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Subject 120-2-52 FAIR AND EQUITABLE SETTLEMENT OF FIRST PARTY PROPERTY DAMAGE CLAIMS

Rule 120-2-52-.01 Authority

This Regulation is promulgated by the Commissioner of Insurance pursuant to the authority set forth in O.C.G.A. Sections 33-2-9 and 33-34-8.

Rule 120-2-52-.02 Purpose

The purpose of this Regulation is to provide procedures for the expeditious and efficient settlement of first party property damage claims arising under personal private passenger motor vehicle policies (hereinafter referred to as "claims").

Rule 120-2-52-.03 Standards for Prompt and Fair Settlements of First Party Property Damage Claims

(1) Every insurer, upon receiving notification of a claim shall, within fifteen (15) days, acknowledge the receipt of such notice by the insured, unless payment is made within that time period. If an acknowledgment is made by means other than writing, a notation of the acknowledgment shall be made in the claim file of the insurer and dated. Notification of a claim given to an agent of an insurer shall be notification to the insurer.
(2) Every insurer, upon receiving notification of a claim shall, within fifteen (15) days, provide the insured with the proof of loss forms, if applicable, with reasonable explanations regarding their use. The providing of these forms will constitute an acknowledgement of receipt of the claim referred to in paragraph (1) above. 18, 1994.
(3) The insurer shall affirm or deny liability on claims within fifteen (15) days of receiving the completed proof of loss from the insured. If the insurer does not require the proof of loss to be completed, the affirmation or denial of liability shall be within thirty (30) days from the day the claim was reported to the insurer.
(4) Payment shall be tendered within ten (10) days after coverage is confirmed and the full amount of the claim is determined and not in dispute. In claims where multiple coverages are involved, payments for individual coverages, which are not in dispute and where the payee is known, shall be tendered within ten (10) days, if such payment would terminate the insurer's known liability under that individual coverage.
(5) If the insurer needs more time than that specified in paragraph (3) above, to determine whether a first party claim should be accepted or denied, it shall notify the claimant within five (5) business days after the time limitation has elapsed in paragraph (3) above giving the reason that more time is needed and an estimate of additional time needed to establish liability. This can be accomplished in writing or if by other means, a proper notation shall be made in the claim file and dated. The total time the insurer has to accept or deny liability shall not exceed 60 days from the company being notified of the claim, unless the company has documented the claim file where information that has been requested necessary to determine liability has not been submitted.
(6) If the insurer has affirmed liability on a claim, or affirmed liability for individual coverages where the claim involves multiple coverages and the amount payable is in dispute, the insured, or the insurer, may submit to the Commissioner a request for their case to be arbitrated. The request must be in writing and must include the facts of the case to include where each party currently stands in the negotiations. The Commissioner may establish a panel of arbitrators consisting of attorneys authorized to practice law in this State and insurance adjusters licensed to act as such in this State. The arbitrators will be charged with the duty of establishing a fair and equitable monetary settlement of the case. If an arbitration panel has been established, three (3) individuals from the panel of arbitrators, at least one of whom shall be an attorney authorized to practice law in this State and at least one of whom shall be an insurance adjuster licensed to act as such in this State, will be designated to hear each request for arbitration. Any claim settled pursuant to this Chapter shall be binding on both parties and fulfill any arbitration provision currently contained in the motor vehicle insurance policy, but shall not preclude or waive any other rights either party has under common law. The decision of the arbitration panel shall in no way be construed as a decision of the Commissioner. If an arbitration panel has been established, the Commissioner shall forward the written request for arbitration to the three (3) individuals selected to hear such request. The cost of the arbitration shall be borne equally by the parties to the arbitration.
(7) No insurer shall deny a claim on the grounds of a specific policy provision, condition or exclusion unless reference to such provision, condition, or exclusion is included in the denial. The denial shall be given to the insured in writing and the claim file of the insurer shall contain documentation of the denial.
(8) The insurer shall pay according to the terms of its policy for the covered loss up to the actual cash value to repair or to replace the damaged or stolen property subject to any deductibles. However, the insured has the right to choose the place of repair and pay the difference in cost, if the cost of the repair shop selected by the insured is greater than that obtained by the insurer.
(a) Unless permitted pursuant to the provisions of the policy of insurance, no insurer shall require an insured to utilize a particular person, firm, or corporation to repair a motor vehicle in order to settle a first party claim if the insured can obtain the repair work on the motor vehicle at the same cost from another source.

