MACEDONIA: The city, in an effort to raise more revenue, contracted last year with a collection agency to charge some drivers for the cost of Macedonia safety forces responding to a crash.
City officials said they entered the agreement with the understanding that Cost Recovery Corp. would collect an administration fee — anywhere from 9 to 33 percent — from the total bill. The agreement, however, never put a limit on the collection agency’s take.
A Beacon Journal comparison of available bills received by traffic offenders or their insurance companies with Cost Recovery’s billing statements to Macedonia shows the company in many cases is seeking the maximum.
However, the Dayton-area company is balking at providing records to the city showing how much they collected in total and how much they are keeping for administrative fees.
The contract with Cost Recovery had the approval of Macedonia’s law director, whose firm reviewed the paperwork for the city. But the law director, after the contract’s approval, also was paid by Cost Recovery to prepare a legal opinion that says Ohio municipalities have the authority to charge at-fault, out-of-town drivers for a safety worker’s time as well as the use of a city police cruiser or fire truck.
So far, Macedonia has collected about $20,000 for police and fire fees.
Mayor Don Kuchta said he was unaware of the company’s fees until contacted by the Beacon Journal, and he pledged to have his finance department examine Cost Recovery’s stake in the program. So far, the company is hedging.
“We get paid and we’re done and we’re not really being made aware that there were any excessive charges. Are there charges? Yes. Are they excessive? I have no idea. I can’t tell you,” Kuchta said. “I think we should start asking some questions.”
Nonetheless, Kuchta and Law Director Joseph Diemert say the restitution program — banned or restricted in some states — is financially prudent during the city’s tough economic times and if anyone is to blame for the costs, it’s insurance companies who refuse to pay up.
Macedonia’s financial woes mean nothing to Louisville resident Tom Bressi. He’s been battling the city and its billing partner since his first bill for $366.05 arrived in January.
After losing control of his employer’s truck on an icy patch of Interstate 271 on Dec. 7 and striking a guardrail, Bressi was cited and appeared in Macedonia Mayor’s Court.
He pleaded no contest three weeks later to an equipment failure charge and paid $214 in fines and court costs. He thought that was that.
A month later, though, he received a bill from Cost Recovery demanding restitution to the city for the use of the police officer who responded to the one-vehicle crash.
The “accident response fee” includes $70 for the officer’s time, $154 for the police cruiser and $142.05 for “police station prep/administration.”
There’s no mention of Cost Recovery’s take.
A letter to Bressi from the company contends the $366.05 bill is for “Safety Services’ costs incurred from your motor vehicle accident.”
A review of records provided under public records laws shows the city’s expected police reimbursement at $245. Nearly 50 percent more —$121 — was tacked on for Cost Recovery’s fees.
Bressi, 60, said he is appalled by the practice.
He said he was never told about the reimbursement fees when he entered his plea in mayor’s court. In fact, the policy is not mentioned on Macedonia’s website along with its menu of traffic fines.
In Bressi’s case, his insurance company and his employer’s insurer refused to pay the bill to Cost Recovery. That left Bressi to fight the charges himself. He said what others have said in the past about similar restitution plans: The officer was merely performing a job for which he was already paid and in most instances required to perform under the law.
“It’s very unfair and underhanded,” Bressi said.
Work for collection agency
Not so, says Diemert, whose Mayfield Heights law firm in February researched and wrote an eight-page legal opinion on the policy at Cost Recovery’s request. Diemert said the work was performed after Macedonia passed its ordinance in May 2010.
Diemert also later represented Cost Recovery in a cease-and-desist letter he wrote to an Ohio Insurance Institute spokeswoman, who has been vocal in her criticism of crash restitution programs throughout Ohio.
Diemert’s law firm has been paid more than $85,000 the past two years by Macedonia for legal work, according to figures released by the city. He declined to say how much he was paid by Cost Recovery to write the opinion.
“CRC and the city’s interests are the same, thus [there’s] no conflict,” Diemert said.
Kuchta wasn’t aware of Diemert’s work for Cost Recovery until informed by the Beacon Journal during a recent interview. However, he said he doesn’t view the law firm’s work for the city and Cost Recovery as a conflict of interest.
The original restitution idea in Macedonia came from its safety forces, which like other city departments were urged by Kuchta to “think outside the box” is terms of cutting costs and raising revenues.
Many accounts unpaid
During the last seven months of 2010, according to the city, motorists were billed $51,851 for police officers responding to about 230 crashes. Of that, $13,833 was collected by the city. The other accounts remain unpaid.
Records provided by Macedonia to the Beacon Journal only show how much was billed or collected for city safety services. They do not reveal how much more was charged or collected by Cost Recovery.
The city’s contract with the company, which was reviewed by Diemert’s firm and signed by Kuchta, also does not cap or restrict the company’s fee structure.
Diemert, however, said he was initially told the charges would be 9 to 33 percent of the entire bill.
“We don’t have a say on their [administrative] costs,” Diemert said.
