Property and Casualty Insurance

Important: Check for Updates States sometimes revise their exam content outlines unexpectedly or on short notice. To see whether there is an update for this product because of an exam change, go to www.kaplanfinancial.com. Any updated study material for the state insurance exam is located in the Updates/Errata icon on the course dashboard.

Effective February 15, 2018

Georgia

Property and Casualty Insurance

State Law Supplement

GA_P&C_Law_Supplement.indb 1 9/28/2018 3:29:18 PM

At press time, this edition contains the most complete and accurate information currently available. Owing to the nature of license examinations, however, information may have been added recently to the actual test that does not appear in this edition. Please contact the publisher to verify that you have the most current edition.

This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional services. If legal advice or other expert assistance is required, the services of a competent professional should be sought.

GEORGIA PROPERTY AND CASUALTY INSURANCE LAW SUPPLEMENT, EFFECTIVE FEBRUARY 15, 2018©2018 Kaplan, Inc.

The text of this publication, or any part thereof, may not be reproduced in any manner whatsoever without written permission from the publisher.

If you find imperfections or incorrect information in this product, please visit www.kaplanfinancial.com and submit an errata report.

Published in October 2018 by Kaplan Financial Education.

Printed in the United States of America.

ISBN: 978-1-4754-8630-8


iii

Contents

Introduction v

S E C T I O N 1 Cram Sheets 1

S E C T I O N 2 Class Notes 5

S E C T I O N 3 Detailed Text 41

S E C T I O N 4 Practice Exam 77


v

Introduction

What is a State Law Supplement?This book focuses on the state-specific statutes and regulations on the state exam content

outline. In order to be fully prepared for the exam, you must understand completely both the national License Exam Manual and this supplement.

How is the supplement organized?In order to make this book flexible and easy to use, we’ve divided it into four sections, and

each section is broken into topic areas as seen in the following table.

Section Topic Areas

Cram SheetsCram sheets focus on very specific details for your state. The information is presented in an easy to understand table format primarily highlighting days, dates, and dollars.

■ General Insurance Law ■ Property Insurance Law ■ Casualty Insurance Law

Class NotesThe class notes are meant to be a summary of the key topics in the law supplement, and are available to all students—classroom and self-study.


Detailed TextThe text section is the most detailed section of the law supplement. All topics in your state’s exam content outline law and regulations section are covered.


Practice ExamsThe practice exams test your retention of the law supple-ment material.


Do I have to learn everything in this book?Not necessarily! The table below shows the sections you should study depending on the

exam you are preparing for.

State Exam Sections to Study

Property and Casualty Insurance General (All Lines), Property, and Casualty Insurance

Property Insurance Only General (All Lines), and Property Insurance only

Casualty Insurance Only General (All Lines), and Casualty Insurance only


Law Supplementvi

How should I study this information?Below is a best study practice for the law and regulations section of your exam.

1. Law Supplement Cram Sheet: Your exam will probably ask about specific fine amounts or days’ notice requirements (e.g., changing your address).

2. Law Supplement Class Notes: Reading the class notes exposes students to the majority of topics covered in the law supplement.

3. Law Supplement Detailed Text: Read this text for more in-depth descriptions of the state’s insurance laws and regulations.

4. Law Supplement Practice Exams: There are two law supplement practice exams. One is in the back of the law supplement. State specific law questions can also be found in the InsurancePro™ QBank at www.kaplanfinancial.com.

5. In your final preparation for the exam take the time to again review the cram sheet and class notes. Use them as a last-minute refresher of the most important law and regulation testable topics.


s e c t i o n

1

1s e c t i o n

1

Cram Sheets

HOW TO USE: In your final preparations for your insurance exam use

this cram sheet to memorize key days, dates, and dollars. A suggested tech-

nique is to cover the left hand column; read the right hand column; then

uncover the left hand column to reveal the correct answer.


2 Law Supplement

GEORGIA LAWS, RULES, AND REGULATIONS COMMON TO ALL LINES

Commissioner of Insurance

5 years

20 days

ExaminationThe period of time in which the Commissioner must conduct an examination of every authorized insurerTime frame for the Commissioner to provide the examinee a copy of the written report

10 days30 days30 days 30 days

Hearings ■ ___ days written notice to all interested parties ■ The hearing must be held no later than ___ days after the request was received ■ Parties may request a rehearing within ___ days ■ The Commissioner must make an order on the hearing within ___ days

$2,000$5,000$10,000

Penalties ■ Maximum fine for each nonwillful insurance code violation ■ Maximum fine for each willful insurance code violation ■ Maximum fine for violating a cease and desist order

Felony$10,0002 years

10 years

Insurance Fraud ■ Insurance fraud is a ___ ■ Maximum fine for insurance fraud ■ Minimum prison time in addition to the above fine ■ Maximum prison time in addition to the above fine

Georgia Insurers Insolvency Pool

Full amount$20,000$300,000

The Pool’s maximum liability per covered claim is as follows: ■ ___ for workers’ compensation claims ■ $___ for the return of unearned premium ■ $___ per claimant for all other covered claims

Licensing

Age 1820 hours

70%

■ Applicant’s minimum age ■ Applicants must complete ___ hours of prelicensing education per line of authority ■ Pass the licensing exam with a score of at least ___%

90 days Nonresident producers moving to Georgia have this long to establish themselves as a resident pro-ducer (without taking Georgia prelicensing education or insurance exam)

Annually3 years30 days

Agent’s Certificate of Authority (agent appointment) ■ Insurers must renew their agents’ certificates of authority ___ ■ Agents must renew their subagents’ certificates of authority every ___ years ■ Insurers must report an agent’s certificate of authority (appointment) termination within ___ days

24 hours20 hours3 hours

Biennial Continuing Education (CE) requirement ■ ___ hours, if licensed for fewer than 20 years ■ ___ hours, if licensed for 20 years or more ■ ___ hours of the total CE hours must be in ethics

3-hourFlood Insurance Training RequirementFlood insurance requires a one-time ___ hour certification course

6 months Temporary licenses are effective for ___ months and can be renewed up to a total of 15 months

$50,00030 days

Surplus lines broker must post a $___ bond with the CommissionerProducers must report name or address change within ___ days

GA_P&C_Law_Supplement_Section_1.indd 2 10/1/2018 2:51:38 PM

3Law Supplement

Unfair and Deceptive Practices

25%Controlled businessNo more than ___% of an agent’s annual premium volume may be derived from insurance written on the agent’s family, or employees of the agent

Binders

90 days Binders are valid up to ___ days or until the policy is issued, whichever period is shorter

GEORGIA LAWS, RULES, AND REGULATIONS COMMON TO PROPERTY AND CASUALTY INSURANCENonrenewal or Cancellation

10 days30 days30 days45 days

Notice of nonrenewal or cancellation ■ ___ days in advance for cancellation due to nonpayment of premium ■ ___ days in advance for cancellation for all other reasons ■ ___ days in advance for nonrenewal ■ ___ days in advance for nonrenewal or cancellation of commercial insurance policies

GEORGIA LAWS, RULES, AND REGULATIONS COMMON TO PROPERTY INSURANCE ONLYHomeowners Insurance

30 days Notice of nonrenewal must be sent within ___ days to the insured and mortgage holder

GEORGIA LAWS, RULES, AND REGULATIONS COMMON TO CASUALTY INSURANCE ONLYAutomobile Insurance

36 months Insurers may cancel automobile insurance policies if, within the past ___ months, the insured has had any of the following occur:

■ Had a driver’s license suspended or revoked ■ Been convicted of operating a vehicle under the influence ■ Been convicted of three or more speeding tickets ■ Been convicted of criminal homicide or assault while operating a motor vehicle

$25,000$50,000$25,000

25/50/25

Financial Responsibility Minimum Liability Limits

■ Bodily injury or death to any one person ■ Bodily injury or death to two or more people per accident ■ Property damage per accident

Uninsured Motorist Coverage

$250$500

$1,000

Uninsured motorist deductible options include: ■ $___ deductible ■ $___ deductible ■ $___ deductible

Worker’s Compensation

3 employees Unless exempt, businesses employing ___ or more employees must comply with the workers’ com-pensation law

75 daysNotice of Nonrenewal or Cancellation

■ ___ days in advance for nonrenewal or cancellation of workers’ compensation policy


s e c t i o n

5

2s e c t i o n

5

Class Notes

HOW TO USE: The class notes are an excellent place to start when study-

ing the state specific laws and regulations. The class notes are a summary

of the key law supplement topics. For some students the class notes may be

their primary section to study the law and regulation exam material.


6 Law Supplement

© Kaplan, Inc.

GEORGIA LAWS, RULES,

AND REGULATIONS

PROPERTY AND CASUALTY INSURANCE

© Kaplan, Inc.

Insurance Department

• Insurance Department sections include the following:– Agent licensing

– Consumer services

– Regulatory services

– Life, accident, and sickness insurance

– Property and casualty insurance

– Examinations

• The agent licensing section does the following:– Approves formal classroom training courses

– Prepares and conducts all licensing examinations

– Issues licenses

© Kaplan, Inc.


• The Commissioner of Insurance is the chief officer of the Insurance Department and enforces Georgia’s insurance laws.

• The Commissioner has the authority to:– appoint personnel to help the Insurance Department

carry out its duties,

– maintain Georgia’s official insurance records,

– make rules and regulations to carry out the Georgia insurance code,

– conduct hearings, and

– examine affairs of insurers.


7Law Supplement

© Kaplan, Inc.


• The Commissioner may appoint any assistants, examiners, actuaries, clerks, or employees to carry out the duties of the Department.

– Department appointees cannot have any financial interest in an insurer or agency.

© Kaplan, Inc.

Broad Powers and Duties

• All rules and regulations made by the Commissioner must be approved by the Attorney General and filed at the Commissioner’s office for at least 10 days before they become effective.

© Kaplan, Inc.

Annual Report

• The Commissioner must compile an annual report containing the following information:– Names and financial statements of authorized insurers

– Names of insurers whose businesses were closed during the year, the reason the businesses were closed, and the amount of the insurers’ assets and abilities

– Names of insurers that had delinquency proceedings instituted against them and statements of the facts regarding each proceeding

– The Insurance Department’s receipts and expenses for the year


8 Law Supplement

© Kaplan, Inc.

Orders and Notices

• Orders and notices issued by the Commissioner must state:

– its effective date,

– its intent or purpose,

– the grounds upon which is it based, and

– the provisions of the insurance code under which the action is to be taken.

• Notices and orders can be served by mail at the recipient’s place of business or last known address.

– Notices to multiple recipients may be served through electronic mail and the Department’s website.

© Kaplan, Inc.

Examinations

• At least once every five years, the Commissioner must examine the affairs, transactions, accounts, records, and assets of insurers authorized to do business in Georgia.

– All records must be available to the Commissioner.

– The Commissioner may initiate any proceeding or action based on the results of the examination.

• The Commissioner may also examine the business records and transactions of an insurance producer.

© Kaplan, Inc.

Examinations

• Whenever the Commissioner deems it necessary for the public interest, the Commissioner may examine the business records and transactions of any person:

– licensed as an insurance producer,

– with a contractual right to control an insurer,

– who controls the management of an insurer,

– involved in the promotion or formation of a domestic insurer, or

– who seeks to acquire a domestic insurer or affiliate.


9Law Supplement

© Kaplan, Inc.

Examinations

• The Commissioner must make a written report of each examination.

– A copy must be given to the examinee at least 20 days before it is filed.

– Examinees may request a hearing within those 20 days.

© Kaplan, Inc.

Examinations

• During examinations or hearings, the Commissioner has the authority to:

– take depositions,

– subpoena witnesses,

– administer oaths,

– examine individuals under oath, and

– compel the production of records, books, and papers.

© Kaplan, Inc.

Hearings

• The Commissioner must hold a public hearing when requested in writing or if required by Georgia law.

– At least 10 days’ advance written notice to all interested parties is required.

– The hearing must be held within 30 days after the written request is received.

– No later than 30 days after the conclusion of a hearing, the Commissioner must make an order on the hearing.

– Requests for a rehearing must be made within 30 days after the Commissioner issues an order.


10 Law Supplement

© Kaplan, Inc.

Hearings

• Formal rules of pleading and evidence do not need to be observed at hearings.

• All parties have the right to:

– appear in person or by counsel,

– be present while evidence is given,

– inspect documentary evidence,

– present evidence supporting their interests, and

– subpoena and compel the attendance of witnesses.

© Kaplan, Inc.

Cease and Desist Order

• If a person appears to be violating the insurance code, the Commissioner may issue a cease and desist order prohibiting the person from continuing the act, practice, or transaction.

• Anyone who violates a cease and desist order is subject to:

– a fine of up to $10,000 for each violation;

– suspension or revocation of the person’s license; or

– any other reasonable and appropriate penalty.

© Kaplan, Inc.

Penalties

• The Commissioner can impose the following penalties for each violation of the Georgia insurance rules or regulations:

– $2,000 maximum fine for each nonwillful violation

– $5,000 maximum fine for each willful violation

– Probation for up to one year


11Law Supplement

© Kaplan, Inc.

Insurance Fraud

• An individual convicted of insurance fraud is guilty of a felony and may be punished by:

– imprisonment for at least 2, but no more than 10, years;

– a fine of up to $10,000; or

– both imprisonment and a fine.

© Kaplan, Inc.

Fees, Taxes, and Penalties

• The Commissioner must remit all fees, taxes, dues, and penalties collected to the Office of Treasury and Fiscal Services.

© Kaplan, Inc.

Complaints

• Every year, the Commissioner will compile and publicly publish a list of all written complaints against authorized insurers that the Commissioner’s office received from consumers in the state.


12 Law Supplement

© Kaplan, Inc.


• The Georgia Insurers Insolvency Pool provides a remedy for covered claims under property and casualty insurance policies when the insurer has become insolvent and is unable to fulfill its contractual obligations.

• All property and casualty insurers must be members of the pool as a condition of their authority to transact insurance in Georgia.

© Kaplan, Inc.


• The Pool’s maximum liability per covered claim is as follows:

– Full amount of workers’ compensation claims

– $20,000 for the return of unearned premium

– $300,000 per claimant for all other covered claims

© Kaplan, Inc.

Agents and Subagents

• Agent—An individual appointed or employed by an insurer who sells, solicits, or negotiates insurance is an agent.

• Subagent—A subagent sells or negotiates insurance or annuity contracts on behalf of a licensed agent.

– A subagent must have a certificate of authority from each agent represented on file with the Commissioner.


13Law Supplement

© Kaplan, Inc.

Counselor

• A counselor advises people regarding the benefits, terms, value, or advantages of any insurance contract offered by an insurer.

• A consultant cannot receive compensation from more than one source involving the same transaction.

• Actuaries or consultants advising insurers are not considered to be counselors.

© Kaplan, Inc.

Certificate of Authority

• An insurer must receive a certificate of authority from the Commissioner before it can transact insurance business in Georgia.

• An insurer will not be authorized to transact business in the state if its name is so similar to that of another authorized insurer that it will cause uncertainty or confusion. – The insurer may have to modify its name to avoid such

confusion.

– The insurer’s name must not mislead consumers about the nature of the insurer’s organization.

© Kaplan, Inc.


• The Commissioner can suspend the certificate of authority of an insurer that:

– violates any provision of the Georgia insurance code;

– violates any rule, regulation, or order of the Commissioner;

– is in an unsound financial condition;

– regularly compels claimants to take legal action to secure payment;

– refuses to be examined; or

– fails to pay judgments within 30 days.


