Fire departments on Long Island, statewide could be owed millions from insurance companies, suit says

Fire departments on Long Island and across New York could be owed millions from out-of-state insurance carriers because the state has failed to enforce a law requiring companies to pay a percentage of premiums for fire services, according to a lawsuit filed Wednesday.

The complaint, filed in the State Court of Claims in Albany on behalf of the presidents of the Blue Point and Hewlett firemen's benevolent associations, names the state and the Department of Financial Services as defendants. It contends the department has failed to ensure that insurance carriers are complying with the law. It also asks for State Comptroller Thomas DiNapoli's office to conduct an audit to determine how much money could be owed to the fire districts.

Currently, insurance companies self-report the funds, which attorneys for the plaintiffs have said results in disorganized and potentially shoddy accounting practices.

Attorneys for the two benevolent associations contend that tens of millions of dollars annually could be owed to the state's 1,700 volunteer fire departments alone. On Long Island, 175 fire departments would be eligible for compensation.

"The law is very well intentioned and should be enforced," said Hauppauge-based attorney Edmond Chakmakian, one of the two lawyers on the case. "But having insurance companies on the honor system is like asking the fox to take inventory of the chicken coop … We don't think it's appropriate that they're self reporting. And we think [the money] is not being collected appropriately per the statute and distributed."

The Department of Financial Services and State Comptroller's office declined to comment.

A long-standing state law, the Foreign Tax Program, stipulates that out-of-state insurance carriers are mandated to annually pay a 2% tax on homeowner's insurance premiums written against loss or damage by fire and, the suit contends, a 3% tax on certain auto fire insurance premiums.

The taxes are collected by the Department of Financial Services and disbursed to volunteer fire departments, fire districts, fire department benevolent associations and the Firemen's Association of the State of New York through a formula based in part on the number of active firefighters in a department. 

The law applies to all fire departments outside of New York City and Buffalo, which have separate systems for receiving the money, commonly known as the “two percent funds.” Similar laws are in place across the country. 

The legislation typically allows fire districts to use the money for any purpose that benefits it as a whole, although experts said most utilize the funds to help injured and uninsured members.

Records obtained by the benevolent associations and provided to Newsday show that about 200 insurance companies allocated a combined $73.4 million under the law in 2022, with $44.5 million going directly to fire districts.

The National Insurance Association of Commissioners reported that roughly $26 billion in insurance premiums are paid annually in the state, although it's not clear how much of that money would be required to be allocated under the law.

Samantha Segal, a Huntington-based attorney working on the suit, said that with no accounting procedures in place to examine the system, and the absence of any verifying data, it's impossible to know if the fire departments are getting everything they're owed. 

"Volunteer firefighters are charged under the law with fighting fires and responding to public emergencies," Segal said, adding that her clients have been looking into this issue for nearly a decade. "And the time that they've spent administratively focused on this … has exhausted them."

Douglas Miller, president of the Blue Point Volunteer Exempt Fireman’s Benevolent Association, said the roughly $22,000 in funds his department receives from the insurance carriers are used to help pay the monthly bills of injured members. But with the cost of living on the rise — and the tax revenue from insurance carriers largely flat — the benevolent association has struggled to provide for its members.

"We've resorted to doing our own fundraising and it just becomes close to a full-time job at this point," said Miller, who doubles as vice president of the Long Island Association of Firemen’s Benevolent Association. "And that was not the intent of this money. So we're just hoping that it's accurately reported."

By Robert Brodsky

robert.brodsky@newsday.com@BrodskyRobert

Robert Brodsky is a breaking news reporter who has worked at Newsday since 2011. He is a Queens College and American University alum.