Georgia Insurers and the Commissioner's Authority

The Department of Insurance and the Commissioner (O.C.G.A. §§ 33-2-1 through 33-2-10)

Georgia’s insurance laws are collected in Title 33 of the Official Code of Georgia Annotated. Title 33 creates the Department of Insurance and makes the Commissioner of Insurance its chief officer, with the duties and powers that Title 33 creates (O.C.G.A. § 33-2-1). Those powers reach every insurer, producer and adjuster, and anyone else transacting insurance in Georgia.

The Commissioner organizes the department into divisions and appoints its examiners, actuaries and other staff (§§ 33-2-3, 33-2-5(a)). The Commissioner and department employees may not be financially interested in any insurer, agency or insurance transaction, except as a policyholder or claimant, and may not accept any fee or gift for their work beyond the compensation and expense allowance the law provides (§ 33-2-5(b)-(c)). A deputy, examiner or other employee acting in the Commissioner’s name and by the Commissioner’s delegated authority may exercise the Commissioner’s powers, and the Commissioner is responsible for those acts (§ 33-2-6).

Rules and regulations

The Commissioner may make rules reasonably necessary to implement Title 33, issue interpretive rulings and prescribe forms, and govern procedure in department proceedings (§ 33-2-9(a)). A proposed rule, amendment or repeal must be on file as a public record in the Commissioner’s office for at least 10 days before it takes effect, and the Commissioner must give notice and let interested persons submit their views (§ 33-2-9(b)-(c)). A licensee who violates a rule faces the same administrative penalties as one who violates Title 33 itself (§ 33-2-24(g)).

Orders and notices

When the Commissioner acts against a particular person, the action takes the form of an order or notice. It is effective only in writing and signed by the Commissioner or by the Commissioner’s authority (§ 33-2-10(a)). Every order states its effective date, its purpose, its grounds and the provisions of Title 33 relied on (§ 33-2-10(b)). It may be served by delivery, or by mail to the person’s principal place of business or last address of record in the Commissioner’s office (§ 33-2-10(c)).

Examination of records (O.C.G.A. §§ 33-2-11 through 33-2-16)

Who may be examined

Whenever the Commissioner deems it expedient, the Commissioner examines the affairs, accounts, records and assets of each insurer authorized in Georgia, along with its business methods, management and dealings with policyholders (§ 33-2-11(a)). Each domestic insurer must be examined at least once every five years. An alien insurer’s examination is limited to its insurance transactions in the United States (§ 33-2-11(a)). For a foreign or alien insurer, the Commissioner may accept an examination report by the insurance department of its state of domicile or port-of-entry state, if that department was accredited under the NAIC’s financial regulation standards when it conducted the examination or the examination meets the other conditions the statute sets (§ 33-2-11(d)).

When the Commissioner considers it necessary in the public interest, the Commissioner may examine the affairs, accounts and transactions of any agent, subagent, broker, counselor, adjuster or other licensee; anyone who controls an insurer or is forming a domestic insurer; and any other person transacting insurance, whether authorized or unauthorized (§ 33-2-12).

Duties and costs of the person examined

The person examined, and its officers and employees, must produce the records relating to the examination, make them freely accessible and help the examiners (§ 33-2-13(a)). If the accounts are inadequate or incorrectly kept and the person does not correct them within 60 days after notice, the Commissioner may hire experts to rewrite or balance them at that person’s expense (§ 33-2-13(b)).

At the Commissioner’s direction, the person examined pays the examination’s expenses. There is one protection for producers: when an agent, broker, solicitor, counselor or adjuster is examined because of a complaint that the Commissioner finds was not justified, the department bears the expense (§ 33-2-15(a)).

Reports and subpoenas

The examination report contains only facts drawn from the records and from sworn testimony (§ 33-2-14(a)). The Commissioner must give the proposed report to the person examined not less than 20 days before filing it, and must hold a hearing first if that person asks in writing within the period (§ 33-2-14(c)). Once certified and filed, the report is prima facie evidence of its facts in any proceeding the Commissioner brings against the person examined (§ 33-2-14(b)).