14 Law Supplement

© Kaplan, Inc.


• After a hearing, the Commissioner can impose an administrative fine on an insurer if its officers, employees, agents, or representatives are found to have committed any of the following acts often enough to indicate a general business practice:– Failure to process or pay claims in a timely manner

– Failure to notify policyholders of the reason claims payments have not been made when due

– Refusal to pay claims without just cause

– Compelling insureds or claimants to accept less than the amount due them

© Kaplan, Inc.

Unauthorized Insurers

• It is illegal for anyone in Georgia to represent an insurer that is not authorized to transact insurance in Georgia.

• This rule does not apply to the following:

– Surplus lines insurance

– Reinsurance

– Adjusters involved in settling claims under policies that were sold, issued, and delivered outside of Georgia

– Professional services provided by an attorney

© Kaplan, Inc.

Licensing

• All agents, subagents, counselors, and adjusters must be licensed to transact insurance business in Georgia.

– Anyone knowingly involved in an illegal transaction is guilty of a misdemeanor.


15Law Supplement

© Kaplan, Inc.

Licensing

• Officers, directors, and employees of insurers and agents do not have to be licensed if no commission is received and their duties are:

– executive, administrative, or indirectly related to insurance;

– related to underwriting, loss control, or inspection or to processing, adjusting, investigating, or settling insurance claims; or

– as a special agent or agency supervisor to assist agents and they do not transact insurance.

© Kaplan, Inc.

Surplus Lines Broker

• A resident property, casualty, and surety insurance producer may be licensed as a surplus lines broker.

– The license expires biennially on the last day of the licensee’s birth month.

– A broker must post a $50,000 bond.

© Kaplan, Inc.

Agency Licensing

• Insurance agency licenses renew biennially.

• A person cannot be an owner of an agency, or an officer of an incorporated agency owning 10% or more of the corporation, if the person has had his license refused, revoked, or suspended.


16 Law Supplement

© Kaplan, Inc.

Producer Information

• Producers must maintain an office accessible to the public.

• Within 30 days, producers must report changes to the following:

– Business or residence address

– Employer’s address and agency’s address and trade name

– Partner’s or corporation’s name

© Kaplan, Inc.

Agent Responsibilities

• Producers must keep a record of every business transaction for at least five years after the transaction is completed or the insurance contract expires, whichever is later.

© Kaplan, Inc.

Licensing Requirements

• Applicants for an agent, subagent, adjuster, or counselor license must satisfy the following requirements:

– Reside in Georgia for at least six months of each year

– Be at least 18 years old and of good character

– Complete the prelicensing course

– Pass the licensing examination


17Law Supplement

© Kaplan, Inc.

Licensing Requirements

• Applicants for a counselor license must have five years’ experience either as an agent, subagent, adjuster, or other insurance experience that, in the Commissioner’s opinion, qualifies the applicant to act as a counselor.

• Applicants for an adjuster license must complete special education regarding the handling of insurance claims.

• Applicants for a counselor or adjuster license must also file a bond.

© Kaplan, Inc.

Agents’ Certificate of Authority

• Agent applicants must be sponsored by an authorized insurer.

• Applicants for subagent licenses must be appointed by an agent.

• The sponsor or appointee must certify that the applicant has satisfied the licensing requirements.

© Kaplan, Inc.

Agents’ Certificate of Authority

• Insurers must obtain a certificate of authority for agents who sell insurance or negotiate contracts for the insurer in Georgia.

– Agent certificates of authority (appointments) must be renewed annually by the insurer.

• Agents must obtain a certificate of authority for all subagents representing the agent.

– Subagent certificates of authority are renewed every three years by the agent.


18 Law Supplement

© Kaplan, Inc.

Prelicensing Education

• Applicants must complete 20 hours of prelicensing education per line of authority.

• Exemption—Applicants licensed in another state are not required to take the prelicensing education or the licensing examination if the license application is received within 90 days of cancellation of the previous state license.

– The person must apply for a Georgia license within 90 days of moving to Georgia.

© Kaplan, Inc.

Exemption for Military Service

• If a producer’s license lapsed while in the U.S. armed forces, the producer can obtain a new license within five years from the lapse date without taking a licensing exam.

– Application for the new license must be received within one year of leaving military service.

© Kaplan, Inc.

Examination Exemptions

• The following applicants are not required to take a licensing examination:

– Life and health insurance license applicants who hold CLU® or FLMI designations

– Applicants for counselor licenses who hold CIC or CLU® designations

– Applicants who hold a PhD in insurance

– Adjusters who are salaried employees of insurers

– Applicants for temporary or renewal licenses


19Law Supplement

© Kaplan, Inc.

Continuing Education (CE)

• Biennial CE requirements are the following:

– 24 hours, if licensed for fewer than 20 years

– 20 hours, if licensed for 20 years or more

– 3 hours of the total hours must be in ethics

• National Flood Insurance Program (NFIP) requires a one-time, three-hour NFIP CE course.

– The course counts toward the agent’s biennial CE requirement and may also be used to satisfy the ethics requirement.

© Kaplan, Inc.

Continuing Education (CE)

• Excess CE credit earned in one compliance period can be applied to the next compliance period as long as the excess CE credits do not exceed 50% of the biennial CE requirement.

© Kaplan, Inc.

License Renewal

• Licensees must provide evidence of continuing education and payment of the required renewal fees prior to the last day of the licensee’s birth month and biennially thereafter.


20 Law Supplement

© Kaplan, Inc.

Suspension or Revocation

• The following may cause a license to be suspended or revoked:– Insurance law or rule violations or fraudulent practices

– Intentional misrepresentation in a licensing application

– Misappropriation of money

– Misrepresentation of policy terms and conditions

– Cheating on the licensing examination

– Holding a license to secure rebates or controlled business

– Conviction of any felony or crime of immorality

– Any kind of license suspension or revocation

© Kaplan, Inc.

Temporary License

• The Commissioner may issue a temporary license to a family member, associate, guardian, or estate executor of a former agent who dies or becomes unable to carry out his duties because of any of the following:– Service in the United States armed forces

– Illness or disability

– Termination of appointment by the insurer

• Temporary licenses are effective for 6 months and can be renewed for up to a total of 15 months.

© Kaplan, Inc.

Temporary License

• At the request of the insurer, temporary licenses may also be issued to agents in training.

• Temporary licensees cannot solicit new insurance contracts.

• Applicants for a temporary license do not need to meet the agent examination, residence, or education licensing requirements.


21Law Supplement

© Kaplan, Inc.

Nonresident Licensing

• The Commissioner may issue nonresident licenses to individuals licensed in another state if the individuals: – hold the same license in their states of residence; and

– pay the Georgia nonresident licensing fees.

• Reciprocity—The individual’s resident state must allow Georgia agents to hold nonresident licenses.

• Nonresident licensees must appoint the Commissioner as the licensee’s agent for the purpose of accepting legal notices or summons.

© Kaplan, Inc.

Unfair Trade Practices

• Misrepresentation—It is illegal to make any written or oral statement, sales presentation, or comparison that:

– misrepresents the dividends, benefits, advantages, conditions, or terms of any policy;

– uses a name of any insurance policy that misrepresents its true nature; and

– is a misrepresentation for the purpose of inducing the lapse, forfeiture, exchange, conversion, policy loan, or surrender of any insurance policy.

© Kaplan, Inc.


• Twisting—The illegal replacement practice of misrepresenting a policy to induce a policyholder to lapse, forfeit, or surrender an existing policy and purchase a new policy from a different

insurer

• Churning—The illegal replacement practice of misrepresenting a policy to induce a policyholder to lapse, forfeit, or surrender an existing policy and purchase a new policy from the same insurer


22 Law Supplement

© Kaplan, Inc.


• False advertising—It is illegal for any producer to formulate or use an advertisement or statement that is untrue, deceptive, or misleading regarding any insurance company or persons associated with that company.

• Defamation—It is illegal to make any statement, written or oral, that is false or maliciously critical of the financial condition of an insurance company or a producer representing that company.

© Kaplan, Inc.


• Unfair discrimination—It is illegal to:

– unfairly discriminate between individuals of the same class and equal life expectancy in the rates, dividends, benefits, or terms of any life or life annuity contract;

– unfairly discriminate between neighborhoods within a municipality and of essentially the same hazard; or

– use sexual orientation in the underwriting process or in the determination of insurability.

© Kaplan, Inc.


• Rebating (illegal inducements)—It is illegal to offer valuable consideration, other than that which is offered in the contract, as an inducement to purchase a policy.

–Rebating includes kickbacks of commission, extraordinary gifts, payment of consulting fees, or offering to pay the insured’s premium.


23Law Supplement

© Kaplan, Inc.


• Controlled business is the sale of an insurance product by an agent on the agent’s own life, on the life of a family member, or on the life of an employee of the agent or family member.

– Such sales are not prohibited but may not exceed 25% of the premium volume written by an agent in the course of any 12-month period.

© Kaplan, Inc.


• The Commissioner may examine and have a hearing to determine whether a person is engaged in unfair trade practices.

– At least 15 days advance notice of the hearing is required.

– If, after a hearing, the Commissioner determines the person has engaged in an unfair practice, the Commissioner may issue a cease and desist order, fine the violator, and suspend or revoke the person’s license.

© Kaplan, Inc.

Reporting of Premiums

• All premiums received by a licensee must be accounted for in the licensee's fiduciary capacity.

• Premiums must not be commingled with the licensee's personal funds.

• Premiums must be promptly accounted for and paid to the insurer or insured, as so entitled.

• A willful violation of this rule is a misdemeanor if the amount involved is less than $500; otherwise the violation is a felony.


24 Law Supplement

© Kaplan, Inc.

Penalties

• Anyone who engages in an unfair trade practice is subject to a fine of up to:

– $1,000 for each nonwillful violation, or

– $5,000 for each willful violation.

• Anyone who violates a cease and desist order is subject to:

– a fine of up to $10,000 for each violation,

– suspension or revocation of the person’s license, or

– any other reasonable and appropriate penalty.

© Kaplan, Inc.

Unfair Claims Settlement Practices

• Knowingly misrepresenting relevant facts or policy provisions to claimants and insureds

• Failing to acknowledge communications regarding claims

• Failing to implement procedures for the prompt investigation and settlement of claims

• Not attempting in good faith to bring about prompt, fair, and equitable settlement of claims submitted in which liability has become reasonably clear

© Kaplan, Inc.


• Compelling insureds to institute suits to recover amounts due under their policies by offering substantially less than the amounts ultimately recovered in suits brought by them

• Refusing to pay claims without conducting a reasonable investigation

• Failing to affirm or deny coverage within a reasonable time after completing a claim investigation

• Making claims payments without indicating the coverage under which each payment is being made


25Law Supplement

© Kaplan, Inc.


• Unreasonably delaying the claim investigation or payment by requiring both a formal proof of loss and subsequent verification that duplicates the information

• Denying a claim or offering a compromise settlement without a prompt explanation for such actions

• Failing to provide claim forms within 15 calendar days of a request

• Issuing partial claim settlement payments under a specific coverage that contains language that releases the insurer from its total liability

© Kaplan, Inc.

Rate Regulation

• Rate making standards—Rates may not be excessive or inadequate, nor unfairly discriminatory.

– Rates will not be considered excessive unless they are unreasonably high for the insurance provided and a reasonable degree of competition does not exist.

– Rates will not be considered inadequate unless they are unreasonably low for the insurance provided and continued use would endanger solvency of the insurer or their use tends to destroy competition or create a monopoly.

© Kaplan, Inc.

Rate Regulation

• Rating organizations must be licensed as a rating organization.

• Rate filings—Every insurer must maintain copies of its rates, rating plans, rating systems, underwriting rules, and policy or bond forms with the Commissioner.


26 Law Supplement

© Kaplan, Inc.

Rate Regulation

• Rate fixing prohibited—If any insurer conspires to fix, set, or adhere to insurance rates, except as expressly allowed by Georgia law, the insurer will be liable to any person damaged for an amount equal to three times the amount of the damage together with the damaged party’s attorney’s fees.

© Kaplan, Inc.

Rate Regulation

• Failure to comply with final order of the Commissioner

– The penalty for failure to comply with a final order of the Commissioner under the rate regulation provisions will not exceed $50.

– If the failure is willful, a penalty may be assessed in an amount up to $5,000.

– The Commissioner may suspend or revoke the license of any rating organization or insurer that fails to comply with an order.

© Kaplan, Inc.

Rate Regulation

• Surcharges for automobile accidents—An insurer may not assess a premium surcharge or cancel the policy as a result of the insured’s involvement in an accident where the insured was not at fault.


27Law Supplement

© Kaplan, Inc.

Rate Regulation

• Personal auto policy premium reductions—A personal auto policy discount of at least 10% must be offered if all named drivers:– have committed no traffic offenses or claims for the

prior three years;

– (drivers 25 years of age or older) have completed an approved defensive driving course; and

– (drivers younger than 25 years of age) have completed an approved preparatory course.

• Premium reductions continue for three years, as long as the requirements are maintained.

© Kaplan, Inc.

Binders

• Binders or other contracts for temporary insurance may be made orally or in writing and include all the usual terms of the policy together with any applicable endorsements that are designated in the binder.

• No binder may be valid beyond the issuance of the policy or beyond 90 days from its effective date, whichever period is shorter.

© Kaplan, Inc.

GEORGIA LAWS, RULES,

AND REGULATIONS

PROPERTY INSURANCE ONLY


28 Law Supplement

© Kaplan, Inc.

Cancellation and Nonrenewal

• 10 days’ notice for nonpayment of premium

• 30 days’ notice of cancellation for individual auto policies and property policies insuring against fire and extended perils

• 45 days’ notice of cancellation for commercial policies

• Must contain the reason for nonrenewal or cancellation

© Kaplan, Inc.

Homeowners Policy Cancellation

• Homeowners policies that have been in effect for at least 60 days may not be canceled EXCEPT for:

– nonpayment of premium;

– fraud, concealment of a material fact, or material misrepresentation in obtaining the policy, continuing the policy, or presenting a claim under the policy;

– a change in the risk that increases the hazard; or

– violation of contract terms by the insured.

© Kaplan, Inc.

Homeowners Policy Nonrenewal

• An insurer must provide a 30-day notice in advance of:

– a nonrenewal to the insured, mortgage holder, and any third-party interests; or

– a change or reduction in coverage.


29Law Supplement

© Kaplan, Inc.

Reduction in Coverage

• Reduction in coverage means a change made by the insurer that results in:

– a removal of coverage,

– diminution in scope or less coverage, or

– the addition of an exclusion.

• It cannot be made at the request of the insured.

• A change in a policy's terms or a reduction in coverage is not considered a nonrenewal of the policy.

© Kaplan, Inc.

FAIR Plan

• The purpose of the Georgia Fair Access to Insurance Requirements (FAIR) Plan is to make property insurance (fire and extended coverage (EC)) available to urban property owners who are unable to obtain coverage in the normal markets.

• All companies in Georgia writing fire and EC policies are required to participate in the FAIR Plan.

© Kaplan, Inc.

FAIR Plan

• When a homeowners policy is cancelled for other than nonpayment of premium, or nonrenewed, the insured must be notified of possible eligibility for coverage under the Georgia Fair Access to Insurance Requirements (FAIR) Plan.