So far this year, approximately 174 drivers or their insurance companies have been billed $39,011 for police service. About $4,700 has been collected for the city.
For the same period, one fire response fee bill for $1,678 was paid. It was the only restitution received from 16 billings. About $12,180 remains unpaid.
Under Macedonia’s plan, if the driver’s insurance refuses to pay — and many appear to be balking — the city’s billing partner in the program may seek payment directly from the driver. Invoices are mailed monthly to motorists like Bressi, whose insurance carriers have refused to pay.
Billing details not revealed
Diemert last week attempted to obtain Cost Recovery’s actual billing statement, but the company so far has refused his request, citing private business reasons.
“They are considering but feel it is proprietary to their business and confidential,” Diemert said in an email. “I’m not sure we can make any vendor reveal their internal costs etc. But we will pursue further.”
A review by the Beacon Journal of five bills provided by Bressi and the Ohio Insurance Institute show Cost Recovery fees increased Macedonia’s billed costs by up to 52 percent — which in the end would mean CRC could keep a little more than 33 percent of the full amount if paid in full.
The insurance lobby group recently reviewed 25 bills sent to insurance companies for Macedonia crashes and reached a similar conclusion as the newspaper.
“I was quite frankly astounded that there was no provision [in its contract with Macedonia] on what CRC can take,” said Dan Kelso, president of the Ohio Insurance Institute.
The insurance lobby has a long battle of the words with Cost Recovery, which has been banding with governments since 1999.
Company defends practice
Regina Moore, Cost Recovery’s president, defended the collection practice as “fair and fiscally responsible” and she said a growing number of insurance companies are paying the claims. Those who do not, she said, are doing their customers a disservice.
“I am not responsible for the budget woes, however, I am attempting to respond in a fiscally fair and responsible fashion,’’ Moore said in an email.
She declined to name other Ohio cities her company is working with, or the insurance companies she said are covering the restitution bills.
Moore contends the company looks at the final bill in calculating its fees and not simply the city’s share. She said the company is charging as little as 7 percent for Cost Recovery’s work and the “aggregate” fee for all cases is about 10 percent of the amount billed.
For example, she said, her company’s fees in Bressi’s case — $121 — represent about 33 percent of the entire bill. Moore said Cost Recovery’s costs increase when insurance companies demand additional documents or other information “to make the process unnecessarily cumbersome.”
“Our fee does not include the time and money CRC spends [out of our own pocket] in meeting with local and state officials, legislators, the media etc. in an ongoing effort to protect safety services by clearly explaining the plight of safety services and the danger to public safety,” Moore said.
“Our fees will decrease when the insurance industry as a whole simply does the right thing and share in the cost of providing services to their negligent policyholders.”
Bressi has contacted lawmakers and lawyers seeking guidance on how to fight Cost Recovery’s collection efforts. So far, the company has only sent letters demanding money. He has been told by the company and Diemert to sue his insurance carrier for failing to cover what they considered a covered event.
Court collection unlikely
Macedonia residents, who already pay taxes in the city, are not billed if their insurer declines to pay. The city will also consider hardship cases and waive the fees, in some instances.
In the end, if no one pays, Diemert said it is unlikely the city or Cost Recovery would go through the expense of pursuing collection in court.
“Mr. Bressi thinks because he paid a fine and costs for his criminal, traffic violations he has no further liability for the civil damages,” Diemert said. “We all know that’s not the case in our system of justice.”
Stow signed up with Cost Recovery in 2006. The relationship was brief as the city dropped out citing negative public reaction and lower than anticipated revenues.
That’s a common experience, said Mary Bonelli, a spokeswoman for the Ohio Insurance Institute.
Bonelli said the bills are simply not covered in most car insurance policies. She said as many as 13 states ban or restrict such practices.
Kuchta said he supports the plan as a means of collecting money during hard economic times. He said the city was looking for any way to raise money and the agreement with Cost Recovery came not long after three officers were laid off last year, reducing the force to 13.
The program passed quickly through the city council, Kuchta said, “because of the dire straights of our community financially.” In retrospect, Kuchta said the city’s contract with Cost Recovery should have spelled out the company’s fee structure.
“As the mayor, I can’t control what they’re doing other than to stop using their services. If they’re charging too much, well that has to be brought to our attention,” he said “I don’t think the city wants anybody to get ripped. We’re just simply looking for other ways to generate revenue. If it buys me one more bullet-proof vest, it’s worth it.”
Meanwhile, Bressi said the company has declined to tell him what will happen if he continues to refuse payment. Because it is a financial claim, the city cannot pursue any criminal action or place a blemish on his driving record. Diemert said he didn’t expect any action against Bressi and it would mark another “win” for the insurance companies.
“They’re billing me for a service they’re obligated to provide. That’s what gets me,’’ Bressi said. “Something’s got to be done.’’
Phil Trexler can be reached at 330-996-3717 or ptrexler@thebeaconjournal.com.