For any examination, investigation or hearing, the Commissioner may subpoena witnesses and records, take depositions and examine people under oath (§ 33-2-16(a)). Refusing without just cause to obey a lawful subpoena is a misdemeanor (§ 33-2-16(e)), and willfully testifying falsely under oath on a material matter is the offense of false swearing (§ 33-2-16(d)).

Investigations and notice of hearing (O.C.G.A. §§ 33-6-6, 33-6-7; 33-2-17 through 33-2-28)

Investigating unfair trade practices

Article 1 of Chapter 6 of Title 33, on unfair trade practices, gives the Commissioner the power to examine and investigate every person engaged in the business of insurance in Georgia to find out whether that person has engaged or is engaging in an unfair method of competition or an unfair or deceptive act or practice (§ 33-6-6(a)). The Commissioner may require reports by ZIP code, or in any other format, that make such practices easy to see (§ 33-6-6(b)). “Person” in this article expressly includes agents, brokers, counselors and adjusters (§ 33-6-2).

When the Commissioner has reason to believe that a person has engaged or is engaging in an unfair practice, whether or not it is one listed in §§ 33-6-4 and 33-6-5, and that a proceeding would be in the public interest, the Commissioner serves a statement of the charges and a notice of hearing. The hearing may not be set less than 15 days after the notice is served (§ 33-6-7(a)). At the hearing, the person may show cause why a cease and desist order should not issue. Formal rules of pleading and evidence need not be observed, and the Commissioner may administer oaths and compel witnesses and documents (§ 33-6-7(b)-(d)).

Hearings generally

Most of the Commissioner’s other hearings, including licensing cases, follow the procedure in Chapter 2 of Title 33 (§ 33-23-22(a)):

• When a hearing is held. The Commissioner must hold a hearing when Title 33 requires one, or on the written demand of a person aggrieved by the Commissioner’s act, threatened act, report or order, other than an order on a hearing the person had actual notice of or appeared at. The demand must state how the person is aggrieved and the grounds relied on (§ 33-2-17(b)-(c)). If the Commissioner finds the demand made in good faith, the person aggrieved and the grounds sufficient, the hearing is held within 30 days after the demand is received, unless postponed by mutual consent (§ 33-2-17(c)).
• Notice. The Commissioner gives notice of the time, place and matters to be considered not less than 10 days in advance (§ 33-2-19). The notice may be a notice to show cause why a proposed action should not be taken (§ 33-2-20).
• The hearing. Hearings are open to the public (§ 33-2-18). A party may appear in person or by counsel, examine witnesses, present evidence and have subpoenas issued (§ 33-2-21(b)). A hearing held on proper notice is valid even if a party fails to attend (§ 33-2-22(b)).
• The order. Within 30 days after the hearing ends, the Commissioner issues an order stating the facts found, the conclusions drawn from them and the effective date (§ 33-2-23(a)-(b)). A party may ask in writing for a rehearing within 30 days after the order is mailed or delivered, which the Commissioner may grant (§ 33-2-21(f)).

Orders without a prior hearing

Where a person would otherwise be entitled to a hearing before an order, two provisions let the Commissioner issue the order first:

• A proposed order takes effect on a later date without a hearing unless the person subject to it requests one within 10 days after receiving it. Failing to ask waives the hearing (§ 33-2-24(b)).
• An emergency order takes effect immediately when the Commissioner has reasonable cause to believe that a prohibited act is occurring or about to occur, that it presents imminent peril to the public health, safety or welfare, and that it requires emergency action. The order states those findings, and a hearing is held if the person requests one within 10 days of receiving it (§ 33-2-24(c)).

Judicial review

A party to the hearing who is aggrieved by the order, or a person whose financial interests are directly affected by the Commissioner’s refusal or failure to hold a required hearing or to issue an order on one, may appeal. The appeal must be taken within 30 days after the order on hearing, or the order denying rehearing, is mailed or delivered, or after the refusal or failure (§ 33-2-26). Review is by a petition in the Superior Court of Fulton County (§ 33-2-27(a)). A cease and desist order for an unfair trade practice becomes final when the time to petition for review runs out without a petition, or when the court affirms it or dismisses the appeal (§ 33-6-10(c)).