30 Law Supplement

© Kaplan, Inc.

Fire Insurance: Premium Refund

• Premium refund on total property loss—In the event of a total loss, if the insurer pays less than the amount insured, the insurer must refund the difference between the amount of premium paid and the premium that would have been charged for a policy with an amount of insurance equal to the amount paid by the insurer for the loss.

© Kaplan, Inc.

Fire Insurance: Loss Valuation

• In the event of a total loss to a one- or two-family residential building, Georgia law reflects a valued policy statute.

• Valued policy (liquidated demand)—When the building is totally destroyed by fire, the insured has the right to demand the policy limits as the loss value.

– Does not apply to personal property (contents).

© Kaplan, Inc.

Windstorm Insurance

• Covers damage to property and personal belongings due to high winds

• Does not cover damages caused by storm surges and flooding– Flood insurance is a separate type of coverage and,

when purchased, does not go into effect for 30 days.

• Does not cover damage to vehicles by fallen trees or other debris – An auto policy with comprehensive, or other-than-

collision, coverage provides coverage for these types of damages.


31Law Supplement

© Kaplan, Inc.

GEORGIA STATUTES,

RULES, AND REGULATIONS

CASUALTY INSURANCE ONLY

© Kaplan, Inc.

Personal Auto Cancellation

• Personal automobile insurance policies may be cancelled for the following reasons:

– Nonpayment of premium

– Obtaining a policy through material misrepresentation

– Failure to disclose proper rating information and motor vehicle records for the past 36 months on the application

– Making a false or fraudulent claim

© Kaplan, Inc.


• Personal automobile insurance policies may be cancelled when the insured or a resident of the household, within the last 36 months, has:

– had a driver’s license suspended or revoked;

– been addicted to the use of narcotics or other drugs;

– been convicted of a felony;

– been convicted of criminal negligence resulting in death, homicide, or assault due to the operation of a motor vehicle;

– been convicted of operating a motor vehicle while intoxicated; or

– been convicted of three or more speeding tickets.


32 Law Supplement

© Kaplan, Inc.


• Personal automobile insurance policies may be cancelled when the insured or a resident of the household:

– is subject to epilepsy or heart attacks and does not provide a physician’s statement attesting to one’s ability to operate a motor vehicle; or

– has an accident record, conviction record, or a physical or mental condition that makes operation of a motor vehicle dangerous to the public.

© Kaplan, Inc.


• Personal automobile insurance policies may be cancelled when the insured automobile:

– is so mechanically defective that its operation might endanger public safety,

– is used to carry passengers for hire,

– is used to transport explosives or flammables,

– is an authorized emergency vehicle, or

– has changed in shape or condition so as to substantially increase the risk insured.

© Kaplan, Inc.

Personal Auto Nonrenewal

• A 30-day advanced notice of nonrenewal must be mailed to the named insured.

• Notice of nonrenewal does not apply in the case of:

– nonpayment of premium for the expiring policy;

– nonpayment of premium for the renewal;

– notice of a reduction in coverage that has been mailed 30 days in advance of a change; or

– insurer has provided renewal policy or certificate.


33Law Supplement

© Kaplan, Inc.

Personal Auto Nonrenewal

• Reduction in coverage means a change made by the insurer (not the insured) that results in:

– a removal of coverage,

– diminution in scope or less coverage,

– or the addition of an exclusion.

• Notice of reduction in coverage must be delivered to the named insured no less than 30 days prior to the proposed change in coverage.

© Kaplan, Inc.

Automobile Policy Provisions

• The previous cancellation provisions do not apply to policies that have been in effect less than 60 days unless it is a renewal policy.

– When a policy is cancelled for a reason other than nonpayment of premium, or if the policy is nonrenewed, the insurer must notify the insured of her possible eligibility for insurance through the Georgia Automobile Insurance Plan.

© Kaplan, Inc.

Compulsory Auto Insurance

• Georgia requires that all owners and operators of motor vehicles carry automobile liability insurance to comply with the state’s financial responsibility law.

– This provision does not apply to self-insurers.

– Policies must be issued for a minimum term of six months.

– No motor vehicle may be licensed in Georgia until the owner has furnished proof of financial responsibility.


34 Law Supplement

© Kaplan, Inc.

Minimum Auto Liability Limits

• The minimum financial responsibility limits in Georgia are (25/50/25):

– $25,000 for bodily injury or death of one person;

– $50,000 for bodily injury or death of two or more persons; and

– $25,000 for property damage to property of others.

© Kaplan, Inc.

Auto Liability Insurance

• Insurers must provide liability insurance for bodily injury and property damage and may also provide coverage for medical payments, comprehensive, collision, and other optional coverages.

© Kaplan, Inc.

Driver’s License Suspension

• Any person whose driver’s license is suspended must immediately return that license to the department.

– Failure to return a license is a misdemeanor punishable by a fine of up to $500, imprisonment of up to 30 days, or both.

• Whenever a driver’s license is suspended, the driver or owner must provide proof of financial responsibility.


35Law Supplement

© Kaplan, Inc.

Driver’s License Suspension

• Any person who drives with a suspended driver’s license will be guilty of a misdemeanor and may be punished by imprisonment for a minimum of five days or a maximum of six months, and a maximum $500 fine may be imposed.

• Proof of financial responsibility may be provided by:– a written certificate of any insurance carrier certifying

that there is in effect a liability policy; or

– a plan of self-insurance, accepted by the Commissioner.

© Kaplan, Inc.


• In Georgia, all automobile liability policies must also provide uninsured motorists (UM) coverage, unless rejected by the insured.

• This coverage is intended to protect people injured in an accident that was caused by an uninsured motorist, hit-and-run driver, or a driver whose insurer is insolvent.

© Kaplan, Inc.


• UM coverage may be issued in an amount up to the bodily injury and property damage liability limits in the policy but in no event less than the financial responsibility limit of the state (25/50/25).

• The coverage may be issued with a deductible of $250, $500, or $1,000 at the option of the insured.


36 Law Supplement

© Kaplan, Inc.

Uninsured/Underinsured Motorists

(UM/UIM)

• Underinsured motorist (UIM)—This provides coverage when the at-fault third party does not carry enough liability insurance.

• Georgia UIM coverage—Insured will choose one of the following coverage options.

– UIM limits are in addition to the at-fault party’s liability insurance.

– UIM limits are only available to the extent of the difference between the at-fault party’s liability limits and the insured’s UIM limit.

© Kaplan, Inc.

UIM Coverage Option Example

• At-fault driver’s liability limit: $50,000

• Insured’s UIM limit: $100,000

• Add-on or excess method—The amount available to the UIM insured would be a total of $150,000 ($50,000 liability limit plus $100,000 UIM limit).

• Difference, traditional, or reduction method—The amount available to the UIM insured would be a total of $100,000 ($50,000 liability limit plus $50,000 (UIM limit minus the liability limit)).

© Kaplan, Inc.


(UM/UIM)

• Subject to subrogation

• Stacking of coverage is allowed in Georgia– (UIM limit) × (# of covered vehicles) = UIM coverage limit on each

vehicle


37Law Supplement

© Kaplan, Inc.

UIM claim example without stacking• Barb owns two cars with a UIM motorist limit of $100,000/$300,000,

and Bob owns one car with a liability limit of $50,000/$100,000.

• They are involved in an accident where Bob is at fault, and Barb is awarded $175,000.

– Bob’s policy’s maximum individual limit benefit is $50,000.

– Barb’s policy’s maximum individual limit benefit is $100,000 (no stacking).

– Barb has access to the difference between her UIM $100,000 and Bob’s liability $50,000.

– Bob will be personally responsible to Barb for the balance of $75,000—Barb may or may not ever receive this awarded amount.


(UM/UIM)

© Kaplan, Inc.

UIM claim example with stacking• Barb owns two cars with a UIM limit of $100,000/$300,000, and Bob

owns one car with a liability limit of $50,000/$100,000.

• Stacking – $100,000 × 2 cars = $200,000 available on each of Barb’s cars.

• They are involved in an accident where Bob is at fault, and Barb is awarded $175,000.

– Bob’s policy’s maximum individual limit benefit is $50,000.

– Barb has maximum limit available of $200,000 – $50,000 (difference between her UIM and Bob’s liability) = $150,000.

– Barb’s policy pays her $125,000 under her UIM limit (stacking).


(UM/UIM)

© Kaplan, Inc.

Automobile Insurance Plan

• The Georgia Automobile Insurance Plan (AIP) makes automobile insurance, including garage liability for commercial risks, available to applicants who are entitled to coverage but are unable to procure it through the voluntary insurance market.– Every insurer authorized to write automobile insurance in the

state is required to participate in the plan.

– Risks are distributed among plan participants based on their percentage of voluntary automobile insurance written in the state.

– Insurance issued in the plan must contain liability insurance in the minimum amounts contained in the financial responsibility law.


38 Law Supplement

© Kaplan, Inc.

Cancellation and Nonrenewal Commercial Policies

• The following notices for commercial policies require at least 45 day’s notice prior to the effective date of change:

– Notice of cancellation or nonrenewal

– Notice of a premium increase exceeding 15%

– Notice of policy provision changes limiting or restricting coverage

• Policyholder may purchase a 30-day extension if insurer fails to comply.

© Kaplan, Inc.

Workers’ Compensation

• Workers’ compensation provides compensation to employees who are injured on the job, generally without any consideration of fault or negligence on the part of either the employer or employee.

• In return for the right of compensation, the employee gives up the right to sue the employer for perhaps a larger but uncertain benefit.

• The amount of an employee’s compensation is fixed by law.

© Kaplan, Inc.


• Administration of Georgia’s workers’ compensation laws is the responsibility of the State Board of Workers’ Compensation.

• The coverage provided under workers’ compensation includes:– wage replacement (temporary total disability,

permanent total disability, temporary partial disability, permanent partial disability, and disfigurement),

– medical compensation,

– death benefits, and

– burial allowance.


39Law Supplement

© Kaplan, Inc.


• In Georgia, worker’s compensation coverage may be provided by a private insurer or arranged by an employer who is self-insured or a self insurance group.

• All businesses employing three or more employees must comply with the law.

– Domestic workers may not be covered, and coverage for farm workers is on a voluntary basis.

© Kaplan, Inc.


• A notice of cancellation or nonrenewal of a workers’ compensation policy must be delivered to the insured at least 75 days prior to the termination date of the policy.

© Kaplan, Inc.


• Residual market mechanism—The Georgia Workers’ Compensation Assigned Risk Plan exists to provide required workers’ compensation coverage for employers who do not qualify for coverage in the voluntary market.

– Liability is apportioned among all insurers authorized to write workers’ compensation in Georgia.


s e c t i o n

41

3s e c t i o n

41

Detailed Text

HOW TO USE: All state specific topics in your state’s exam content out-

line law and regulation section are covered in this detailed text. Students

are encouraged to read the text for in-depth descriptions of the state’s insur-

ance laws and regulations. In addition, some topics are not covered in the

Cram Sheets and Class Notes, and are only covered in the Detailed Text.


42 Law Supplement

I. GEORGIA LAWS AND REGULATIONS PERTINENT TO PROPERTY AND CASUALTY INSURANCE

A. THE INSURANCE DEPARTMENT [CH. 120-2-1.01, .02]

1. The Insurance Department is divided into sections.

a. Agent licensing

b. Consumer services

c. Regulatory services

d. Life, accident and sickness insurance

e. Property and casualty insurance

f. Examinations

2. The agent licensing section: ■ approves formal classroom training courses; ■ prepares and conducts all licensing examinations; and ■ issues licenses.

B. THE COMMISSIONER OF INSURANCE [SEC. 33-2-1 THROUGH 10]

1. The Commissioner of Insurance, the chief officer of the Insurance Department, is responsible for carrying out and enforcing Georgia’s insurance laws.

a. The Commissioner has the authority to: ■ appoint personnel to help the Insurance Department carry out its duties; ■ maintain Georgia’s official insurance records; ■ make rules and regulations to carry out the Georgia Insurance Code; ■ conduct hearings; and ■ examine affairs of insurers.

b. Appointment of deputies [Sec. 33-2-4] The Commissioner must appoint a chief deputy commissioner and any other deputies needed to help carry out the Commissioner’s duties. The chief deputy performs the Commissioner’s duties in event of the Commissioner’s absence or disability.

c. Appointment of personnel [Sec. 33-2-5] The Commissioner may appoint any assistants, examiners, actuaries, clerks, or employees to carry out the duties of the Department.


43Law Supplement

d. No financial interest with insurer [Sec. 33-2-5] Insurance Department appointees or employees (including the Commissioner) cannot have any finan‑cial interest in an insurer, agency, or insurance transaction except as a policy‑holder or claimant under a policy. As long as there is no conflict of interest, however, the Commissioner can periodically employ independent actuaries who may also be employed by insurers.

e. Annual report [Sec. 33-2-8] The Commissioner must compile an annual report containing the following information for the previous calendar year:

■ names and financial statements of the authorized insurers transacting insur‑ance in Georgia;

■ names of insurers whose businesses were closed during the year, the reason why they were closed, and the amount of their assets and abilities;

■ names of insurers that had delinquency proceedings instituted against them and statements of the facts regarding each proceeding;

■ the Insurance Department’s receipts and expenses for the year; ■ the Commissioner’s recommendations regarding any amendments or addi‑

tions to law affecting insurance matters related to the Department; and ■ any other pertinent information.

f. Rules and regulations [Sec. 33-2-9] All rules and regulations made by the Commissioner must be approved by the attorney general and filed at the Commissioner’s office for at least 10 days before they become effective.

g. Orders and notices [33-2-10]

1.) Orders and notices issued by the Commissioner are effective when they are in writing and signed by the Commissioner or under the Commissioner’s authority. Every order must state its effective date and:

■ its intent or purpose; ■ the grounds upon which is it based; and ■ the provisions of the insurance code under which the action is to be

taken, though failure to state the provision does not void the order or notice.

2.) Notices and orders can be served by mail at the recipient’ place of business or last known address. If the notice or order is directed at multiple recipi‑ents, the Commissioner can serve it through electronic mail and post it on the department’s web site.

h. Examination of insurers [Secs. 33-2-10 through 15] Whenever necessary, the Commissioner (or designee) must examine the affairs, transac‑tions, accounts, records, and assets of insurers authorized to do business in Georgia. The Commissioner must also examine any other facts relating to the insurer’s business methods, management, and dealings with policyholders. All records relating to the subject of the examination must be made freely accessible to the Commissioner. If inadequate or incorrect accounts are found and have not been corrected by the examinee within 60 days after notice is given, the


44 Law Supplement

Commissioner may employ experts to rewrite, post, or balance the records at the examinee’s expense.

