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You are here: Experts > Money > Personal Insurance > Property & Casualty Insurance > Statutory Laws in Georgia Protecting Insured's
Expert: Kristen Mulcahy, CIC - 10/26/2009
Question
Insured A & B Inc. paid their annual premiums to their retail agent of record at the inception of a P & C policy providing Auto Liability and physical damage coverage for their trucking operation. 60 days into the policy period the insured received a notice of cancellation for non-payment of premium to the company. The insurance policy was taken out through an MGA (Managing General Agency by the retail agent of record and the retail agent of record failed to provide the MGA with the premium payment made by the insured. Subsequently, the retail agent of record filed chapter 13 bankruptcy and was taken over by the bankruptcy courts, who discovered the premiums were no where to be found.
In lieu of the retail agent of record not sending the MGA/Insurance company the premium payment made by the insured (Which was the payment in full), the MGA/Insurance company "Cancelled" the insured's coverage for non-payment and the insured was forced to take out another policy is basically "Out" a full years premium and having to pay another annual premium to a different insurance company, to allow them to operate legally with coverage in place.
Question 1: Does Georgia Insurance Law provide any statutory rights to the insured, by stating "Payment made to a retail agent of record constitutes payment made to the MGA/Insurance Company?
Question 2: What action should an insured take if they find themselves in this situation?
Thank you for your help and i look forward to hearing your input.
Sincerely
Tyler
Answer
Tyler;
You have described a situation that unfortunately, occurs all too often. I am not in the state of Georgia nor am I familiar with the insurance laws in the state but I do have some information to share. My guess is that payment received by the agent does NOT constitute "payment received". It MIGHT if the agent of record was an appointed agent of the carrier. However in this case, they are not. They had to access the carrier through the MGA. If the payment had reached the MGA, but was never forwarded on to the carrier, then the argument could potentially be made but in this case, the premium was essentially given to a middle man, a third party who has no contractual relationship with the carrier.
Some potentially good news is that the lost premium could possibly be recovered through the agent's E and O (Errors and Omissions) policy. Obviously the agent was in financial trouble so it's possible that they did not have an E and O policy in force. However, most state insurance departments require a policy be in force and may even require notification of a lapse in coverage in which case, they would require the agent cease and desist until a policy was in force. In either case, the state insurance department may very well have that information on file, which will allow A and B, Inc., to file a claim. Most E and O policies are "Claims Made", meaning, the policy that's in force when the Claim is Made, is the one that responds. Most other types of insurance are "occurrence" based, meaning, what ever carrier was in force when the claim Occurred, is the one that responds. With Claims Made policies, even when the business is no longer in existence, because claims can still arise (until a statute of limitations time frame is reached) Tail Coverage is usually purchased, it is generally less expensive than a normal E and O policy so there is the chance that the agent has Tail Coverage in force.
I hope this has been helpful. If there is anything additional I can answer for you, feel free to email me again. Good Luck.
Kristen
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