Sidenote

The order of steps

Under Chapter 2, a hearing follows a fixed path: notice at least 10 days ahead, a public hearing, a written order within 30 days after it ends, then a rehearing request or an appeal to the Superior Court of Fulton County within 30 days. An unfair trade practice charge needs at least 15 days’ notice. Proposed and emergency orders reverse the sequence: the order comes first, and the person has 10 days to request a hearing.

Penalties (O.C.G.A. §§ 33-6-8, 33-6-9, 33-2-24, 33-3-20)

Unfair trade practices. If, after the hearing, the Commissioner determines that the person engaged in an unfair practice, the Commissioner orders the person to cease and desist (§ 33-6-8(a)). For a practice §§ 33-6-4 and 33-6-5 prohibit, such as misrepresentation or rebating, the Commissioner may also fine the person for each act, suspend or revoke the license if the person knew or reasonably should have known of the violation, or order other relief (§ 33-6-8(a)). Violating the cease and desist order while it is in effect brings its own fine per act, license action or other relief, after notice and hearing (§ 33-6-9).

Violations of Title 33 generally. For any violation of Title 33 or of the Commissioner’s rules, regulations or orders, in addition to every other penalty, the Commissioner may place a licensee on probation for up to one year for each act. The Commissioner may also fine anyone who is licensed, or should be, up to $2,000 for each act, or up to $5,000 for each act if the person knew or reasonably should have known of the violation (§ 33-2-24(g)). The Commissioner may ask a superior court to enforce an order or enjoin a violation, and refers crimes to the prosecuting attorney (§ 33-2-24(d)-(f)).

Insurers’ claim practices. After a hearing, the Commissioner may fine an insurer that, as a general business practice, fails to handle or pay claims diligently and on time, compels claimants without just cause to accept less than is due or to sue, or takes payment for steering repair work to a particular shop (§ 33-3-20(a)).

Violation	Penalty	Provision
Unfair trade practice prohibited by §§ 33-6-4 and 33-6-5	A fine for each act, larger if the person knew or reasonably should have known	§ 33-6-8(a)(1)
Violating a cease and desist order while it is in effect	A fine for each act while the order is in effect	§ 33-6-9(1)
By a person licensed or required to be licensed: any violation of Title 33 or of a rule, regulation or order	$2,000 per act, or $5,000 per act if the person knew or reasonably should have known; a licensee may also be placed on probation for up to one year per act	§ 33-2-24(g)
Insurer’s general business practice of poor claim handling	$1,000 per act, or $5,000 per act of willful misconduct	§ 33-3-20(b)

Every one of these penalties is counted for each act, and in all but the cease and desist penalty, knowledge or willfulness raises the ceiling. Ten misrepresentations made to ten customers are ten violations, not one.

Domestic, foreign and alien insurers (O.C.G.A. § 33-3-1)

Georgia classifies an insurer by where it was formed, not by where it does business:

Definitions

Domestic insurer

An insurer formed under the laws of Georgia (§ 33-3-1(4)).

Foreign insurer

An insurer formed under the laws of another state or government of the United States, including a territory, district or commonwealth (§ 33-3-1(5)-(6)).

Alien insurer

An insurer formed under the laws of a country other than the United States (§ 33-3-1(2)).

From Georgia’s point of view, an insurer incorporated in Ohio or Puerto Rico is a foreign insurer, and one incorporated in Bermuda or England is an alien insurer. A common mistake is to call an insurer “from another country” a foreign insurer. It is an alien insurer.

The classification shapes Georgia’s oversight. An alien insurer that enters the United States through Georgia must keep its principal U.S. place of business, and complete records of its U.S. business, in Georgia (§ 33-3-30(a)).

