Commissioner of Insurance
O.C.G.A. § 33-36-3(2)(I) excludes from the definition of "covered claims" which must be paid by the Georgia Insurers Insolvency Pool unearned premiums on an insurance policy resulting from a completed audit.
You have asked for an official opinion as to whether O.C.G.A. § 33-36-3(2)(I) would exclude unearned insurance premiums derived from a completed audit from those claims which must be paid by the Georgia Insurers Insolvency Pool ("GIIP"). GIIP is comprised of various licensed insurers in the State of Georgia who pay assessments into a "pool," which then provides a remedy for consumers with "covered claims" under property and casualty insurance policies "when the insurer has become insolvent and is unable to perform its contractual obligations." O.C.G.A. § 33-36-2. See also Claxton Mfg. Co. v. Hodges, 201 Ga. App. 371, 372 (1991).
In order to have a "covered claim" which would be paid by GIIP, the claim must meet the statutory definition contained in O.C.G.A. § 33-36-3(2). The pertinent portion of that Code Section for purposes of this opinion states as follows:
A covered claim shall include a claim for unearned premium only if such claim derives from the payment of a stated premium and shall not include those which derive from an unstated premium such as calculated from audit, dividend, deposit, or retrospect plans. A covered claim shall not include a claim for unearned premium resulting from a policy which was not in force on the date of the final order of liquidation.
O.C.G.A. § 33-36-3(2)(I)(emphasis added).
It is a fundamental rule of statutory construction that where the language of a statute is plain and unambiguous, it is not open to construction and the terms should be given their common and ordinary meaning. O.C.G.A. § 1-3-1(b); Hollowell v. Jove, 247 Ga. 678, 681 (1981). The above provision recognizes that while some premiums are stated in the insurance policy itself, premiums may thereafter be established or changed based upon a later audit. For example, with workers' compensation coverage, an employer's initial stated premium may be based upon a previous year's payroll; however, an end of the year audit which looks at the actual payroll may result in an adjustment of such a premium. Since the latter case involves a premium which is "unstated" in the policy because it is determined by audit, O.C.G.A. § 33-36-3(2)(I) excludes any claim for such premium from its coverage. The Code Section does not distinguish between "completed" audits versus audits which are in the process of being performed. Therefore, a claim for unearned premium which derives from any audit is considered an "unstated premium" and not a "covered claim" for purposes of GIIP.
You have indicated that some insureds have cited a case in 1989 where claims for unearned premiums resulting from audit were paid by GIIP, and argue that this creates some type of "precedent" for the future payment of unearned premiums derived from an audit. This earlier case involved an insurance company being placed in rehabilitation prior to the effective date of O.C.G.A. § 33-36-3(2)(I). Although the final order of liquidation occurred some ten days after the effective date of that Code Section, a decision was made to pay claims for unearned premiums resulting from an audit because delinquency proceedings had been initiated prior to the applicability of O.C.G.A. § 33-36-3(2)(I). That decision had nothing to do with any contrary interpretation of the effect of O.C.G.A. § 33-36-3(2)(I) on unearned premiums derived from a completed audit, but was based upon the fact that the company in question had been placed in rehabilitation prior to the effective date of the statute. This creates no precedent for overriding the plain language of O.C.G.A. § 33-36-3(2)(I).
Based upon the foregoing, it is my official opinion that O.C.G.A. § 33-36-3(2)(I) excludes from the definition of "covered claims" which must be paid by the Georgia Insurers Insolvency Pool unearned premiums on an insurance policy resulting from a completed audit.
MARK H. COHEN
Senior Assistant Attorney General