1.) Domestic insurers must be examined when applying for authority to do business in Georgia and at least once every five years.

i. Examination of other persons [Sec. 33-2-12] Whenever the Commissioner deems it necessary for the public interest, the Commissioner may examine the business records and transactions of:

■ any licensed insurance producer; ■ any person with a contractual right to control an insurer; ■ any person who controls the management of an insurer; ■ any person involved in the promotion or formation of a domestic insurer; ■ any person who transacts insurance business, whether the person is autho‑

rized or not; ■ any person who seeks to acquire a domestic insurer or an affiliate of one; and ■ any person who seeks to acquire any person subject to the Commissioner’s

jurisdiction.

j. Conduct of examination [Sec. 33-2-13] Every insurer or person being examined by the Commissioner must make available for inspection the busi‑ness records in the insurer’s or person’s possession or control that are relevant to the examination. If accounts are inadequate or incorrectly maintained, the Commissioner may hire experts to revise or correct the records at the expense of the person or insurer being examined, if the person or insurer failed to correct the accounts within 60 days of Commissioner’s notice to do so.

k. Examination reports [Sec. 33-2-14] The Commissioner must make a written report of each examination. He must provide the examinee with a copy of the proposed report at least 20 days before it is filed and may grant a hearing if requested to do so by the examinee within those 20 days. The examination report may be withheld from public inspection to protect the examinee from unwarranted injury. The Commissioner can disclose the contents of an examina‑tion report as long as the agency or office receiving the report agrees in writing to treat the report confidentially.

l. Examination expenses [Sec. 33-2-15] In most cases, examinees must pay examiners’ travel and living expenses related to an examination. If an exami‑nation is initiated because of a complaint and the Commissioner determines that the complaint was not justified, the Insurance Department (not the person examined) will pay the examination expenses.

m. Commissioner’s powers regarding examinations [Sec. 33-2-16] During examinations, investigations, or hearings, the Commissioner has the authority to:

■ take depositions; ■ subpoena witnesses;


45Law Supplement

■ administer oaths; ■ examine individuals under oath; and ■ compel the production of records, books, papers, and other documents.

2. Hearings [Secs. 33-2-17 to 19] The Commissioner must hold a public hearing whenever such a request is made in writing or whenever a hearing is required by the Georgia Insurance Code. Unless postponed by mutual consent, the hearing must be held no later than 30 days after written request is received by the Commissioner, and the Commissioner must give a notice of the time and place of the hearing at least 10 days in advance.

a. Show cause notice [Sec. 33-2-20] A person entitled to a hearing may be notified of a proposed action in the form of a notice to show cause, which states that the proposed action may be taken unless the person shows cause at a hearing why the action should not be taken.

b. Rules of order at the hearing [Sec. 33-2-21] The Commissioner (or designee) presides over all hearings. Formal rules of pleading and evidence do not need to be observed at hearings. All parties to a hearing have the right to:

■ appear in person or by counsel; ■ be present while evidence is given; ■ inspect documentary evidence; ■ present evidence supporting their interests; ■ have subpoenas issued by the Commissioner to compel the attendance of

witnesses and the production of evidence on their behalf; and ■ request a rehearing or reargument within 30 days after the Commissioner

issues an order.

c. Order on hearing [Sec. 33-2-23] No later than 30 days after the conclu‑sion of a hearing, the Commissioner must make an order on the hearing. This order must state the facts found in the hearing, the Commissioner’s conclusions, and the effective date of an action.

d. Penalties [Secs. 33-2-24, 26] Whenever a person appears to be engaging in an act, practice, or transaction that is prohibited by the Georgia Insurance Code, the Commissioner may issue a cease and desist order prohibiting the per‑son from continuing the act, practice, or transaction. The order must take effect immediately, even before a hearing, if the act or practice could endanger public health, safety, or welfare and requires emergency action.

1.) The Commissioner can impose one of the following penalties for each violation of the Georgia insurance rules or regulations:

■ Probation for up to one year ■ Fine of up to $2,000 for each nonwillful violation ■ Fine of up to $5,000 for each willful violation


46 Law Supplement

2.) Appeals [Sec. 33-2-26] Any party to a hearing or who is affected by an order of the Commissioner may appeal the order within 30 days after:

■ the order has been mailed or delivered; ■ the Commissioner’s order to deny a rehearing has been mailed or

delivered; ■ the Commissioner has refused or failed to issue an order on a hearing;

or ■ the Commissioner has refused or failed to hold a hearing.

3.) Judicial review [Sec. 33-2-27] The Commissioner can post‑pone the effective date of an order while a matter is under judicial review. The reviewing court may also postpone the effective date of the Commissioner’s order, and it can temporarily grant or extend the relief denied or withheld by the Commissioner’s order.

4.) Insurance fraud [Sec. 33-1-9] A natural person convicted of insur‑ance fraud is guilty of a felony and may be punished by:

■ imprisonment for at least 2, but no more than 10, years; ■ a fine of up to $10,000; or ■ both imprisonment and a fine.

e. Fees and taxes [Secs. 33-2-29] The Commissioner must remit all fees, taxes, dues, and penalties collected to the Office of Treasury and Fiscal Services. Refunds and credits can be claimed by written request to the Commissioner within seven years from the date of payment or collection of the amount claimed as a refund or credit.

f. Deficiency assessments [Secs. 33-2-30] The Commissioner will issue a notice of a tax deficiency within seven years from the day on which a return is filed. In the case of a failure to file a return, the Commissioner may issue this notice within 10 years from the date on which the return is due. There is no time limit for this notice in the case of fraud.

1.) Extensions for filing tax returns [Sec. 33-2-31] The Commissioner may extend the time for filing a tax return or paying taxes due for up to 30 days. If an extension is granted, the taxpayer must also pay interest on the amount due at the rate of 1% per month during the extension.

2.) Bonds and security deposits [Sec. 33-2-32] Corporations and individuals with bonds or securities on deposit are required to pay their annual fees by January 15. Failure to do so by that date subjects them to license suspension or revocation until they pay the fees in full.

g. Annual list of complaints [Sec. 33-2-33] Every year, the Commissioner will compile and publicly publish a list of all written complaints against autho‑rized insurers that the Commissioner’s office received from consumers in the state.


47Law Supplement

C. GEORGIA INSURERS INSOLVENCY POOL [33-36-2 TO 7] The Georgia Insurers Insolvency Pool provides a remedy for covered claims under property and casualty insurance policies when the insurer has become insolvent and is unable to fulfill its contrac‑tual obligations.

1. The pool consists of three accounts: ■ workers’ compensation account; ■ automobile account; and ■ other covered insurance account.

2. The pool is responsible for the: ■ investigation, adjustment, compromise, settlement, and payment of covered

claims; ■ investigation, handling, and denial of uncovered claims; and ■ management and investment of funds administered by the pool.

3. Membership [Sec. 33-36-5] All insurers must be members of the pool as a con‑dition of their authority to transact insurance in Georgia. The pool functions under the immediate supervision of the Commissioner.

4. A covered claim [Sec. 33-36-3] A covered claim is one that arises out of a property or casualty policy issued by an insurer that was authorized to do business in Georgia either at the time of policy issuance or at the time of the insured event.

a. In addition, to be covered the claim must be: ■ for unearned premium of a resident policyholder; ■ for unearned premium for property permanently situated in Georgia; ■ of a policyholder who was a resident of the state at the time of the insured

event; ■ of a person having an insurable interest in or related to property that was

permanently situated in the state; or ■ under liability or workers’ compensation when either the insured or the

third‑party claimant was a resident of the state at the time of the insured event.

b. The pool does not cover: ■ a claim in an amount less than $50; ■ a first‑party claim in excess of $300,000 or the policy limit, whichever is less; ■ a third‑party claim (other than workers’ compensation) in excess of

$300,000 or the policy limit, whichever is less; ■ any claim or obligation to insurers, insurance pools, underwriting associa‑

tions, or any person with a net worth greater than $10 million at the time of the insured event;

■ a claim for punitive damages and attorneys’ fees; ■ a claim for interest;


48 Law Supplement

■ a claim for workers’ compensation benefits payable after the effective date of the court order to rehabilitate or liquidate the insurer;

■ the portion of a claim unearned premium exceeding $20,000; or ■ a claim for unearned premiums only, if the policy did not contain a stated

premium.

5. Covered policies [Sec. 33-36-3(7)] The pool applies to property and casualty policies as defined in the Code, except:

■ life insurance and annuities; ■ accident, health and disability policies; ■ title insurance; ■ credit life insurance; ■ credit insurance; ■ mortgage guaranty, financial guaranty, and similar insurance; ■ fidelity and surety bonds; ■ insurance of warranties or service contracts; and ■ ocean marine insurance.

6. Board of trustees [Sec. 33-36-4] The Georgia Insurers Insolvency Pool is governed by a board of trustees consisting of seven members who are selected by the Commissioner and represent both stock and nonstock insurance companies doing business in the state.

a. Assessments are based on the amount of business written by the insurer and pro‑vide a mechanism to fund the pool.

b. The members of the board are not paid for their participation but are reimbursed for expenses.

c. Term of service is three years.

7. Assessments [Sec. 33-36-7] All members of the Georgia Insurers Insolvency Pool are assessed an amount based on their net premiums written for the line of busi‑ness to which the fund applies.

a. Separate accounts are established for workers’ compensation, automobile, and other lines.

b. When the pool has sufficient funds to pay in the event of an insolvency, assess‑ments are not made against the pool’s members.

c. Members may be exempted from participating in assessments by the Commissioner when he feels that the insurer’s financial condition may be seri‑ously affected if payments are made.


49Law Supplement

D. DEFINITIONS

1. Domestic insurance company [Sec. 33-3-1(4)] A domestic insurance com-pany is a company incorporated, formed, or organized under the laws of Georgia that usually has its principal or home office located in this state.

2. Foreign insurance company [Sec. 33-3-1(5)] A foreign insurance company is a company incorporated or organized under the laws of another state but licensed and permitted to conduct the business of insurance in the state of Georgia. For instance, Hanover Insurance Company of Worcester, Massachusetts is authorized to solicit insurance business in the state of Georgia. Therefore, in Georgia, the Hanover Insurance Company is viewed as a foreign insurer.

3. Alien insurance company [Sec. 33-3-1(2)] An alien insurance company is a company incorporated or organized outside the United States but licensed in the state of Georgia. For instance, Continental Reinsurance Company of London, England is incorporated in another country (England) but is licensed to conduct the business of insurance in this state.

4. Authorized insurance company An insurer that has received a certificate of authority from the State of Georgia and is licensed or authorized to conduct insurance business in this state is referred to as an authorized company. An authorized insurance company may also be referred to as an admitted company.

5. Unauthorized insurance company An insurer that has not received a cer‑tificate of authority from the State of Georgia and is not licensed nor authorized to transact insurance business in this state may be referred to as an unauthorized com-pany. An unauthorized insurance company may also be referred to as a nonadmitted company.

6. Transacting insurance [Sec. 33-1-2] Insurance business includes the transac‑tion of all matters pertaining to a contract of insurance, both prior to and subsequent to the effectuation of such a contract, and all matters arising out of such a contract or any claim thereunder. Insurance business does not include the pooling together by public entities for the purpose of self‑insuring casualty risks.

a. Transacting insurance involves making, negotiating, procuring, or proposing to make an insurance contract, taking an application, receiving or collecting premi‑ums, issuing contracts, or any form of business considered insurance business.

b. Other types of actions considered as transacting insurance involve disseminating information as to coverages or rates, forwarding applications, delivering policies, inspecting risks, fixing rates, or investigating losses or claims.

7. Agent [Sec. 33-23-1] An agent is an individual appointed or employed by an insurer who sells, solicits, or negotiates insurance. Agent also means an individual insurance producer.


50 Law Supplement

8. Subagent [Sec. 33-23-1] A subagent sells or negotiates insurance or annu‑ity contracts on behalf of a licensed agent. A subagent must have on file with the Commissioner a certificate of authority from each agent he represents.

9. Adjuster [Sec. 33-23-1] An adjuster, for some form of compensation, inves‑tigates, settles, adjusts, and reports about claims arising under insurance contracts. Independent adjusters represent the interest of the insurer but are not employees of the insurer. Public adjusters represent persons insured under policies covering physical property.

10. Counselor [Sec.33-23-1] A counselor advises people regarding the benefits, terms, value, or advantages of any insurance contract offered by an insurer. Actuaries or consultants advising insurers are not considered to be counselors. A consultant can‑not receive compensation from more than one source involving the same transaction.

11. Mutual insurer [Sec. 33-14-2] Mutual insurer means an incorporated insurer without capital stock or shares that is owned and governed by its policyholders.

12. Stock insurer [Sec. 33-14-2] Stock insurer means an incorporated insurer with capital divided into shares and owned by its shareholders.

E. CERTIFICATE OF AUTHORITY [SEC. 33-3-2] The Commissioner must grant a certificate of authority (license) to an insurer before it can transact insurance business in Georgia. The certificate of authority certifies that the company has complied with the requirements of the Georgia Insurance Code. Insurers that collect premiums and service policies currently in force covering residents of Georgia, but do not transact new insur‑ance, are not considered to be transacting insurance (except for purposes of premium tax requirements).

1. Qualifications for certificate of authority [Sec. 33-3-3] A certificate of authority can be issued to:

■ incorporated stock insurers; ■ incorporated mutual insurers; ■ fraternal benefit societies; ■ hospital service nonprofit corporations; ■ nonprofit medical service corporations; ■ Farmers’ mutual fire insurance companies; ■ Lloyd’s associations; and ■ reciprocal insurers.

2. Classes of insurance [33-3-5] Each of the following is considered a separate class of insurance:

■ Life, accident, and sickness ■ Property, marine, and transportation ■ Casualty ■ Surety


51Law Supplement

■ Title ■ Health Maintenance Organization

3. Minimum capital stock and surplus requirements [33-3-6] To qualify for an original certificate of authority to transact one or more classes of insurance, an insurer must maintain a minimum of $1.5 million in capital stock or in surplus.

4. Surplus requirements for new insurers [33-3-7] When first authorized, an insurer must possess surplus equal to the larger of:

■ $1.5 million, or ■ 50 percent of its paid‑in capital or surplus.

5. Issuance or refusal of certificate of authority [Sec. 33-3-15] If the Commissioner does not deny a certificate of authority within 90 days after an appli‑cation is filed, it is considered approved. The certification must specify the kinds of insurance the insurer is authorized to transact in Georgia.

6. Renewal [Sec. 33-3-16]

a. Certificates of authority must be renewed annually.

b. All certificates of authority expire at 12:00 midnight on June 30 of the year fol‑lowing date of issuance or renewal.

c. An insurer desiring renewal must file on March 1 preceding expiration a copy of its annual statement of the preceding year in a form approved for current use by the Commissioner.

7. Certificate of authority refusal [Sec. 33-3-17] After a hearing, the Commissioner can revoke, suspend, or refuse to renew the certificate of authority of an insurer that:

■ violates any provision of the Georgia insurance code; ■ knowingly violates any rule, regulation, or order of the Commissioner; ■ is in an unsound condition or a condition that renders its insurance transactions

in Georgia hazardous to the public; ■ regularly compels claimants to accept less than the amount due or forces them to

take legal action to secure full payment; ■ refuses to be examined; ■ fails to pay any final judgment rendered against it in Georgia within 30 days; or ■ is affiliated with and under the same general management or ownership as another

insurer that transacts direct insurance in Georgia without a certificate of authority (except as permitted for surplus lines insurance).

8. Certificate of authority suspension [Sec. 33-3-18] The Commissioner may, without giving advance notice or a hearing, place an insurer under administrative supervision or immediately suspend its certificate of authority:

■ who is under delinquency proceedings in any state;


52 Law Supplement

■ whose authority to do business has been revoked, suspended, or restricted in any state;

■ whose business may be hazardous to the public or to its insureds; ■ who exceeds the powers granted under its certificate of authority and applicable

law; or ■ whose business is conducted fraudulently.