Stock and mutual insurers (O.C.G.A. § 33-14-2)

Definitions

Stock insurer

An incorporated insurer with capital divided into shares and owned by its shareholders (§ 33-14-2(2)).

Mutual insurer

An incorporated insurer without capital stock or shares, owned and governed by its policyholders (§ 33-14-2(1)).

These are not the only forms an authorized insurer can take. An insurer authorized in Georgia must be an incorporated stock insurer, an incorporated mutual insurer, a fraternal benefit society, a farmers’ mutual fire insurance company, a Lloyd’s association or a reciprocal insurer (§ 33-3-3(a)). A reciprocal or Lloyd’s insurer may not transact life insurance, and a title insurer must be a stock insurer (§ 33-3-4).

Policyholders as members of a mutual

Each policyholder of a domestic mutual, other than under a reinsurance contract, is a member of the insurer, and the policy must say so (§ 33-14-67(a)).

Membership can carry an obligation. Unless the policy is nonassessable, each member has a contingent liability, pro rata, for the insurer’s obligations, up to the maximum stated in its charter, and every policy must state it (§ 33-14-68(a)-(b)). If the mutual’s assets fall below its liabilities plus its required minimum surplus, and the shortfall is not cured from other sources, the directors must levy an assessment on members who held policies with contingent liability at any time within the 12 months before the assessment notice was mailed (§ 33-14-69(a)). The assessment covers the deficiency plus working funds of no more than 5 percent of the insurer’s liabilities (§ 33-14-69(b)). A domestic mutual that keeps its required deposits and surplus, complies with Title 33 and is in sound condition may, with the Commissioner’s written approval, extinguish that liability and issue nonassessable policies (§ 33-14-71(a)).

Dividends

A domestic stock insurer pays dividends to stockholders only out of unassigned surplus unless the Commissioner specially approves (§ 33-14-41(b)). A domestic mutual pays dividends to members only out of net realized savings and earnings (§ 33-14-73(a)). No earned dividend may be made contingent on paying the renewal premium (§ 33-14-16(b)), and returning dividends to participating policyholders is not an illegal rebate (§ 33-9-36(d)).

Authorized and unauthorized insurers and the certificate of authority (O.C.G.A. §§ 33-3-2 through 33-3-30)

The certificate requirement

No person may act as an insurer, and no insurer may transact insurance in Georgia, except as authorized by a subsisting certificate of authority from the Commissioner, unless Title 33 expressly provides otherwise (§ 33-3-2(a)). An insurer with a certificate is authorized; Title 33 also calls such an insurer admitted (§ 33-23-38(b)), and one without a certificate unauthorized or nonadmitted (§§ 33-5-1, 33-5-21).

Section 33-3-2 itself names three activities that need no certificate; other parts of Title 33, such as the surplus lines law, provide more:

• Investigating, adjusting and litigating a claim in Georgia (§ 33-3-2(b))
• Collecting premiums on and servicing policies still in force, by an insurer writing no new Georgia business, which is treated as transacting insurance for premium tax purposes only (§ 33-3-2(c))
• Later transactions on coverage that was solicited, written and delivered outside Georgia on a subject not resident, located or expressly to be performed in Georgia when issued (§ 33-3-2(d))

Kinds, classes and financial requirements

The certificate specifies the kinds of insurance the insurer may transact in Georgia (§ 33-3-15(b)). Those kinds are grouped into six classes (§ 33-3-5):

1. Life, accident and sickness
2. Property, marine and transportation
3. Casualty
4. Surety
5. Title
6. Health maintenance organization

Before granting a certificate, Georgia requires minimum capital, surplus and a deposit. An insurer must have and keep at least $1.5 million in capital stock or surplus (§ 33-3-6(a)), with domestic mutual and reciprocal insurers and farmers’ mutual fire insurance companies meeting surplus rules set in their own chapters (§ 33-3-6(b)). It must also keep additional surplus equal to the larger of $1.5 million or 50 percent of the paid-in capital (or, for a mutual or reciprocal, the surplus) otherwise required (§ 33-3-7). Except for farmers’ mutual fire insurance companies, it must deposit eligible securities in trust with the state, generally $100,000 for one class of insurance and $25,000 for each additional class, up to $200,000 in total (§ 33-3-8(a), (b)(1)). A foreign insurer may instead show that a like deposit is held in public custody in another state, and alien insurers follow separate rules (§ 33-3-8(b)(2)-(4)).

