Can An Agency Limit The Types Of Insurance Policies It Will Issue?

The answer to the above question seems obvious. The right of a business to choose what types of products and/or services it will provide is fundamental to the successful operation of a free enterprise economy. If every insurance agency had to offer the same types of insurance policies and/or services, competition among them would be limited to price only. That would result in a race to the bottom and would be disastrous for everyone concerned.
Fortunately, for the most part, insurance agencies are free to choose what types of insurance policies and/or services they will offer to the public. However, there does exist a trap for the unwary with respect to personal lines motor vehicle policies and to a lesser extent, homeowner’s policies. This trap arises from the prohibition on “the fictitious grouping of risks” found in the Georgia Insurance Code.
In a regulation issued by the Georgia Insurance Commissioner’s Office, a “fictitious grouping of risks” can arise when an “insurer, broker or agent” makes a determination on the issuance or renewal of an insurance policy based on the “lack of, lack of potential for or failure of [an] applicant or insured to agree to a writing of additional business, which includes but is not limited to any additional coverages or increased liability limits on an automobile which are not compulsory according to O.C.G.A. § 40-9-37.” The statute referred to is the one that requires minimum liability limits of $25,000/$50,000/$25,000. Thus, an agent cannot condition the acceptance of an application for a motor vehicle insurance policy on the insured applying for any coverages or liability limits that are not required by law. An agent cannot, for example, require an applicant to apply for liability limits in excess of the statutory minimum amounts or to accept uninsured motorist coverage before the agent will accept an application for motor vehicle insurance. The same thing is true for the number of vehicles insured. An agent cannot refuse to accept an application for an insurance policy that covers only one motor vehicle or that covers more than one motor vehicle. The regulation contains eight other examples of prohibited criteria for the issuance or renewal of motor vehicle insurance policies.
As with everything in the law, there are exceptions to the use of the ten criteria in the above regulation. The use of those criteria is permitted if they are actuarially supported, relevant to risk, and based on one or more of the reasonable considerations specified in O.C.G.A. § 33-9-4(7)(size, expense, management, individual experience, location or dispersion of hazard, or any other reasonable considerations). Unless the use of one or more of the specified criteria meets all three of those tests, it is illegal to use that criteria in deciding whether to accept an application for a motor vehicle insurance policy.
There is a similar regulation regarding the issuance and renewal of homeowner’s insurance policies. That regulation specifies seven criteria that cannot be used in determining whether to issue or renew such a policy, unless the above three tests are satisfied. The most pertinent of those criteria for the purposes of this post is the conditioning of the issuance or renewal of such a policy on the “failure of applicant or insured to agree to purchase an additional policy which is not requested by the insured or applicant.” Thus, an agent cannot refuse to accept an application for a stand-alone homeowner’s policy.

Use of Text Messages by Insurance Agents

All the marketing articles I have seen recently advise insurance agencies and other businesses to be accessible to their customers and potential customers using every means of communication available.  One of those means is sending text messages to a mobile telephone number.  The IIABA recently published a memorandum on the legal requirements that must be met by insurance agencies and agents who choose to communicate with customers and potential customers using text messages.  The memorandum includes sample forms for use in complying with those requirements.

The legal requirements are based on the Telephone Consumer Protection Act (“TCPA”).  The passage of the TCPA in 1991 was in response to the growing number of unwanted calls from telemarketers and the avalanche of advertisements being sent to telefax machines.  It imposed limitations on those marketing methods, one of which was the need to obtain the consent of the recipient of any telefax intended as an advertisement.  The TCPA was passed before there were text messages, but the Federal Communications Commission (“FCC”) has interpreted its provisions to cover the sending of such messages.

