Rule to Limit Ga. Contract Obligations in Effect March 1

February 28, 2006

An emergency rule that goes into effect March 1 in Georgia entitled “Unfair Trade and Claims Settlement Practices” limits consumers contractual liaiblities and according to the Insurance Commissioner’s Office, enables consumers to have their claims settled fairly. The commission website, has the entire rule. It says the new regulations are necessary because the Commissioner finds that a practice exists which is having the effect of preventing consumers from having their claims settled fairly.

“Specifically, insurers have included contractual limitations in their policies under which no suit or action on said policy for the recovery of any claim shall be sustainable in any court of law or equity unless all the requirements of the policy shall have been complied with, and unless commenced within twelve months next after inception of the loss,” the description of the rule says on the department’s website. “It can be difficult for even a diligent consumer to comply with all policy requirements within 12 months.

“The commissioner has received a number of complaints indicating that insurers are becoming increasingly strict in requiring claimants to comply rigorously with every requirement of the policy. This results in an untenable situation if the consumer is unable to fully comply with all of the policy requirements until more than twelve months after the loss. In that event, the insurer can simply deny even a legitimate claim because the consumer is forever barred from filing suit by the time limitation in the policy.

“The Commissioner has received an increasing number of complaints regarding insurers relying on this time limitation provision to avoid suits for recovery of claims. Moreover, these complaints indicate that many consumers are unaware of the fact that an action on the policy must be brought within twelve months, instead of the statutory period for actions on written contracts in general.

“Although these provisions are included in the policies, insurers make no effort to call the attention of consumers to these limitations in connection with the claims process. The Commissioner finds that, all too often, insurers are utilizing such provisions, of which the insureds are unaware, as traps for the unwary.

“This gives the Commissioner reasonable cause to believe: that an act, practice, or transaction is occurring or is about to occur; that the situation constitutes a situation of imminent peril to the public health, safety, or welfare; and that the situation therefore imperatively requires emergency action. Pursuant to O.C.G.A. §33-32-1, the Commissioner is authorized to promulgate by regulation a standard fire policy for use in Georgia. Pursuant to O.C.G.A. §36-6-36, the Commissioner is authorized to promulgate rules and regulations necessary to implement and enforce the provisions of the Unfair Claims Settlement Practices Act. Regulation Sections 120-2-19-.01-0.18 and 120-2-19-.03-0.18, and Regulation Chapter 120-2-20-0.19 shall be effective for a period of 120 days.

“During the 120-day period the emergency regulation is in effect, a final regulation will be promulgated according to the rulemaking process outlined in O.C.G.A. Section 50-13-1 et seq. This Regulation shall be effective for policies written or renewed on or after March 1, 2006.”

The commission suggests that anyone with questions concerning this notice, should contact the Office of Commissioner of Insurance, Administrative Procedure Division, Room 612, West Tower, 2 Martin Luther King, Jr. Drive, Atlanta, Ga. 30334; (404) 656-5875.

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