Applying for and renewing a certificate

The application describes the insurer and attaches its charter, bylaws and last examination report. A foreign or alien insurer also files its annual statement, a certificate from its home regulator, and its appointment of the Commissioner as its attorney to receive service of legal process (§ 33-3-13). The Commissioner has 90 days to approve or disapprove, and may extend that once by another 90 days with written notice. An application not acted on in time is deemed approved (§ 33-3-15(a)).

Certificates expire at 12:00 midnight on June 30 of the year following issuance or renewal and are renewed annually if the insurer qualifies; a certificate stays in force until a new one is issued or renewal is specifically refused (§ 33-3-16(a)). To renew, the insurer files its December 31 annual statement by March 1 and publishes a short-form statement in a Georgia newspaper by March 1; the Commissioner may extend the filing deadline by up to 60 days for good cause (§ 33-3-16(a)). The insurer’s annual report of its affairs, also due by March 1, is a condition of renewal (§ 33-3-21).

Refusal, suspension and revocation

Georgia’s grounds for action against a certificate come in three levels:

• Discretionary (§ 33-3-17). The Commissioner may refuse to issue a certificate, refuse after a hearing to renew it, revoke or suspend it, or place the insurer under administrative supervision, if the insurer violates Title 33 or knowingly violates a rule or order; is in unsound or hazardous condition; as a general scheme compels claimants without just cause to accept less than is due or to sue; refuses to be examined; fails to pay a final Georgia judgment within 30 days after it becomes final; or shares management, directors or ownership with an insurer writing direct business in Georgia without a certificate, other than as surplus lines and holding company law permit.
• Immediate, without notice or hearing (§ 33-3-18). The Commissioner may suspend the certificate at once, or place the insurer under administrative supervision, if receivership or similar proceedings have begun against it in any state; another state has revoked, suspended or restricted its authority; or its condition is hazardous, it has exceeded its powers, it has failed to comply with Title 33, its business is being conducted fraudulently, or it consents.
• Mandatory (§ 33-3-19). The Commissioner must act when Title 33 requires it, or when the insurer no longer meets the requirements for its authority, for example because of a deficiency in assets.

Georgia also retaliates. If another state or a foreign country imposes greater taxes, fees, fines, deposits or other burdens on Georgia insurers or their agents than Georgia imposes on its insurers, the Commissioner imposes the same burdens on that jurisdiction’s insurers and their agents here (§ 33-3-26(a)).

Unauthorized insurers

Georgia protects the public from unauthorized insurers mainly by pressing on the people who help them:

• No person in Georgia may represent an unauthorized insurer in soliciting or effectuating insurance, inspecting risks, fixing rates, adjusting losses or collecting premiums on subjects resident, located or to be performed in Georgia, or represent anyone in buying insurance from one, with exceptions for surplus lines, reinsurance and a few other cases (§ 33-5-1). Violating Chapter 5 is a misdemeanor (§ 33-5-3).
• No person may place insurance on a Georgia risk except with an admitted insurer, unless Title 33 provides otherwise (§ 33-23-38(b)).
• Anyone who acts for an insurer without a certificate, or collects or forwards its premiums, must pay a sum equal to the taxes and license fees authorized insurers pay, and is personally liable on the contracts involved (§ 33-23-41). Those acts are also a misdemeanor (§ 33-23-42).
• A natural person who knowingly and willfully, or with reckless disregard, acts for an unauthorized insurer commits the felony of insurance fraud (§ 33-1-9(b), (e)).
• No Georgia publication or broadcaster may carry advertising for an insurer not authorized in Georgia, except in publications meant mainly for other states where the advertising is not aimed at Georgia residents or risks (§ 33-5-2(b)).

