Firemen watch as man's house burns down

There has been a lot of discussion about this story. Over at Volokh, Orin Kerr asks readers if paying for the fire-fighting service that the man neglected to pay for should be made mandatory, and over at The Corner, Dan Foster says that this episode is "bad for libertarians", and argues that the fire department should have tried to stop the fire since the homeowner was willing to pay full price for the service.

I agree that it's not exactly the best PR moment for the cause of libertarianism. I guess I wish that the fire department had stopped the fire and then sent a bill for every last dime worth of expenses and trouble they had incurred. And then if the homeowner failed to pay, they perhaps should have been to able to go to the man's insurance company to seek reimbursement (although that is a legal issue that I am not all that familiar with).

Which brings me to my main point. The other important player in this whole equation is the insurance company that was insuring the man’s home. Apparently, the insurance company is on the hook for the loss.

My guess is that insurance companies are now going to want to change their contracts to include a requirement that policy holders pay for a fire-fighting service if it's not otherwise provided. It would work the same way that a mortgage contract works, where the lender requires the borrower to maintain a homeowners insurance policy. The insurance company could even set up an escrow account on behalf of the homeowner to make sure the fee is paid.

So no, a government mandate is not necessary. The marketplace will work this out in about a second, assuming the state insurance board approves such a change and the mayor and the town hold firm on this policy.

[Update]

Arnold Kling, in arguing in favor of private, for-profit fire service , says:

I think that the solution to the problem of how to get people to pay the membership fee would come from fire insurance. I would assume that if you want to get fire insurance, the fire insurance company will be much more receptive to writing a policy if you maintain your membership fees. Mortgage lenders, in turn, will require fire insurance. As long as the vast majority of people who own their homes free and clear also obtain fire insurance, not many people would go without fire protection in this scenario.