9. Suspension or revocation of certificate: mandatory grounds [33-3-19] The Commissioner may refuse to issue or to renew, or may revoke or suspend an insurer’s certificate of authority:

■ if such action is required by any provision of this title; or ■ if the insurer no longer meets the requirements for the authority originally granted

on account of deficiency in assets or otherwise.

10. Administrative fines [Sec. 33-3-20]

a. After a hearing, the Commissioner can impose an administrative fine on an insurer if its officers, employees, agents, or representatives are found to have committed any of the following acts often enough to indicate a general business practice:

■ failure to process or pay claims in a timely manner; ■ failure to notify policyholders of the reason claims payments have not been

made when due; ■ refusal to pay claims without just cause; ■ compelling insureds or claimants to accept less than the amount due to

them; or ■ compelling insureds to initiate legal action to secure full payment or

settlement.

b. An administrative fine cannot exceed: ■ $1,000 for each nonwillful violation; or ■ $5,000 for each willful violation.

11. Information disclosure statement [33-3-28] Every property and casualty insurer must provide, within 60 days of receiving a written request from the claimant, a statement, disclosing:

■ each policy of insurance, including excess or umbrella insurance; ■ the name of the insurer; ■ the name of each insured; and ■ the limits of coverage.

12. Regulation of unauthorized insurers [Sec. 33-5-1] It is illegal for anyone in Georgia to represent an insurer that is not authorized at the time to transact insur‑ance in Georgia. These rules, however, do not apply to:

■ surplus lines insurance;


53Law Supplement

■ reinsurance; ■ adjusters involved in settling claims under policies that were sold, issued, and

delivered outside of Georgia; and ■ the professional services provided by an attorney.

F. AGENT, SUBAGENT, COUNSELOR, AND ADJUSTER LICENSING [SECS. 33-23-1 THROUGH 46] All agents, subagents, counselors, and adjusters must be licensed by the Commissioner to transact insurance business in Georgia. These licenses can only be issued to individuals. The Commissioner can issue two or more licenses to one individual who satisfies the requirements for each license.

1. Licensing exemptions [Secs. 33-23-4(h); 33-23-1(b)] The following do not need to be licensed:

■ salaried officers or employees of an agent or subagent who only perform clerical or administrative services in connection with insurance transactions (but do not sell insurance, sign or countersign contracts, or receive premiums);

■ insurance counselors who do not receive commission; ■ an employer or its officers, directors, or employees who administer an employee

benefit package that involves insurance, as long as the individuals are not com‑pensated by the company issuing the contracts;

■ employees of insurers or organizations employed by insurers who engage in the inspection, rating, or classification of risks or in the supervision of the training of insurance agents and who are not individually engaged in the sale, solicitation, or negotiation of insurance;

■ a person whose activities are limited to advertising without the intent to solicit insurance in Georgia through communications in printed publications or other forms of electronic mass media whose distribution is not limited to residents of the state;

■ a nonresident person who sells commercial property and casualty insurance to an insured with risks located in more than one state, provided that the person is otherwise licensed as an insurance agent to sell insurance in the state where the insured maintains its principal place of business and the contract of insurance insures risks located in that state; or

■ a salaried, full‑time employee who advises his employer relative to the insurance interests of the employer or its subsidiaries or business affiliates, provided that the employee does not sell or solicit insurance or receive a commissions.

2. Types of licenses [Ch. 120-2-3-.06] Agent and subagent licenses can be issued for the following kinds of insurance: life, accident and sickness, property, casualty, vari‑able products, personal lines property and casualty, limited lines credit insurance, and any other lines permitted by Georgia law.

3. Agents and subagents can only sell the kinds of insurance for which they hold a license and have a certificate of authority on file with the Commissioner. However, the subagent does not include those who:

■ place 12 or fewer insurance policies through another agent in any one calendar year; and

■ only place surplus lines insurance through surplus lines brokers.


54 Law Supplement

4. Insurers or agents doing business in Georgia can only make insurance contracts through or pay commissions to licensed agents, subagents, or adjusters.

G. LICENSING REQUIREMENTS [SECS. 33-23-5 TO 7] Applicants for agent, lim‑ited subagent, adjuster, and counselor licenses must:

■ be a resident of Georgia and be present in the state for at least six months each year (or live in a city that is located partly within Georgia and partly within an adjacent state that has similar licensing requirements);

■ be of good character; ■ be at least 18 years old; ■ complete the approved prelicensing course of study within one year after filing the

application; ■ pass any written examination required for the license; ■ not intend to use the license to obtain rebates or commission upon controlled busi‑

ness (no more than 25% of the agent’s premiums collected can come from controlled business);

■ (counselor license) five years’ experience either as an agent, subagent, adjuster; ■ be appointed by an authorized insurer; ■ (adjuster license) complete special education regarding the handling of loss claims

under insurance contracts; and ■ (adjuster and counselor license) file a bond, as required by the Commissioner.

H. LICENSE APPLICATION [SEC. 33-23-8] All licensing applicants must file a written application with the Commissioner. All applicants for agent licenses must be sponsored by an authorized insurer, that agrees to appoint the agent as its representative (if the agent’s license is granted). Applicants for subagent licenses must be appointed by an agent. The sponsor or appointee must certify that the applicant has satisfied the licensing requirements.

1. Agent’s certificate of authority [Sec. 33-23-26; Ch. 120-2-3-.21] Insurers authorized to transact insurance in Georgia must obtain an agent’s certificate of authority for each agent who sells insurance and negotiates contracts for them in Georgia. Each year, all insurers must renew their certificates of authority for agents and pay the appropriate fees.

2. Subagent’s certificate of authority [Secs. 33-23-27, 28] Agents licensed in Georgia must obtain a certificate of authority for all subagents representing them in Georgia. Each subagent’s certificate of authority must be renewed by the agent not more than once every three years. A subagent’s certificate of authority can only cover the kinds of insurance for which the agent is licensed. It does not grant the power to bind an insurer or countersign policies. All business transacted by a subagent must be in the name of the agent who employs the subagent. The agent is responsible for all of the subagent’s acts.

3. Prelicensing education [Ch. 120-2-3-.07(3), (4); .08] Licensing applicants must complete at least 20 classroom hours or approved online equivalent of prelicens‑ing education per line of insurance for which they are seeking licensure.


55Law Supplement

a. Study materials The Commissioner determines the study materials that must be used to prepare for the state’s insurance licensing exams. All exam questions are based on the content of these study materials.

b. Alternative prelicensing education In lieu of fulfilling the stated preli‑censing education requirements, an applicant may provide evidence of approved related education, such as:

■ college transcript showing 10 quarter hours (or equivalent) of insurance courses in the preceding 12 months; or

■ Chartered Property and Casualty Underwriter (CPCU®) kind of license.

4. Examination of applicants [Sec. 33-23-5; Ch. 120-2-3-.09, .14, .32] Individual applicants for agent, subagent, counselor, surplus lines broker, or adjuster licenses must take a written examination that tests their competence to act in such capacity. Examinees must obtain a score of at least 70% to pass the examination. Examinees who fail the examination must wait two weeks and pay the required fee before retaking the exam. Anyone who fails the exam three times must take the preli‑censing course before retaking the exam. The following applicants are not required to take a written examination:

■ applicants for a personal lines license who hold CPCU® designations; ■ applicants for counselor licenses who hold Certified Insurance Counselor, CPCU®,

or CLU® designations; ■ applicants who hold a Ph.D. in risk management; ■ adjusters who are salaried employees of insurers; ■ applicants for temporary licenses; ■ applicants for renewal licenses (unless the Commissioner determines that exami‑

nation is necessary to establish the applicant’s competency); ■ travel ticket selling agents who only sell individual accident policies; ■ applicants for credit insurance agent licenses; and ■ applicants for a workers’ compensation adjusters license who hold the designation

of CWCP.

5. Issuance of license and continuing education [Ch. 120-2-3-.15] Licenses (except temporary or probationary licenses) will not expire as long as the Commissioner receives the appropriate fees, along with evidence that the biennial continuing education requirements have been completed.

a. The standard requirement for continuing education is 24 hours biennially. Continuing education courses may be in any area in which a person is licensed. Three of the required hours must be on the subject of ethics.

1.) Residents who have been licensed for less than 20 years must complete at least 24 hours of continuing education biennially, of which three hours must be completed in ethics.

2.) Residents who have been licensed for at least 20 years must complete at least 20 hours of continuing education biennially, which includes three hours of ethics.


56 Law Supplement

b. For any person holding a multiple lines license where one of the lines is credit insurance or is a limited subagent license, no more than five hours of continuing education can come from the credit insurance or limited subagent subject areas. The ethics continuing education requirement does not apply to persons licensed in credit insurance only, or limited subagent only.

c. Workers’ compensation adjusters may complete either 10 hours of approved con‑tinuing education through the state workers’ compensation board or the normal requirement for property and casualty agents. Persons licensed solely as workers’ compensation adjusters are exempted from the ethics requirement.

d. Agents who will be selling through the National Flood Insurance Program (NFIP) must complete a one‑time three‑hour NFIP continuing education course. This course will count toward the agent’s regular continuing education require‑ment and may also be used to satisfy the ethics requirement.

e. Persons who are newly licensed will be considered to have met initial require‑ments for continuing education by filing their prelicensing course certificate with the renewal form. This exemption only applies for the first year of licensure.

f. Licensees will not receive credit for taking the same continuing education course in a two‑year period unless the course focuses on current issues, ethics, or legisla‑tive updates.

g. Credit for continuing education courses earned in one compliance period that exceeds the number of required hours can be applied to the next compliance period, as long as the credit does not exceed 50% of the biennial continuing education requirement.

6. Continuation of license [Sec. 33-23-18] All resident agent, limited sub‑agent, adjuster, and counselor licenses, with the exception of temporary or probation‑ary licenses, shall be issued on a biennial basis and shall expire on the last day of the licensee’s birth month. The Commissioner shall provide for a transitional process from annual to biennial licenses which may involve renewals for more or less than a bien‑nial license period and prorated license fees.

a. Licenses may be renewed upon receipt by the Commissioner of evidence of completion of required continuing education and payment of required fees prior to the last day of the licensee’s birth month and biennially thereafter.

b. An individual licensed for 10 or more consecutive years, and who does not currently transact insurance, shall be exempt from the continuing education requirement.

7. Refusal, suspension, or revocation of license [Sec. 33-23-21] A license (other than a probationary license) can be refused, suspended, or revoked by the Commissioner (anyone whose license or application has been refused or revoked must wait at least five years before reapplying for a license) if the individual commits any of the following acts:

■ violates any Georgia insurance laws;


57Law Supplement

■ misrepresents or conceals any facts in a licensing application or any form filed with the Commissioner;

■ attempts to obtain a license by misrepresentation, concealment, or other fraud; ■ misappropriates, converts to his own use, or illegally withholds money belonging

to an insurer, insured, agent, applicant, or beneficiary; ■ commits fraudulent or dishonest practices; ■ materially misrepresents the terms and conditions of an insurance policy or

contract; ■ fails or cheats on a required examination; ■ violates any rule or regulation issued by the Commissioner; ■ holds a license to secure rebates, commissions, or controlled business; ■ lacks trustworthiness or competence to act as a licensee; ■ fails or refuses (upon written demand) to pay over to any insurer, agent, applicant,

beneficiary, or insured any money that belongs to that person; ■ refuses to produce records in response to a written demand by the Commissioner; ■ has knowingly participated in writing or issuing substantial overinsurance of any

property risk; ■ fails to report to the Commissioner any criminal prosecution taken in any

jurisdiction; ■ has not complied with a court order to pay child support; ■ is a borrower in default who is not in satisfactory repayment status; ■ is convicted, arrested, charged, or sentenced for any felony or crime of immorality;

and ■ has had any kind of license revoked, suspended, denied, or refused by any licensing

authority.

8. Temporary licenses [Sec. 33-23-13] The Commissioner can issue a temporary license to a family member, associate, guardian, or estate executor of a former agent or subagent who dies or becomes unable to carry out his duties because of service in the United States armed forces, illness, disability, or termination of appointment by the insurer.

a. The Commissioner will only grant a temporary license to an agent if the inca‑pacitated agent or subagent was the only person in the agency who was licensed to transact that specific type of insurance.

b. Temporary licenses may also be issued, at the request of the insurer, to agents in training.

c. Holders of temporary licenses can continue the former agent or subagent’s insur‑ance business, but cannot solicit, negotiate, or procure new insurance accounts.

d. Applicants for temporary licenses do not need to meet the agent or subagent examination, residence, or education licensing requirements.

e. Temporary licenses are effective for six months and can be renewed, at the dis‑cretion of the Commissioner, for up to a total of 15 months.


58 Law Supplement

9. Probationary licenses [Sec. 33-23-14] The Commissioner can issue proba‑tionary licenses for periods of between three and 12 months.

10. Limited subagent licenses [Ch. 120-2-3-.31] The Commissioner can issue limited subagent licenses, without requiring an examination, to applicants who only transact personal lines (property and casualty) or personal insurance (life, accident and sickness).

a. Limited subagent means an individual licensed under the sponsorship of a licensed agent. The sponsoring agent must agree to appoint the applicant as a representa‑tive of the agent.

b. The sponsoring agent shall retain the limited subagent’s license. In the event the relationship with the limited subagent is terminated, the sponsoring agent must return the license to the Commissioner with a request for termination of the limited subagent license.

c. The termination, cancellation, or nonrenewal of the sponsoring agent’s license will result in the cancellation of the limited subagent license.

d. Limited subagent licensees must: ■ complete 20 hours of prelicensing education; and ■ complete at least 10 hours of continuing education biennially.

11. Nonresident licenses [Ch. 120-2-3-.34; Sec. 33-23-16] The Commissioner can issue nonresident licenses to individuals who reside and are licensed in another state and:

■ submit to the Commissioner the licensing application that the person submitted in his home state or a completed uniform application or a form prescribed by the Commissioner for licensing nonresident agents;

■ pay the required licensing fee and submit the proper application; ■ live in a state that allows Georgia residents to be licensed in the same manner as

nonresidents are licensed in Georgia; and ■ hold the same kind of license in their state of residence and is currently in good.

12. Place of business [Sec. 33-23-25] Every licensed producer must maintain an office that is accessible to the public. This office must be where the producer conducts most of its insurance business under the license. The Commissioner will keep records of all such offices.

a. Producer information [Sec. 33-23-33] The producer must notify the Commissioner of any change in any of the following within 30 days of the change:

■ Business address ■ Residence address ■ Employing insurer’s address


59Law Supplement

■ Agency’s address ■ Agency’s trade name ■ Partners’ or corporation’s name

b. Business records [Sec. 33-23-34] Every producer is required to keep a record of every business transaction for at least five years after the transaction is completed or the insurance contract expires, whichever is later.

13. Surplus lines brokers [Sec. 33-23-37] A resident property, casualty, and surety insurance producer may be licensed as a surplus lines broker. The license expires biennially, on the last day of the licensee’s birth month, and may be renewed. A bro‑ker must post a $50,000 bond with the Commissioner. The bond cannot be terminated unless the Commissioner is given at least 30 days’ notice.

I. UNFAIR TRADE PRACTICES AND FRAUDS [SECS. 33-6-4 AND 5] It is illegal to engage in any trade practice that is considered to be an unfair method of competition or a deceptive act. The Commissioner can fine violators or suspend or revoke their licenses.