In fact, the FCC has taken a very restrictive view of what the TCPA requires for text messages sent for a commercial purpose.  The FCC has ruled that statute covers all text messages sent for a commercial purpose, even if they are to sent to only one person.  The FCC has also held that, unlike many other commercial communications, the fact that the recipient of a text message has an existing business relationship with the sender of the message does not exempt the sender from the requirement of obtaining the prior written consent of the recipient to the sending of such a message.  It appears that this requirement even applies before an insurance agency or agent can reply to a text message initially sent to them by a customer or potential customer.

The IIABA memorandum notes that many agencies and agents may choose not to follow the legal requirements, especially when the text messages are sent by or to a customer about their existing policy.  Why this is the case can be seen by examining the sample forms attached to the memorandum.  While the consent, or opt-in form, is a manageable one page document, the sample terms and conditions that will apply to the use of text messages is five pages long and filled with legal jargon that will likely make any customer or potential customer think long and hard about whether to sign the consent form.  The jargon includes disclaimers of liability and warranties, a waiver of the right to participate in class actions, and a requirement to arbitrate any dispute.

As noted in the memorandum, if an agency or agent intends to use text messages for mass marketing purposes, they should follow the above legal requirements with respect to every person to whom such messages are sent.  If for no other reason than each recipient of a text message sent in violation of those requirements is eligible to receive their actual damages or $500, whichever is greater.  If the court finds the sender of the message did so knowing it was in violation of the law, the amount awarded as damages can be increased by up to three times.

Given the requirements imposed by the FCC on the use of text messages for commercial purposes and the amount of damages that can be claimed for a violation of those requirements, agencies and agents will need to carefully weigh the risks and benefits of using that means of communication with their customers and potential customers.

 

 

 

 

New PEO Regulation

Last weekend, I attended an insurance agency function at which the Insurance Commissioner, Ralph Hudgens, spoke.  In his speech, he mentioned that a new regulation governing the sale of insurance products by Professional Employer Organizations (“PEOs”) has been adopted by his office.  That regulation will take effect on February 14, 2018.  It amends Sections 120-2-3-.03 and 120-2-3-.05 of the Georgia Rules and Regulations.  A definition of “negotiate” that is specifically directed at the activities of PEOs was added to Section 120-2-3-.03.  A specific requirement that any business entity that employs an individual who is engaged in the sale, solicitation, or negotiation of insurance on behalf of that entity be licensed as an insurance agency was added to Section 120-2-3-.05.

The definition of “negotiate” in Section 120-2-3-.03 tracks the one found in the Insurance Code.  It goes on to define a “purchaser” of insurance to include “current or prospective coemployers, or their employees, of professional employer organizations.”  It also addresses when an employee of a PEO will be deemed to “negotiate” with such a purchaser about the purchase of insurance.  Such a negotiation will occur if the PEO employee “offers advice or renders opinions as to the substantive benefits, terms, conditions, value, effect, advantages or disadvantages under any contract of insurance issued or offered by any insurer” to the PEO, which contract of insurance “covers or is proposed to cover” a coemployer or their employees of the PEO.

Under the new regulation, a PEO employee cannot discuss with a current or prospective customer for its services any of the terms or conditions of the insurance coverages provided through the PEO or the relative merits of such coverages compared to what the customer may already have, unless that employee has the appropriate insurance agent’s license.  In addition, if such discussions are occurring, the PEO must obtain an insurance agency license.

This new regulation in intended to level the playing field for insurance agents who are competing with PEOs to place insurance coverages for their current or prospective customers.  If a PEO wants its employees to be able to discuss the insurance coverages available through it with such customers, they must obtain an insurance agency license and the employees must obtain an insurance agent’s license; just like an independent insurance agent and agency does.

In his speech, Commissioner Hudgens encouraged anyone who has information about a possible violation of this new regulation to report it to his office once that regulation becomes effective.  He stated an intent to make a serious effort to enforce the requirements of the new regulation.  Insurance agents who have been complaining about unfair competition by PEOs in connection with the sale of insurance now have a way to stop such competition.  If they don’t take advantage of it, nothing will change.