Rule 120-2-52-.04 Vehicle Repairs

(1) If losses are settled on the basis of a written estimate prepared by or for the insurer, the insurer shall supply, upon request of the insured, a copy of the estimate upon which the settlement is based. The estimate prepared by or for the insurer shall be reasonable, and of an amount which will allow for repairs to be made in a workmanlike manner which would restore the damaged vehicle to its preaccident condition relative to quality, safety, function and appearance. If the insured subsequently shows, based upon a written estimate which he obtains, that necessary repairs will exceed the written estimate prepared by or for the insurer, the insurer shall review and respond within fifteen (15) days. The insurer shall either provide the insured with the name of a repair shop that will make the repairs according to the written estimate obtained by the insurer which are commercially acceptable and conform with industry standards, or pay the difference between the written estimate and the one obtained by the insured.
(2) When the monetary amount claimed by the insured is reduced because of betterment or depreciation, all reasons for such reduction shall be contained and documented in the insurer's claim file. Such deductions shall be itemized and specified as to dollar amount and shall be appropriate for the amount of deductions. Deductions for betterment and depreciation shall be allowable only if:
(a) They reflect a measurable decrease in market value attributable to the poorer condition of; or prior damage to, the vehicle;
(b) They reflect the general overall condition of the vehicle considering its age, for either or both:
1. The wear and tear, or rust, limited to no more than a deduction of $1,000, and/or
2. Missing parts, limited to no more of a deduction than the replacement cost of such part or parts.
(c) The deductions set forth in subparagraphs (2)(a) and (b) above shall be limited to 20% of the market value of the vehicle prior to the loss.
(3) No insurer shall require the insured to supply parts for replacement.

Rule 120-2-52-.05 Aftermarket Crash Parts

(1) Purpose. The purpose of this section is to set forth standards for the use of aftermarket crash parts. It sets forth certain requirements relative to the identity, quality and disclosure of after market crash parts.
(2) Definition. For purposes of this regulation, the term "aftermarket crash part" shall mean a replacement for any of the non-mechanical sheet metal or plastic parts which generally constitute the exterior of a motor vehicle, including inner and outer panels.
(3) Identification. All aftermarket crash parts which are subject to this section and manufactured after the effective date of this section, shall carry sufficient permanent identification so as to identify their manufacturer. Such identification shall be accessible to the extent practicable after installation.
(4) The price of nonoriginal manufacturer aftermarket crash parts may be used by insurers to determine repair costs, provided the use of such parts would restore the damaged vehicle to its preaccident condition relative to quality, safety, function and appearance. If an insurer includes nonoriginal manufacturer aftermarket crash parts in its repair estimate, the insurer shall notify the insured in writing as follows:
(a) The written repair estimate shall clearly identify each such part.
(b) A disclosure document containing the following information in no smaller print than 10 point type shall appear on or be attached to the insurers copy of the estimate:

"THIS ESTIMATE HAS BEEN PREPARED BASED ON THE USE OF AFTERMARKET CRASH PARTS SUPPLIED BY A SOURCE OTHER THAN THE MANUFACTURER OF YOUR MOTOR VEHICLE.

THE AFTERMARKET CRASH PARTS USED IN THE PREPARATION OF THIS ESTIMATE ARE WARRANTED BY THE MANUFACTURER OR DISTRIBUTION OF SUCH PARTS RATHER THAN THE MANUFACTURER OF YOUR VEHICLE."

(5) No insurer, as part of a claims settlement, may require an insured to authorize the use of nonoriginal manufacturer aftermarket crash parts in the repair of a damaged vehicle.

