousands or tens of thousands of dollars for emergency service in a time of need.
Fire department service charge coverage may be a sub-limited coverage, a partial exclusion, in the property portion of your homeowner’s insurance or an auto insurance policy.
Look in your homeowners or auto policy to find:
- If a fire department service charge line item is there…
- How much it is.
It’s less common in auto insurance but on the property side, you may see an exclusion or a sub-limited amount for a $1,000 or $2,500 limit for a fire department service charge.
Will Fire Department Service Charge Coverage Include Electric Vehicle Fires?
Lithium-ion batteries are being rapidly adopted for many consumer applications because they are versatile, energy dense and increasingly affordable.
Researchers estimate that EVs may catch fire less often than internal combustion engine (ICE) vehicles.
However, should a large lithium-ion battery of an electric vehicle, appliance, tool or home energy storage system – fail or be physically damaged, the pressurized, flammable electrolyte it contains could ignite or explode.
The requirements to put out an EV fire can be significant… And if a lithium-ion battery is on fire, or in thermal runaway, it can burn for days.
This diverts resources1 from the fire department and EV fires may require 100X as much water as it would take to put out a normal fire or one from an internal combustion engine.
Recently in my area of Fairfield County, Connecticut, it took the fire department 25,000 gallons of water to put out a Tesla vehicle fire.
25,000 gallons of water is roughly equivalent to the amount of water that a family of four uses on average in a two month period.
There is no free lunch… All that water, and the money to pay for it, has to come from somewhere.
Not only do battery manufacturers need battery energy storage insurance, but EV fleet insurance buyers should be aware of fire department service charges in their policies.
Battery manufacturers should also be aware of the downstream fire risks associated with recycling lithium-ion batteries at non-owned disposal sites and recycling centers.
If the money does not come from the fire department, the town may look to the insurance company. If the insurance company fails to pay, the fire department will look to you, or you may see an increase in your taxes or find yourself in collections for something you never expected.
For Tesla owners, while Tesla Insurance not available in every state, buying insurance directly from Tesla may be the best option for some people over the long term.
Summary
Insurance companies must maintain profitability or they will exclude risks that are expensive or unprofitable.
Otherwise, they will increase premiums.
As such, you may find a clause in your insurance policy limiting fire department service charge coverage.
If municipalities fail to manage their finances or other public service cost pressures increase, you could see these fire departments start to charge these fees more often.
Insurance companies are taking note of the risks associated with lithium-ion battery fires… And the risk to EV owners seems particularly acute.2
The U.S. Department of Transportation (DOT) regulates the transporting of lithium-ion batteries as a hazardous material and proper disposal is critical to avoid a fire.
In the future, insurance carriers could add a line item added to policies or an exclusion or a sub-limited amount for fire department service charge coverage.
Check your insurance policy for a fire department service charge and inquire whether your town charges for the fire department to come out.
Thanks for reading and if you have questions about business insurance for an EV fleet, renewable energy or climate tech business, please feel free to schedule an appointment with me today.
Footnotes
- Damage from hurricane Ian recently highlighted the risk of EV fires from exposure to salt water. Insurance premiums are already under pressure from flood and property insurance companies, now fire department resources are tending to EV fires in parts of Florida damaged by the storm.
- Insurance company AXA recently staged an EV fire using a Tesla, however the Tesla's lithium-ion battery had been removed purposely. AXA admitted using pyrotechnics to cause the blaze. This understandably led to criticism because of how easily the EV appeared to catch fire.