1. Misrepresentations and false advertising [Sec. 33-6-4] It is illegal to make, issue, or circulate untrue, deceptive, or misleading statements regarding the insurance business. It is also illegal to misrepresent a policy to induce a policyholder to lapse, forfeit, or surrender a policy. This practice is called twisting. Similarly, inducing a policyowner to borrow, make a partial withdrawal, or otherwise to financially encum‑ber an existing policy in order to purchase another with the same agent or insurer without appropriate justification is an unfair practice called churning. Specifically prohibited is information that misrepresents:

■ benefits, advantages, or terms of any policy; ■ dividends or share of the surplus previously paid or to be received any policy; ■ financial condition of any insurer or the legal reserve system upon which a life

insurer operates; or ■ any policy’s name or title to misrepresent its true nature.

2. False financial statements [Sec. 33-6-4] It is illegal to publish or circu‑late any false statement regarding an insurer’s financial condition with the intent to deceive.

3. Boycott, coercion, and intimidation [Sec. 33-6-4] It is illegal to commit an act of boycott, coercion, or intimidation that results in unreasonable restraint of or monopoly in the insurance business.

4. Controlled business The sale of an insurance product by an agent on the agent’s own life, the life of a family member, or the life of an employee of the agent or fam‑ily member is considered controlled business. Such sales are not prohibited, but may not exceed 25% of the premium volume written by an agent in the course of any 12‑month period.


60 Law Supplement

5. Defamation of insurer [Sec. 33-6-4] It is illegal to make or circulate any statement that is false or maliciously critical regarding an insurer’s financial condition to injure any person engaged in the insurance business.

6. Delivery of stock [Sec. 33-6-4] It is illegal to issue or deliver agency or com‑pany stock, benefit certificates, or any advisory board contracts promising returns and profits as an inducement to purchase insurance.

7. Unfair discrimination [Sec. 33-6-4] It is illegal to make or permit any unfair discrimination in the issuance, renewal, or cancellation of any policy or contract of insurance against direct loss to residential property and the contents, in the amount of premium, policy fees, or rates charged for the policies or contracts when the discrimi‑nation is based solely upon the age or geographical location of the property within a rated fire district without regard to objective loss experience relating to it.

8. Rebates [Sec. 33-6-4] It is illegal to offer, as an inducement to purchase insur‑ance, anything of value not specified in the contract, such as:

■ rebates of premiums payable on the contract; ■ special favors or advantages in the dividends or other benefits; and ■ stocks, bonds, securities, and their dividends or profits.

9. Not considered rebates or unfair discrimination [Sec. 33-6-4] Not con‑sidered to be a rebate or unfair discrimination, and not prohibited is paying commis‑sions or other compensation to agents or brokers or allowing or returning dividends, savings, or unabsorbed premium deposits to participating policyholders, members, or subscribers.

10. Applications and solicitation [Sec. 33-6-4(10)] It is illegal to encourage agents to accept applications that misrepresent or conceal information that, if stated in the application, would prevent the policy from being issued.

11. Representation [Sec. 33-6-4(12), (14)] The following acts are illegal: ■ representing that any insurer or agent is employed by or otherwise associated with

any Medicare program or with the United States Social Security Administration, or that any insurance policy sold or offered has been endorsed or sponsored by the federal or state government;

■ offering to sell Medicare supplement coverage that does not comply with the Georgia insurance laws or regulations;

■ representing that an individual policy is a group policy; ■ failing to disclose in printed advertising material that medical benefits are calcu‑

lated on the basis of usual, customary, and reasonable charges; and ■ knowingly selling Medicaid recipients unnecessary coverage that duplicates ben‑

efits provided under Medicaid.

12. Prohibited advertising [Sec. 33-6-4(13)] Insurers cannot advertise individual or group policies in a manner that has not been approved for use in Georgia by the Commissioner.


61Law Supplement

13. Other unfair methods of competition [Sec. 33-6-5] It is illegal for agents or insurers to:

■ use a name that deceptively suggests that a person is an insurer; ■ include the premium for insurance in the overall purchase price of merchandise or

property, without separately identifying the amount charged and to be paid for the insurance; and

■ limit the amount or kind of coverage available to an individual solely because the individual is blind or partially blind.

14. Investigation by the Commissioner [Sec. 33-6-6] The Commissioner can examine and investigate the affairs of all persons engaged in the insurance business in Georgia to determine whether they are engaged in any prohibited unfair method of competition or a deceptive act or practice.

15. Hearings regarding unfair practices [Sec. 33-6-7] The Commissioner can issue a statement of charges to any person believed to be engaged in an unfair practice or method of competition, if a proceeding appears to be in the public’s best interest. The statement must include a notice of hearing to be held no less than 15 days after the notice is served. At the hearing, the person has the opportunity to show cause why the Commissioner should not issue an order to cease and desist from the practice.

16. Penalties [Sec. 33-6-8] If, after a hearing, the Commissioner determines that the person charged has engaged in an unfair practice or method of competition, the Commissioner can fine the violator. The Commissioner may also file a cease and desist order after a notice and hearing. An appeal may be filed for review with the court.

a. Penalty for violating cease and desist order [Sec. 33-6-9] Anyone who violates a cease and desist order is subject to:

■ a fine of up to $10,000 for each violation; ■ suspension or revocation of the person’s license; or ■ any other reasonable and appropriate penalty.

17. Unlawful contracts [Sec. 33-6-13] It is illegal to enter into any contract to: ■ control the rates to be charged for insuring any risks in Georgia; ■ discriminate against any person in Georgia by reason of his method of transacting

insurance or affiliation with any insurance organization; or ■ establish any condition in Georgia that is detrimental to competition or injurious

to the public.

J. UNFAIR CLAIMS SETTLEMENT PRACTICES [SEC. 33-6-34] The insurance code sets forth standards for the investigation of claims arising under policies or certificates of insurance issued to residents of Georgia (not including workers’ compensation, fidelity, or surety insurance). The Commissioner can issue a statement of charges and notice of a hearing to anyone believed to be engaging in an unfair claims settlement practice, if a pro‑ceeding appears to be in the public interest. It is an improper claims settlement practice for a domestic, foreign, or alien insurer to commit any of the following acts flagrantly or with such frequency that they indicate a general business practice:

■ knowingly misrepresent relevant facts or policy provisions to claimants and insureds;


62 Law Supplement

■ failing to acknowledge communications regarding claims arising under its policies; ■ failing to adopt and implement procedures for the prompt investigation and settlement

of claims arising under its policies; ■ not attempting in good faith to bring about prompt, fair, and equitable settlement of

claims submitted in which liability has become reasonably clear; ■ compelling insureds or beneficiaries to institute suits to recover amounts due under their

policies by offering substantially less than the amounts ultimately recovered in suits brought by them;

■ refusing to pay claims without conducting a reasonable investigation; ■ when requested by the insured in writing, failing to affirm or deny coverage of claims

within a reasonable time after completing an investigation related to such claims; ■ when requested by the insured in writing, making claims payments to an insured or

beneficiary without indicating the coverage under which each payment is being made; ■ unreasonably delaying the investigation or payment of claims by requiring both a formal

proof of loss and subsequent verification that duplicates the information; ■ when requested by the insured in writing, failing in the case of claims denial or offers of

compromise settlement to provide a prompt explanation of the basis for such actions; ■ failing to provide forms necessary to file claims within 15 calendar days of a request,

with reasonable explanations regarding their use; ■ failing to adopt and implement reasonable standards to assure that the repairs of a

repairer owned by the insurer are performed in a workmanlike manner; ■ indicating to a first‑party claimant on a payment, draft check, or accompanying letter

that the payment is final or a release of any claim unless the policy limit has been paid or there has been a compromise settlement agreed to by the first‑party claimant and the insurer as to coverage and amount payable under the contract; and

■ issuing checks or drafts in a partial settlement of a loss or claim under a specific coverage which contains language that releases the insurer or its insured from its total liability.

K. RATE REGULATION

1. Applicability of provisions [33-9-3] These provisions apply to all insurance on risks or on operations in this state, except:

■ reinsurance other than joint reinsurance; ■ life insurance; ■ disability income; ■ ocean marine; ■ aircraft hull and liability; ■ title insurance; and ■ annuities.

2. Rate making standards [33-9-4]

a. Rates may not be excessive or inadequate, nor unfairly discriminatory.


63Law Supplement

b. No rate will be held to be excessive unless it is unreasonably high for the insur‑ance provided and a reasonable degree of competition does not exist in the area with respect to the classification to which such rate is applicable.

c. No rate for personal private passenger motor vehicle insurance will be held to be excessive unless it is unreasonably high for the insurance provided and a reason‑able degree of competition does not exist.

d. No rate will be held inadequate unless it is unreasonably low for the insurance provided and continued use of it would endanger solvency of the insurer, or unless its use tends to destroy competition or create a monopoly.

3. Licensing of rate service organizations [33-9-12] No rating organization may conduct its operations in Georgia without first filing a written application and securing a license to act as a rating organization.

4. Rate filings [33-9-21] Every insurer must maintain with the Commissioner copies of its rates, rating plans, rating systems, underwriting rules, and policy or bond forms. The maintenance of rates, rating plans, rating systems, underwriting rules, and policy or bond forms with the Commissioner by a licensed rating organization of which an insurer is a member or subscriber will be sufficient compliance for any insurer maintaining membership or subscriberships in such organization, to the extent that the insurer uses the rates, rating plans, rating systems, underwriting rules, and policy or bond forms of such organization.

5. Suspension or revocation of license [33-9-29] The Commissioner may suspend or revoke the license of any rating organization that has willfully engaged in any fraudulent or dishonest act or practices.

6. Rate fixing prohibited [33-9-37] If any insurer conspires to fix, set, or adhere to insurance rates, except as expressly sanctioned by this chapter, the insurer will be liable to any person damaged for an amount equal to three times the amount of the damage together with the damaged party’s attorney’s fees.

7. Failure to comply with final order of the Commissioner [33-9-30, 38]

a. The penalty for failure to comply with a final order of the Commissioner under the rate regulation provisions will not exceed $50.

b. If the failure is willful, a penalty may be assessed in an amount up to $5,000.

c. The Commissioner may suspend or revoke the license of any rating organization or the certificate of authority of any insurer that fails to comply with an order or any extension thereof.

8. Surcharges for automobile accidents [33-9-40] No insurer may surcharge the premium or rate charged on a policy of motor vehicle insurance or cancel such policy as a result of the insured person’s involvement in a multivehicle accident when such person was not at fault.


64 Law Supplement

9. Personal auto policy premium reductions [33-9-42]

a. For each personal auto policy issued the insurer must offer a reduction of not less than 10% in premiums if all named drivers:

■ have committed no traffic offenses for the prior three years or since the date of licensure, whichever is shorter;

■ have had no claims based on fault against an insurer for the prior three years; ■ (for drivers 25 years of age or older) have completed an approved course in

defensive driving of not less than six hours or emergency vehicles operations; and

■ (for drivers younger than 25 years of age) have completed an approved pre‑paratory course of not less than 30 hours of classroom training and not less than six hours of practical training.

b. Eligibility for reductions in premiums will continue for a period of three years, as long as these requirements are maintained.

L. BINDERS [33-24-33]

1. Binders or other contracts for temporary insurance may be made orally or in writing and include all the usual terms of the policy together with any applicable endorse‑ments that are designated in the binder, except as superseded by the clear and express terms of the binder.

2. No binder may be valid beyond the issuance of the policy or beyond 90 days from its effective date, whichever period is shorter, unless the binder is issued for excess or surplus line insurance.

3. If the policy has not been issued, a binder may be extended or renewed beyond 90 days with the written approval of the Commissioner.

4. This section does not apply to life or accident and sickness insurance.

II. GEORGIA LAWS, RULES, AND REGULATIONS PERTINENT TO PROPERTY INSURANCE ONLY

A. CANCELLATION AND NONRENEWAL OF POLICIES

1. General cancellation provisions [Sec. 33-24-44] When an insurer cancels an insurance policy, the insured must be notified in writing no less than 30 days prior to the effective date of cancellation.

a. The notice of cancellation must be delivered in person or via first class mail to the last known address of the insured.

b. The notice must contain the reason(s) for cancellation.


65Law Supplement

c. If a policy is canceled due to nonpayment of premium, the insurer must give the insured 10 days’ advance notice of cancellation.

d. Any unearned premium that is due the insured must be refunded on a pro rata basis.

1.) If the return premium is not sent with the notice of cancellation, it must be made on or before the cancellation date.

2.) Unearned premiums may be refunded to the insured’s agent of record, in which case the agent must mail the return to the insured within 10 working days of receipt in the agent’s office or on the date of cancellation, whichever is later.

e. If an insured has an open account with the agent, the agent may apply any return premiums due the insured to any outstanding balance; however, return premiums in excess of amounts owed to the agent must be returned to the insured within 10 working days.

2. Cancellation and notice requirement by the insured [Sec. 33-24-44.1] An insured may request cancellation of an existing insurance policy by returning the original policy to the insurer or by making a request for cancellation to the insurer or its duly authorized agent orally, electronically, or in writing stating a future date on which the policy is to be canceled.

a. In the event of oral cancellation, the insurer must, within 10 days, provide con‑firmation of cancellation to the insured electronically or in writing. The insurer or its duly authorized agent may require that the insured provide written, elec‑tronic, or other recorded verification of the request for cancellation prior to such cancellation taking effect.

b. If only the interest of the insured is affected, the policy must be canceled on the later of:

■ the date the returned policy, ■ the date the request is received by the insurer, or ■ the date specified in the request.

An insurer may waive the future date requirement by confirming the date and time of cancellation to the insured, and the insurer must document in its policy file the request for cancellation along with the date of the requested cancellation.

c. If by statute, regulation, or contract the insurance policy may not be canceled unless notice is given to a governmental agency, mortgagee, or other third party, the insurer shall mail or deliver the notice stating the date cancellation shall become effective, but such date shall not be less than 10 days from the date of mailing or delivery of the notice. Notice must be sent by first‑class mail to the last address of record of the named insured, mortgagee, or other third party, where applicable, and must provide evidence of mailing.


66 Law Supplement

3. Cancellation and nonrenewal of homeowners policies [Sec. 33-24-46] No insurer shall refuse to renew a policy unless written notice of nonrenewal is deliv‑ered in person or mailed to the insured no less than 30 days prior to the date of such nonrenewal.

a. The notification must contain the reason(s) for nonrenewal.

b. The insurer must mail or deliver a notice of reduction in coverage to the named insured no less than 30 days prior to the proposed change in coverage. Reduction in coverage means a change made by the insurer that results in a removal of cov‑erage, diminution in scope or less coverage, or the addition of an exclusion, but not made at the request of the insured. A change in a policy’s terms , or a reduc‑tion in coverage, is not considered a nonrenewal of the policy.

c. When a homeowners policy has been in effect for at least 60 days or is a renewal, cancellation may only be effected for the following reasons:

■ nonpayment of premium; ■ fraud, concealment of a material fact, or material misrepresentation made by

or with the knowledge of the insured in obtaining the policy, continuing the policy, or presenting a claim under the policy;

■ a change in the risk that substantially increases the hazard insured against; or ■ violation of any material terms or conditions of the contract by the insured.

d. When a policy is canceled for other than nonpayment of premium or if the insurer nonrenews a policy, the insured must be notified of his possible eligibility for coverage under the Georgia Fair Access to Insurance Requirements (FAIR) Plan.

e. Nonrenewal of a homeowners policy is prohibited if based on:

1.) lack of supporting business with the insurer;

2.) change in the insurer’s underwriting guidelines that is not approved by the Commissioner; or

3.) two or fewer claims against the policy in the preceding 36 months if the claims are not attributable to the negligent or intentional acts of the insured or other resident of the household.

