Should London's fire department tap home insurance policy money? It's a hot topic

To its backers, Fire Marque's business model helps municipal fire departments recover thousands in costs by tapping into a little-used area of coverage in many homeowner fire insurance policies. 

But others say their work will lead to higher premiums for homeowners or worse, make them less likely to call for help in an emergency.

It's a discussion underway in London after council's community and protective services committee (CAPS) voted last month to take a look at the Fire Marque program for London. After hearing a pitch from the company at a recent Federation of Canadian Municipalities conference, Coun. Elizabeth Peloza wrote a letter to CAPS asking them to look into it and report back.

Peloza says Fire Marque could lead to "potential cost recoveries of opportunities" of between $291,461 to $485,769 a year. 

But in a letter coming to Monday's council meeting, London Fire district chief Kevin Dash says he's "deeply concerned" about entering into any fee recovery agreement.

"When it comes to life safety, fees for service would have a profound negative effect on Londoners, some of whom may delay calling for help when seconds count," he said. 

So what is Fire Marque?

The company enters into agreements with municipalities that allow them to access clauses in home insurance policies that include reimbursement for fire departments that incur extra costs while battling a blaze. Fire Marque pockets 30 per cent of any claim paid to a fire department. 

Fire Marque president Ted Woods said the claims can vary by policy, but said he's seen fire departments collect anywhere from $1,000 per claim up to $250,000 for large commercial fires. 

"It can really make sense," said Woods. "If Londoners can receive a quarter of a million dollars or in that range every year, then every four years they could receive two fire trucks, if you want to look at it that way." 

The claims for this coverage can only be paid to the fire department, not the home owner or the municipality. Also, the money has to be spent in one of three areas: public education, capital expenses and training. The money can't simply be absorbed into the fire department's general budget.

And the claims aren't for typical firefighting costs, such as regular staff time.

"They're for expenses that aren't normal," said Woods. 

Woods said Fire Marque offers a potential benefit for cash-strapped municipalities without any risk to taxpayers. If a claim is successful, the fire department gets a cheque. 

London city staff last looked at entering an agreement with Fire Marque in 2016, but opted against it.  

Greg Hankkio is Thunder Bay's acting fire chief. 

His fire department became a Fire Marque client in 2017 and says they collected $100,000 in claims in 2018 and about the same amount in 2019. 

"It's been a revenue generator for us," he said. 

Hankkio said his department has put the money into a capital fund and used some of the cash to by a small boat for water rescues.

But won't premiums rise?

Woods says he doesn't think his company's work will lead to a rise in home insurance premiums.

"The insurance companies have calculated the premiums based on the coverages," he said. "A quarter of a million dollars in recoveries across all the companies and across the whole city is negligible." 

Not so fast says Pete Karageorgos of the Insurance Bureau of Canada. 

He says it's naive to think that a rise in claims won't also increase premiums. 

"Any time claims costs increase, that will in the future be reflected in the premiums that homeowners pay," he said. "Those taxpayers who are paying property taxes for the fire department are going to be paying a second time if they have claims pay outs for fire department charges." 

But what about Dash's letter, where he worries homeowners may become reluctant to call 911 in an emergency, fearing their premiums will rise or they'll be hit with extra costs?

Woods says it appears Dash doesn't understand how Fire Marque's program works. 

"He's misinformed," said Woods. 

In a note to CBC News, London's Police Chief Lori Hamer said Dash's letter to city council "reflects his own personal opinion on this matter." 

Hamer said her department is reviewing the Fire Marque program in response to the request from the CAPS committee. 

"We will be reviewing this request and will bring information back to Council for their consideration by June, 2020," she said.