Rule 120-2-52-.06 Total Loss Vehicle Claims

If the insurer determines the insured vehicle to be a total loss, and the insurance policy provides for the adjustment and settlement of first party vehicle claims on the basis of actual cash value or replacement, the insurer may elect to pay a cash equivalent settlement or replace the insured vehicle. The insurer shall use one of the following methods:

(a) Cash Equivalent Method. The insurer may elect to pay a cash equivalent settlement based upon the actual cost less any deductible provided in the policy, to purchase a comparable automobile by the same manufacturer, same model year, with similar body style, similar options and mileage, including all applicable taxes, license fees and other fees incident to the transfer of ownership of a comparable automobile. The amount payable on taxes, license fees, and transfer fees shall be limited to the amount that would have been paid on the totaled, insured vehicle at the time of settlement. Such cost shall be based on one or more of the following methods:
1. The cost of two or more comparable automobiles in the local market area, defined in this subsection as fifty (50) miles from the county seat where the insured vehicle was principally garaged, when comparable automobiles are available or were available within the last thirty (30) days to consumers in the local market area. These sources may include dealer's sales price, any established printed automobile sales publication or newspaper.
2. The cost of two (2) or more comparable automobiles in areas proximate to the local market area defined in this subsection as 100 miles from the county seat where the insured vehicle was principally garaged, including the closest major metropolitan area within or without the state, that are available or were available within the last thirty (30) days to consumers when comparable automobiles are not available in subparagraph (a)1. above. These sources shall include the same as in subparagraph (a)1. above.
3. One of two or more quotations obtained by the insurer from two or more licensed dealers located within the local market area defined in this subparagraph as 50 miles from the county seat where the insured vehicle was principally garaged, when the cost of comparable automobiles are not available in subparagraphs (a)1. and 2. above.
4. Any source for determining statistically valid fair market values that meet all of the following criteria which may be in electronic or printed format:
(i) The source shall give primary consideration to the values of vehicles in the local market area, or may consider data on vehicles outside the area when comparable vehicles have not been available for data collection in the local market area.
(ii) The source's database shall produce values for at least 85% of all makes and models for at least the last fifteen (15) model years, taking into account the values of all major options for such vehicles.
(iii) The source shall produce fair market values based on current data available from the area surrounding the location where the insured vehicle was principally garaged or a necessary expansion of parameters (such as time and area) to assure statistical validity.
(b) Replacement Vehicle Method. The insurer may elect to replace the insured vehicle, including all applicable taxes, license fees, and other fees necessary to transfer ownership. The following requirements and standards shall apply if the insurer elects the replacement vehicle method:
1. The replacement vehicle must be comparable to the insured vehicle in that it is the same manufacturer model, same or newer model year, similar body style, similar options and mileage as the insured vehicle and in good overall condition.
2. The replacement vehicle shall be available for inspection by the insured within fifty (50) miles of the insured's residence or further if agreeable to the insured.
3. The insurer's claim file shall contain a full description of the replacement vehicle, including, but not limited to, the vehicle identification number and the schedule of options.
4. A replacement vehicle of the same or newer model year must be available for purchase through a licensed dealer or through an established printed sales publication.
5. In the event that a replacement vehicle meeting the requirements in subparagraphs 1. through 4. above is not available, the cash equivalent method should be used.
6. If the insured rejects a replacement vehicle, the option to replace the insured vehicle may not be exercised. The rejection shall be documented in the claim file. The insurer need only pay the amount it would have otherwise paid if the insured had accepted the replacement vehicle, including the applicable taxes, license fees, or other fees to transfer ownership.
7. If the insured selects another vehicle substantially similar in value, the insurer may either replace the insured vehicle with this substitute, or only pay the amount it would have otherwise paid if the insured had accepted the replacement vehicle, including the applicable taxes, license fees or other fees to transfer ownership.

Rule 120-2-52-.07 Loss of Use

If a policy provides loss of use or rental reimbursement coverage, reimbursement is limited to actual expenses incurred while an insured vehicle is inoperable due to a loss payable under either comprehensive or collision coverage. It is not necessary that the policy include coverage for the kind of loss itself (i.e., a comprehensive loss, but no comprehensive coverage), as long as rental reimbursement is applicable to the loss.

(a) Actual expenses include reasonable fares for substitute transportation. If a rental car is used, the expenses can include daily charges, mileage expenses and taxes, subject to policy limitations.
(b) The insurer may apply daily or aggregate monetary limitations to the actual expenses subject to policy provisions.
(c) The insurer may limit the benefits to the period the vehicle is inoperable or under repair, or ending when an offer to pay for a total loss is made. The offer to pay for the total loss must be made in accordance with these rules, and the date of the offer must be clearly documented in the insurer's claim file.

Rule 120-2-52-.08 Severability

If any provision of this Regulation or the application thereof to any person or circumstance is held invalid by a court of competent jurisdiction, the remainder of the Regulation or the applicability of such provision to other persons or circumstances shall not be affected.