B. MISCELLANEOUS GEORGIA INSURANCE LAWS In insurance, the terms property insurance and fire insurance are often used interchangeably. Generally speaking, property insurance policies are those designed to provide protection for loss of damage to buildings and personal property.

1. Standard fire insurance policy [Sec. 33-32-1] Georgia law requires that every policy of fire insurance covering property located in the state conform to the provisions of the standard fire policy as approved by the Commissioner.


67Law Supplement

a. Multiple lines policies that include fire insurance must contain provisions at least as favorable as those provided under the standard fire policy, but need not contain the form itself.

b. This provision does not apply to casualty insurance, marine or transportation insurance, or insurance on growing crops.

2. Return of premiums paid [Sec. 33-32-4] In the event of a total loss to property, if the insurer pays an amount less than the amount insured under the policy, the insurer must refund to the insured the difference between the amount of premium actually paid and the premium that would have been charged for a policy with an amount of insurance equal to the amount paid by the insurer for the loss.

3. Valuation of loss [Sec. 33-32-5] In the event of a total loss by fire to a one‑ or two‑family residential building or structure, Georgia law reflects a valued policy statute.

a. An insurer is required to value the property at the amount of insurance in effect at the time of the loss, less any depreciation that may have occurred between the time the policy was issued and the time of the loss.

b. This provision does not prohibit an insurer from using a coinsurance clause in a policy, nor does it prevent the insurer from repairing or replacing the damaged property at its own expense without contribution from the insured.

c. This valuation provision does not apply where: ■ the building or structure is not wholly destroyed by fire; ■ two or more policies provide insurance for the same loss; ■ two or more buildings or structures are insured using a blanket amount of

insurance; or ■ the completed value of a building or structure is insured under a builder’s risk

policy.

4. Tobacco crop coverage [Sec. 33-32-6] Any insurer who issues a crop insur‑ance policy, other than federal crop insurance, for tobacco crops grown in Georgia will have coverage available for wind, hail, or both until the crop is harvested. This may be accomplished by endorsement or as a part of the basic policy.

5. Georgia Fair Access to Insurance Requirements plan (FAIR plan) [Secs. 33-33-1 to 33-33-8] FAIR plans are federally mandated programs used in various states, such as Georgia, that create a pool to provide basic property insurance to individuals who are unable to obtain such coverage through the voluntary insur‑ance market.

a. The purpose of the FAIR plan is to make property insurance available to urban property owners and others in areas where insurers are reluctant to issue policies.


68 Law Supplement

b. The plan operates as an underwriting association comprised of licensed insurers who share risks on a fair and equitable basis.

c. The plan is governed by a board of directors, subject to approval by the Commissioner.

d. All insurers authorized to and writing insurance in the state are required to par‑ticipate in the FAIR plan.

e. A company’s share of FAIR plan risks is based on its share of the voluntary mar‑ket, divided between personal and commercial risks.

f. When an applicant is refused coverage by the plan, an appeal may filed with the Commissioner who will either overturn or sustain the action of the plan.

g. Local public entities, including counties, municipalities, or local boards of educa‑tion who are insured with the plan and are refused a renewal policy may appeal the decision to the Commissioner.

h. When requested, the Commissioner will grant the entity temporary coverage if the current policy is due to expire while the review is pending.

i. During the time any such temporary coverage is in effect, the public entity may be directed to enact loss control measures including:

■ protection of physically damaged property from further damage; ■ prevention or limitation of access to the premises; ■ disconnection of utilities; ■ installation of locks, alarms, or security lighting; ■ inspections of the premises; or ■ provision of security guards.

C. WINDSTORM INSURANCE Windstorm insurance is designed to cover damage to property and personal belongings due to high winds. In states where windstorms, tornadoes, and cyclones are more prevalent, insurance companies may require homeowners to purchase windstorm insurance riders to cover damage to property and personal belongings.

It is not unusual for storm surges and flooding to occur after windstorms. Windstorm insurance does not cover damages caused by these events. Flood insurance is a separate type of coverage and goes into effect 30 days after purchase. Additionally, damage to vehicles by fallen trees or other debris is not covered by windstorm insurance. An auto policy with com‑prehensive, or other‑than‑collision, coverage provides coverage for these types of damages.


69Law Supplement

III. GEORGIA LAWS, RULES AND REGULATIONS PERTINENT TO CASUALTY INSURANCE ONLY

A. CANCELLATION AND NONRENEWAL OF POLICIES

1. Cancellation of personal automobile insurance [Sec. 33-24-45] No notice of cancellation issued by an insurer is effective except for:

■ failure of the insured to pay premiums when due; ■ obtaining a policy through material misrepresentation; ■ violation of the terms and conditions of the policy by any insured; ■ failure to fully disclose motor vehicle records for the past 36 months if asked in an

application for insurance; ■ failure to disclose information necessary for proper issuance or rating of the risk; ■ making a false or fraudulent claim; ■ when the insured or a resident of the household

— has, within the last 36 months, had a driver’s license suspended or revoked; — is or becomes subject to epilepsy or heart attacks and does not provide a physi‑

cian statement attesting to the unqualified ability to operate a motor vehicle; — has an accident record, conviction record (criminal or traffic), or a physical,

mental, or other condition that makes operation of a motor vehicle dangerous to the public;

— has been addicted to the use of narcotics or other drugs in the past 36 months; — has been convicted of a felony during the past 36 months; — has been convicted, during the past 36 months, of criminal negligence re‑

sulting in death, homicide, or assault arising out of the operation of a motor vehicle;

— has been convicted of operating a motor vehicle while intoxicated or under the influence of drugs during the past 36 months;

— has left the scene of an accident; — has been convicted of motor vehicle theft; — has made false statements in a driver’s license application; — has been convicted of three or more speeding violations in the past

36 months; or ■ when the insured automobile:

— is so mechanically defective that its operation might endanger public safety; — is used to carry passengers for hire; — is used to transport explosives or flammables; — is an authorized emergency vehicle; or — has changed in shape or condition so as to substantially increase the risk

insured.


70 Law Supplement

2. Nonrenewal of personal automobile insurance [Sec. 33-24-45] No insurer shall refuse to renew a policy unless written notice of nonrenewal is deliv‑ered in person or mailed to the insured no less than 30 days prior to the date of such nonrenewal.

a. The notification must contain the reason(s) for nonrenewal.

b. Nonrenewal of personal automobile insurance is prohibited if based on: ■ failure of the insured to agree to write supporting business with the insurer; ■ change in the insurer’s underwriting rules that is not approved by the

Commissioner; ■ accidents in which the insured was not at fault; ■ filing of an uninsured or underinsured motorists claim; ■ filing of a comprehensive claim; ■ filing of a claim for towing or road service; ■ age, sex, residence location, race, creed, national origin, ancestry, or marital

status; ■ lawful occupation of the insured; ■ military service of the insured; ■ number of years of driving experience of the insured; ■ claims that occurred more than 36 months prior to the expiration date of the

policy; ■ one claim for an at‑fault accident if coverage has been in effect continuously

for at least 36 months; ■ two claims for at‑fault accidents if the policy has been in effect continuously

for the past 72 months; or ■ factors not related to the claims record, driving record, or driving ability of

the insured or other vehicle operators in the insured’s household.

c. Notice of nonrenewal does not apply in the case of: ■ nonpayment of premium for the expiring policy, ■ failure of the insured to pay the premium as required by the insurer for

renewal, ■ the insurer making an offer to renew by delivering the policy or certificate,

and ■ a reduction in coverage that has been mailed 30 days in advance of the

change.Reduction in coverage means a change made by the insurer that results in a

removal of coverage, diminution in scope or less coverage, or the addition of an exclusion, but not made at the request of the insured. The insurer must mail or deliver a notice of reduction in coverage to the named insured no less than 30 days prior to the proposed change in coverage.

3. Other provisions for personal automobile insurance [Sec. 33-24-45] The above cancellation and nonrenewal provisions do not apply to policies that have been in effect less than 60 days unless it is a renewal policy. When a policy is canceled


71Law Supplement

for a reason other than nonpayment of premium, or if the policy is nonrenewed, the insurer must notify the insured of his possible eligibility for insurance through the Georgia Automobile Insurance Plan.

4. Cancellation and nonrenewal of commercial policies [Sec. 33-24-47] A notice of termination, including a notice of cancellation or nonrenewal, a notice of increase in premiums other than due to a change in risk or exposure, that exceeds 15% of the current policy’s premium, or a notice of change in any policy provision that limits or restricts coverage must be delivered in person or mailed to the insured at least 45 days prior to the effective date of such termination or change.

a. Failure to comply with this requirement entitles the policyholder to purchase a policy for an additional 30 days beyond the current expiration date on the same terms and conditions and with the same premium as the expiring policy.

b. If a policy will incur a premium increase of more than 15%, the dollar amount of that increase must be stated in the notice.

c. An insurer must provide a written notice of a reduction in coverage to the named insured no less than 45 days prior to the effective date of the proposed reduction in coverage. A reduction in coverage means a change made by the insurer that results in a removal of coverage, diminution in scope or less cover‑age, or the addition of an exclusion. Reduction in coverage will not include any change, reduction, or elimination of coverage made at the request of the insured.

5. Cancellation and nonrenewal of workers’ compensation policies [Sec. 33-24-47] A notice of cancellation or nonrenewal of a workers’ compensa‑tion policy must be delivered in person to the insured by certified mail or statutory overnight delivery, return receipt requested, to the last address of record at least 75 days prior to the termination date of the policy.

6. Notice requirements for cancellations and nonrenewals [120-2-53-.03] Each notice of cancellation or nonrenewal must advise the insured of the opportunity of review of the nonrenewal by the Commissioner if the insured believes that his or her policy has been nonrenewed in violation of law. The notice of cancellation or nonrenewal must specifically state any and all reasons for such cancellation or nonre‑newal in clear language.

7. Tender of premiums during period of review, refund of premiums [120-2-53-.04] During the period of review of the cancellation or nonrenewal, the insured must tender to the insurer a 30 day pro rata portion of the premiums appli‑cable to the policy at the time the cancellation or nonrenewal is issued. The insured must submit proof of such tender of premium as a part of the request for review by the Commissioner.

8. Disposition and penalties [120-2-53-.05]

a. If the Commissioner determines the cancellation or nonrenewal is lawful, ter‑mination under the policy will be effective as of the date and time originally set forth under the notice of cancellation or nonrenewal.


72 Law Supplement

b. Termination of the interim coverage during the Commissioner’s review may not be effective less than five days following the date of the Commissioner’s decision.

c. If the cancellation or nonrenewal is upheld by the Commissioner, the insurer may retain that portion of the pro rata premiums tendered for the review period, but must refund all remaining premiums to the insured within ten working days of receipt of the Commissioner’s decision establishing the effective date of the termination of the interim coverage.

d. A penalty may be assessed against the insurer in any cases where the Commissioner has determined that the cancellation or nonrenewal was not lawful.

e. If the Commissioner makes such a determination, the insurer must reinstate or renew the policy.

B. MISCELLANEOUS GEORGIA INSURANCE LAWS

1. Automobile insurance Auto insurance is perhaps the most significant aspect of casualty insurance. Nationwide, it represents more than half of the total premium dol‑lars spent on insurance. The following is a summary of Georgia laws relevant to auto insurance.

a. Compulsory insurance [Secs. 33-34-3,4; 33-7-11; 40-9-2 through 80] Georgia requires that all owners and operators of motor vehicles in the state carry automobile liability insurance as evidence of security in complying with the state’s financial responsibility law.

1.) This provision does not apply to self‑insurers.

2.) Policies must be issued for a minimum term of six months.

3.) No motor vehicle may be licensed in Georgia until the owner or insured has furnished proof of financial responsibility evidenced by automobile liability insurance or an approved self‑insurance plan.

4.) No automobile insurance policy may be issued for limits less than the state’s financial responsibility limits. The financial responsibility limits in Georgia are (25/50/25):

■ $25,000 for bodily injury or death of one person; ■ $50,000 for bodily injury or death of two or more persons; and ■ $25,000 for property damage to property of others.

5.) Insurers must provide liability insurance for bodily injury and property damage, and may also provide coverage for medical payments, compre‑hensive, collision, and other optional coverages. Insurers may offer cover‑age restricted to named insured and resident relatives.


73Law Supplement

6.) Government-owned vehicles [40-9-4] The financial responsi‑bility statutes do not apply to any motor vehicle owned by the United States, the State of Georgia, any political subdivision of this state, or any municipality therein, or any motor carrier required by any other law to file evidence of insurance or other surety.

7.) Surrender of license [40-9-7] Any person whose driver’s license is suspended must immediately return that license to the department. Any person willfully failing to return a suspended driver’s license will be guilty of a misdemeanor and, upon conviction thereof, punished by a fine of up to $500, imprisonment of up to 30 days, or both.

8.) Misdemeanor violations [40-9-8] Any person whose driver’s license has been suspended under this chapter and who, during such suspension, drives any motor vehicle upon any highway except where permitted under this chapter, will be guilty of a misdemeanor and, upon conviction thereof, may be punished by imprisonment for not less than five days nor more than six months and there may be imposed a fine of not more than $500.

9.) Reinstatement fees [40-9-9] Whenever a driver’s license is sus‑pended and the filing of proof of financial responsibility is made a prereq‑uisite to reinstatement of the license, the driver or owner must pay a fee of $25.

10.) Methods of giving proof [40-9-80] Proof of financial responsibil‑ity may be provided by:

■ a written certificate of any insurance carrier certifying that there is in effect a liability policy; or

■ a plan of self‑insurance, accepted by the Commissioner.

b. Uninsured motorist coverage [Sec. 33-7-11] Uninsured motorists (UM) coverage allows the insured, resident relatives, and passengers in a cov‑ered auto to collect sums another driver would be legally liable to pay for bodily injury or property damage. In other words, the insured’s own policy responds by transferring the insured party’s own liability insurance to the party causing the accident.

1.) This coverage is intended to protect people injured in an accident that was caused by an uninsured motorist, hit‑and‑run driver, or a driver whose insurer is insolvent.

2.) In Georgia, all automobile policies that provide liability insurance must also provide uninsured motorists coverage, unless rejected in writing by the insured.

3.) UM coverage may be issued in an amount up to the limits provided in the policy for bodily injury and property damage, but in no event less than the financial responsibility limit of the state.


74 Law Supplement

4.) The coverage may be issued with a deductible of $250, $500, or $1,000 at the option of the insured.

a.) Deductibles may not be reduced below $250.

b.) The deductible will reduce the UM premium otherwise payable.

5.) Uninsured motorist limits [Sec. 33-7-11 (b)(1)(D)] In Georgia, the insured will select whether the uninsured motorist limits are in addi‑tion to the liability coverage of the at‑fault party (addition method) or whether the insured will only collect the difference between the at‑fault party’s liability coverage and the insured’s uninsured motorist limits (reduction method). The reduction method will have a lower premium.

c. Advance premium payment [Sec. 33-34-3] All automobile policies issued in the state require that the insurer collect an advance payment for the first 30 days of coverage.

1.) This provision applies only to personal automobile policies.

