Every U.S. jurisdiction has a law or “spill bill” that holds the party responsible for hazmat spills  legally liable to report, respond, cleanup and dispose of spilled materials deemed harmful to the public and the environment. And nearly every state and many municipalities have laws or local ordinances that allow fire departments and other public-sector responders to recover their necessary and reasonable costs from spill generators. But the insurance industry — which ultimately receives the invoices — takes a dim view of incomplete documentation and unreasonable charges from fire services. More often than not, requests for reimbursement are denied or delayed until requested information is provided.

According to an insurance industry insider, insurers have refused payment of up to 80% of invoices for spill-related costs due to discrepancies or lack of detailed information on fire services invoices. The answer to recovering spill-related costs lies in getting educated about what insurance claims adjusters need to close out their files — including an explanation of how rates are calculated for personnel and equipment.

Cost-recovery model

The Framingham (Mass.) Fire Department requested advice on billing spill generators after hazmat spills. They knew about the invoice auditing work we do for insurance and transportation industry clients related to cost recovery after environmental spills. Framingham recently changed its policy on seeking reimbursement, which previously was limited to major hazmat spills. The department has started billing for all spills in which cost recovery is authorized under Mass. General Law 21E, which states:

“Any person who undertakes a necessary and appropriate response action regarding the release or threat of oil or hazardous material shall be entitled to reimbursement from any other person liable for such release or threat of release for the reasonable costs of such response action.”

In Framingham, consultants worked closely with Asst. Chief John Magri to develop a computerized billing system to facilitate invoice preparation that met the needs of the department. Framingham covers a 26.2 square-mile area with 148 uniformed firefighters working out of five stations. The cost-recovery computer program takes data from NFIRS reports that fire officers complete using Firehouse software after each hazmat run. The computer program extracts the data and calculates reimbursable charges.

 

“We don’t charge astronomical rates," Magri said. The FEMA rates are a little low, but they are nationally accepted standard rates, which are less likely to raise objections.

An invoice package is prepared and sent back to Framingham FD within 24 hours of our receipt of the incident report. A typical package includes the following:

• Cover letter to be signed by the chief detailing the response actions taken by the department and citing the law that authorizes reimbursement of its costs.

• Invoice with breakdown of charges for labor, equipment and administrative time.

• Calculation report detailing equipment and personnel on scene, along with hourly rate and time on scene for all.

• NFIRS report of the incident, detailing types of apparatus and resources used, plus names and rank/grade of personnel on scene.

• FEMA Schedule of Equipment Rates, covering all eligible costs. (The FEMA fee schedule is a nationwide standard that is considered reasonable and not likely to draw an objection from insurance adjusters. Another fee schedule can be substituted.)

• Salary calculations of the fire department for each rank and firefighter grade.

• Authorizing law or statute in its entirety that entitles the department to reimbursement.

“This is a professional invoice that leaves little opportunity for questions," Magri said. "It gives the insurance adjustor all the information he needs to pay it without having to come back to the fire department for answers. That means faster payments for the 150 to 200 reimbursable runs we make each year.

Cost recovery helps a municipality’s overall budget. These spill generators are carrying liability insurance just for this reason,” he added.

Insurance industry insiders who are familiar with the invoice package agree that by submitting such complete documentation, fire departments can expect to receive 100% payment. Insurers say they welcome this degree of detail because the invoices are easy to process. One insurance executive told me he can see that the invoices are properly payable immediately. He noted that prompt payment raises the insurer’s ratings, which benefits the company because insurers are evaluated on how long they take to pay claims on average – the faster the better.

In the spill-related auditing of invoices from fire services that we do for clients, the most common problems we find are incomplete documentation, as when a $1,200 charge for cleaning turnout gear is included on the invoice but is not accompanied by a paid bill from a cleaning or decontamination service.