The policyholder is protected, not punished. A contract that an unauthorized insurer effectuates in violation of Title 33 is voidable except at the insurer’s instance, unless the insurer becomes authorized for that class of insurance during the life of the contract (§ 33-5-2(a)). The insurer cannot use its own violation to escape the contract.

The main lawful route to a nonadmitted insurer is surplus lines insurance placed through a licensed surplus lines broker under Chapter 5 of Title 33. The representation ban, the personal liability rule and the insurance fraud provision do not apply to it (§§ 33-5-1(b)(1), 33-23-41, 33-1-9(f)).

Sidenote

Personal liability for unauthorized insurance

An agent who places a Georgia risk with an insurer that has no certificate of authority, outside the surplus lines law, can end up owing the claim personally. The agent is liable to the same extent as the insurer on every contract the agent helped solicit, negotiate, make, endorse, modify or collect premium for (O.C.G.A. § 33-23-41). Confirm an insurer’s authority before placing business with it.

Insurance transaction and transacting business (O.C.G.A. § 33-1-2)

Much of Georgia’s insurance law turns on whether someone is “transacting” insurance. With respect to insurance, transact includes any of the following (§ 33-1-2(9)):

1. Solicitation and inducement
2. Preliminary negotiations
3. Effectuation of a contract of insurance
4. Transaction of matters after the contract is effectuated and arising out of it

The definition covers the whole life of a policy. A producer who invites a prospect to apply, quotes a premium, binds coverage or later processes an endorsement is transacting insurance at each step.

Definitions

Insurance

A contract that is an integral part of a plan for distributing individual losses, under which one party undertakes to indemnify another or to pay a specified amount or benefits upon determinable contingencies (§ 33-1-2(4)).

Insurer

Any person engaged as indemnitor, surety or contractor who issues insurance, annuity or endowment contracts, subscriber certificates or other contracts of insurance “by whatever name called,” including burial associations, health care plans and health maintenance organizations (§ 33-1-2(5)).

No person may act as an insurer in Georgia without complying with Title 33 (§ 33-1-6), and an insurer, officer or agent who issues or delivers a policy in violation of Title 33 is guilty of a misdemeanor unless the title provides otherwise (§ 33-1-7). Unless Title 33 provides otherwise, transacting insurance as an insurer requires a certificate of authority (§ 33-3-2(a)), and selling, soliciting or negotiating insurance requires a license for that line of authority (§ 33-23-4(a)(1)).

Lesson summary

• The Commissioner of Insurance heads the Department of Insurance with the powers Title 33 grants, adopts rules after at least 10 days on public file, and acts through written, signed orders.
• The Commissioner may examine any authorized insurer (each domestic insurer at least once every five years) and any licensee or other person transacting insurance. The person examined pays, unless an agent, broker, solicitor, counselor or adjuster is examined on a complaint found unjustified.
• An unfair trade practice charge requires at least 15 days’ notice. Other hearings require 10 days’ notice and an order within 30 days, with an appeal to the Superior Court of Fulton County within 30 days. Proposed and emergency orders come first, with a hearing if requested within 10 days.
• Under § 33-2-24(g), a person licensed or required to be licensed can be fined up to $2,000 per act for violating Title 33 or a rule, regulation or order, or up to $5,000 per act if the person knew or reasonably should have known, and a licensee can be put on probation for up to one year per act.
• Domestic insurers are formed in Georgia, foreign insurers in another U.S. jurisdiction, and alien insurers outside the United States.
• A stock insurer is owned by shareholders; a mutual is owned and governed by its policyholders, who may carry a contingent liability for assessments unless their policies are nonassessable.
• Except where Title 33 provides otherwise, as for surplus lines, an insurer needs a certificate of authority, which requires minimum capital, surplus and usually a deposit, lists the kinds of insurance allowed, and runs to June 30, renewable each year.
• Acting for an unauthorized insurer outside the surplus lines law is a crime and makes the person personally liable on the contracts placed.