2.) If payment is made with a check or money order that is not honored by a financial institution upon first presentation, the insurer is deemed to have complied with this provision and may issue notice of cancellation for nonpayment upon 10 days’ advance notice.

d. Selection of repair facility [Sec. 33-34-6] No insurer shall represent to an insured or other party making a claim under an automobile policy that the use of or failure to use a particular repair facility may result in nonpayment of a claim.

e. Continuation of spousal coverage [Sec. 33-34-7] Every policy of automobile insurance providing coverage for private passenger vehicles must contain a provision that allows the spouse of a named insured to continue coverage for 90 days following the death of the insured or the termination of the marital relationship. This continued coverage must be requested from the insurer or its agent.

f. Georgia Automobile Insurance Plan [Ch. 120-2-14-.-01 to .17] The Georgia Automobile Insurance Plan makes automobile insurance, includ‑ing garage liability for commercial risks, available to applicants who are in good faith entitled to such coverage but are unable to procure it through the voluntary insurance market.

1.) Every insurer authorized to and writing automobile insurance in the state is required to participate in the plan.

2.) Risks are distributed among plan participants based on their percentage of voluntary automobile insurance written in the state.


75Law Supplement

3.) Insurance issued in the plan must contain liability insurance in the mini‑mum amounts contained in the financial responsibility law.

4.) In addition, other coverages may be offered.

2. Workers’ compensation coverage [Secs. 34-9-1 to 14, Ch. 120-2-37-.01 through .09] Workers’ compensation provides compensation to employees who are injured on the job, generally without any consideration of fault or negligence on the part of either the employer or employee.

a. In return for the right of compensation, the employee gives up the right to sue the employer for perhaps a larger but uncertain benefit.

b. The amount of an employee’s compensation is fixed by law.

c. Workers’ compensation insurance is an exclusive remedy coverage.

d. In Georgia, this coverage may be provided by a private insurer or arranged by an employer who is self‑insured or a self insurance group.

e. Businesses subject to the workers’ compensation law are required to obtain insurance or qualify as self‑insureds for possible compensation liability to their employees.

f. All businesses employing three or more employees must comply with the law.

g. Domestic workers may not be covered, and coverage for farm workers is on a voluntary basis.

h. State Board [Sec. 34-9-40] Administration of Georgia’s workers’ compen‑sation laws is the responsibility of the State Board of Workers’ Compensation.

i. Coverage [Sec. 34-9-260 to 265] The coverage provided under workers’ compensation is:

■ wage replacement (temporary total disability, permanent total disability, temporary partial disability, permanent partial disability, and disfigurement);

■ medical compensation; ■ death benefits; and ■ burial allowance.

j. Residual market mechanism [Sec. 34-9-133] The Georgia Workers’ Compensation Assigned Risk Plan exists to provide required workers’ compen‑sation coverage for employers who do not qualify for coverage in the voluntary market. Liability is apportioned among all insurers authorized to write workers’ compensation and employer’s liability in the state.


76 Law Supplement

k. Workers’ compensation rate filings [Reg. 120-2-37-.05]

1.) Every insurer desiring to revise the premium rates it charges for workers’ compensation insurance coverage must file its own individual rate filing with the Commissioner. The insurer must simultaneously file a copy of the filing with the authorized rating organization of which the insurer is a member or subscriber.

2.) Premium rates for each individual rate filing will be developed and established based upon each individual insurer’s experience in the state of Georgia to the extent the experience is actuarially credible. Where the experience of an insurer is less than fully credible, it may be credibility‑weighted against the latest corresponding experience as filed with the Department by an authorized rating organization. The Commissioner may make the determination as to the credibility of the material contained in such a filing or filings.

3.) With each individual rate filing, the individual insurer must include the loss ratios, reserves, reserve development information, expenses including commissions paid and dividends paid, investment income, pure premium data adjusted for loss development and loss trending, profits, and all other data and information used by that insurer for formulating its workers’ compensation premium rates contained in the individual rate filing.


s e c t i o n

77

4s e c t i o n

77

Practice Exam

HOW TO USE: The practice exam tests your retention of the law supple-

ment material. After you have studied the Cram Sheets, Class Notes, and

Detailed Text take the following practice exam, as well as the state specific

law questions in the InsuranceProTM QBank at www.kaplanfinancial.com.


78 Law Supplement

I. General Insurance

1. Which of the following types of insurers is incorporated or organized under the laws of a country other than the United States?A. ForeignB. DomesticC. AlienD. International

2. The Commissioner can impose all of the following penalties for violating Georgia’s insurance laws EXCEPTA. a fine of up to $2,000 for nonwillful violationsB. imprisonment for up to 2 yearsC. a fine of up to $5,000 for willful violationsD. probation for up to 1 year

3. Who investigates, settles, and provides reports involving claims arising under insurance contracts?A. AdjusterB. AgentC. SubagentD. Counselor

4. Who enforces all laws that relate to insurance in Georgia?A. Commissioner of InsuranceB. Insurance agentsC. Federal Insurance AssociationD. Georgia legislature

5. Which of the following is NOT a duty of the Commissioner of Insurance?A. Conducting hearingsB. Granting licenses to agentsC. Writing Georgia insurance lawsD. Making rules and regulations to help interpret

the state insurance laws

6. To qualify for an agent’s license, an applicant mustA. be at least 21 years oldB. be appointed by at least 2 insurersC. pass the state examinationD. be employed for at least 2 years by an insurer

7. If an insurer violates any section of the insurance code, what can the Commissioner issue to stop the insurer from committing the violation?A. Notice of a hearingB. Notice of violationC. Cease and desist orderD. Suspension order

8. How often must the Commissioner examine domestic insurers?A. Only when a violation is suspectedB. At least once every 5 yearsC. AnnuallyD. At least once every 3 years

9. When conducting examinations, the Commissioner of Insurance can do all of the following EXCEPTA. subpoena witnessesB. administer oathsC. require the production of records, books,

papers and any other relevant documentsD. require parties to appear in person

10. The Georgia Insurers Insolvency PoolA. is voluntary for domestic insurersB. protects insureds against insurer insolvenciesC. cannot investigate or defend claimsD. never offers coverage for claims that involve

refunds of unearned premiums

L A W S U P P L E M E N T P R A C T I C E E X A M

Student instructions: Following your thorough study of this supplement, take this 50-question sample examination. Grade your performance utilizing the answer key provided. Carefully review the topics pertaining to those questions answered incorrectly.


79Law Supplement

11. An insurer’s license to do business in Georgia is called aA. notice of risk assignmentB. certificate of authorityC. mutual benefit cardD. license to solicit registration

12. What nonprofit association in Georgia protects owners of policies issued by insurers that become insolvent?A. Georgia Board of InsolvencyB. Department of InsuranceC. Georgia Insurers Insolvency Pool D. Georgia Life, Accident and Sickness

Insurance Pool

13. All of the following constitute the transaction of insurance EXCEPT A. solicitation of insuranceB. making preliminary insurance negotiationsC. offer and acceptance of insurance contractsD. applying for an agent’s license

14. Parties to a public hearing held by the Commissioner of Insurance have the right to do all of the following EXCEPTA. withhold incriminating evidenceB. present evidence supporting their interestsC. request a rehearing after an orderD. inspect documentary evidence

15. The Commissioner of Insurance may suspend or revoke a certificate of authority for all of the following EXCEPTA. the company is in an unsound conditionB. the company refuses to be examinedC. the company is under the same ownership as

another insurer that transacts direct insurance in Georgia without a certificate of authority

D. the company was compelled by a court order to pay a final judgment rendered against it

16. Agent licenses can be issued for all of the following kinds of insurance EXCEPTA. lifeB. casualty C. credit life, accident and healthD. surplus lines through appropriate brokers

17. The Commissioner may, without a hearing, immediately suspend the certificate of authority of an insurer except for each of the following reasons EXCEPTA. failing to pay claims when dueB. exceeding powers granted under its certificate

of authorityC. conducting business in a fraudulent mannerD. having authority to do business revoked in any

state

18. An applicant for an agent’s license is required to take a written examination if heA. is applying for a temporary licenseB. has completed the prelicensing education

requirementsC. holds a CPCU designation and is applying

for a property and casualty insurance agent’s license

D. holds a Ph.D. in risk management

19. How long do temporary agent licenses remain in effect?A. Until a licensed agent can fill the positionB. Six weeks, renewable up to 5 monthsC. Three months, nonrenewableD. Six months, renewable up to 15 months

20. Which of the following must be authorized to transact insurance in Georgia?A. Reinsurance insurersB. Insurers that only provide property and

casualty insuranceC. Surplus lines insurersD. Attorneys who advise clients about insurance


80 Law Supplement

21. Who performs the Commissioner’s duties in the Commissioner’s absence?A. Chairman of the Board of the Department of

InsuranceB. Deputy Commissioner of InsuranceC. GovernorD. Director of the Advisory Board

22. Knowingly circulating a false statement about an insurer’s financial condition is calledA. defamationB. replacementC. conversionD. rebating

23. Misrepresenting the terms of a policy to induce a policyholder to lapse or surrender a policy is calledA. coercionB. rebatingC. unfair discriminationD. twisting

24. All of the following are considered to be unfair and deceptive trade practices EXCEPTA. rebating premiumsB. circulating a statement claiming that another

insurer is in danger of going bankruptC. inflating the dividend amount when discussing

the policies advantages with potential policyholders

D. issuing checks in full settlement of a claim that contain language releasing the insurer from liability

II. Property Insurance

25. Homeowners insurance may be canceled by an insurer by mailing or delivering how many days’ advance notice of cancellation?A. 10 daysB. 15 daysC. 20 daysD. 30 days

26. When a homeowners policy has been in effect for at least 60 days, it may be canceled for each of the following reasons EXCEPTA. nonpayment of premiumB. failure to install smoke detectorsC. concealment of a material factD. presenting a fraudulent claim

27. If an insurer cancels a homeowners policy, it must notify the insuredA. that a hearing may be obtained from the

Insurance CommissionerB. that the insured may be eligible for coverage

from the Georgia FAIR PlanC. of the phone number for the Georgia

Department of InsuranceD. that coverage may be obtained for another

insurer or the insured’s choice

28. Nonrenewal of a homeowners policy is prohibited based on any of the following reasons EXCEPTA. change in the insurer’s underwriting guidelines

if not approved by the CommissionerB. lack of supporting automobile insurance with

the insurerC. a claim for a fire started by a tenant of the

insured who became angryD. 2 claims in the past 3 years for windstorm

damage

29. When the renewal of a commercial policy will contain coverage restrictions not in the current policy, the insurer must notify the insured of this fact how many days prior to renewal?A. 20B. 30C. 45D. 60

30. In order to operate as a premium finance company in Georgia, an individual must obtain a(n)A. certificate of authorityB. approvalC. licenseD. authorization


81Law Supplement

31. Failure to obtain the necessary documentation to operate as a premium finance company may result in a fine of up toA. $500B. $1,000C. $10,000D. $25,000

32. A law that requires an insurer to pay the face amount of a policy in the event of a total loss to property is referred to as aA. replacement cost lawB. total property lawC. valued policy lawD. market value law

33. An insurer may pay less than the face amount of a policy when any of the following conditions exist EXCEPT whenA. the loss is partialB. there is a blanket amount of insuranceC. there are two policies covering the lossD. the loss is to a two‑family structure

34. The Georgia FAIR Plan isA. operated by the Insurance CommissionerB. an association of insurance companiesC. a public entityD. a voluntary insurance market

35. Risks submitted to the Georgia FAIR Plan are shared based on an insurer’sA. operating profit in the prior yearB. appetite for high‑risk businessC. market share of similar businessD. complain ratio with the Department

36. When a public entity requests temporary coverage from the Georgia Fair Plan, they may be asked to enact any of the following loss control measures EXCEPTA. disconnection of utilitiesB. provision of security guardsC. limitation of access to the premisesD. provision of guard dogs

III. Casualty Insurance

37. Each of the following is a valid reason for cancellation of personal automobile insurance EXCEPTA. failure of the insured to pay premiums when

dueB. failure of the insured to install safety devices

in an automobileC. obtaining a policy through material

misrepresentationD. making a false or fraudulent claim

38. An insurance company may cancel a personal automobile policy if an insured or a resident of the household hasA. cancerB. any medical conditionC. epilepsy or a heart conditionD. poor eyesight

39. An insurance company is legally entitled to cancel an automobile policy when the insured vehicleA. reaches 20 years of age or olderB. is used to carry passengers other than resident

relativesC. is used as an emergency vehicleD. has outstanding parking violations

40. Personal automobile insurance must be renewed by an insurer unless they have notified the insured of their intention not to renew withinA. 5 days of the expirationB. 10 days of the expirationC. 20 days of the expirationD. 30 days of the expiration

41. A personal automobile policy may be nonrenewed for which of the following reasons? A. Failure of the insured to place homeowners

coverage with the insurerB. Failure of the insured to provide underwriting

informationC. Filing an uninsured motorists claimD. Filing a claim for damage to a vehicle’s

windshield


82 Law Supplement

42. When an insurer cancels a policy of personal automobile insurance, it must notify the insured thatA. coverage is available in another insurer of his

choiceB. he may be eligible for workers’ compensation

benefitsC. coverage may be obtained from the insurer at

a later point in timeD. he may be eligible for coverage under the

Georgia Automobile Insurance Plan

43. An insurer must notify a commercial insured when the renewal premium for the policy is going to increase by more thanA. 10%B. 15%C. 20%D. 25%

44. Workers’ compensation insurance may only be nonrenewed by giving the insured how many days’ advance notice?A. 30B. 45C. 60D. 75

45. Which of the following statements about workers’ compensation coverage in Georgia is CORRECT?A. Businesses with 10 or more employees must

comply with the law.B. Domestic workers must be covered.C. Coverage of farm workers is mandatory.D. It is considered an exclusive remedy coverage.

46. Automobile insurance in the state of Georgia isA. required by lawB. requested as proof of financial responsibilityC. difficult to obtainD. optional based on a person’s driving record

47. The minimum financial responsibility limits in Georgia areA. 15/30/10B. 25/50/10C. 25/50/25D. 15/30/5

48. Automobile policies issued in Georgia must contain which of the following coverages?A. ComprehensiveB. Medical paymentsC. Property damage liabilityD. Towing and labor

49. Which of the following statements regarding uninsured motorists coverage in Georgia is CORRECT?A. It is required and may not be rejected by the

insured.B. It must be issued at the same limit as the

bodily injury liability.C. It must be included but may be rejected by the

insured.D. It is optional and an insurer may or may not

provide it.

50. Uninsured motorists coverage may include a deductible in any of the following amounts EXCEPTA. $100B. $250C. $500D. $1,000


83Law Supplement

1. C 11. B 21. B 31. B 41. B

2. B 12. C 22. A 32. C 42. D

3. A 13. D 23. D 33. D 43. B

4. A 14. A 24. D 34. B 44. D

5. C 15. D 25. D 35. C 45. D

6. C 16. D 26. B 36. D 46. A

7. C 17. A 27. B 37. B 47. C

8. B 18. B 28. C 38. C 48. C

9. D 19. D 29. C 39. C 49. C

10. B 20. B 30. C 40. D 50. A

A N S W E R S T O L A W S U P P L E M E N T P R A C T I C E E X A M


Property and Casualty Insurance

Documents

Transcript of Property and Casualty Insurance