A big thank you for this new regulation goes to the Independent Insurance Agents of Georgia and its lobbyist, John Barbour.  They were one of the leading organizations that lobbied successfully for its adoption through two administrative hearings and countless hours of meetings.

 

Insurance Certificates – Use of Additional Remarks Schedule

A couple of weeks ago I wrote a blog post on the legality of agents issuing opinion letters about the coverages provided by their insured’s insurance policies.  The next week, I received an email from a participant in the Free Legal Service Program that I run for the Independent Insurance Agents of Georgia asking me to take a look at the language on an Additional Remarks Schedule that another agency had been routinely adding to the certificates of insurance it issued.  That schedule contained language that purported to revise the “cancellation clause” of ACORD form 25.  It stated that the agency that issued that document would “provide a 30 day notice of cancellation to the certificate holder” if any of the policies described on the ACORD form 25 were “cancelled prior to the expiration dates thereof but only as required by written contract.”

The addition of the above language to an ACORD form 25 is bad for the agency in question on two levels.  First, it provides a basis for the certificate holder to sue the agency if it does not do what it states it will do.  That could very well happen if there is a cancellation for non-payment of premium or the premium has been financed or the agency fails to effectively monitor the cancellation notices it receives.  Depending on the situation, the damages for a violation of this self-imposed duty could be significant.

The agency may be counting on the condition added at the end, “but only as required by written contract’, to limit its exposure.  However, it is unclear what “written contract” is being referred to.  If the reference is to the policy of insurance described on the ACORD form 25, it is entirely possible that what is in that policy of insurance is not consistent with the rest of the language on the Additional Remarks Schedule.  That would expose the agency to disciplinary action by the Insurance Commissioner’s Office, as the insurance certificate statute and the regulations adopted by that Office prohibit the preparation or issuance of a certificate of insurance “that contains any false or misleading information.”  If the reference is to another separate contract between the agency and the certificate holder, that would be a violation of the prohibition on making reference in an insurance certificate to any contract other than the contract of insurance identified in the certificate.

The attempt to revise the “cancellation clause” of the ACORD form 25 also runs afoul of the section of the statute that states, “A certificate holder shall have a legal right to notice of cancellation, nonrenewal, or any material change, or any similar notice concerning a policy of insurance only if the person is named within the policy or any endorsement and the policy or endorsement requires notice to be provided. The terms and conditions of the notice, including the required timing of the notice, are governed by the policy of insurance and cannot be altered by a certificate of insurance.”  By attempting to specify what notice of cancellation will be provided regardless of what the insurance policy in question states, the agency has violated this statutory requirement and put “false or misleading information” on the certificate.

Finally, the addition of the language in question may also result in the certificate of insurance being rendered useless, as the statute states any certificate of insurance “prepared, issued, or requested in violation of this Code section shall be null and void and of no force and effect.”  Such an outcome would provide another basis for the certificate holder, as well as the insured, to sue the agency.

I realize the competitive pressure to do what a prospective certificate holder wants done is great. However, the risk assumed by the agency and the agent involved in the issuance of the above Additional Remarks Schedule is greater.  They may lose a customer if they don’t issue such a document, but they would be exposed to potentially significant liability and may find their licenses suspended or revoked if they do.

 

Brokerage Fees – Revisited

A recent Bulletin from the Insurance Commissioner’s Office has caused me to reconsider a blog post from almost five years ago.  In the Bulletin, the Insurance Commissioner reminded brokers who handle excess and surplus lines policies that they cannot collect sums for those policies in excess of the “premiums and charges for insurance specified by the insurer in the insurance policy.”  This prohibition is found in the Unfair Trade Practices section of the Georgia Insurance Code.  That section contains a specific reference to excess and surplus lines policies and states “the premiums and charges for insurance. . . shall not be in excess of or less than those specified in the policy.”

In my previous blog post, I concluded that a broker who had no contact with the insured and was acting purely as an intermediary between the insurance company and another insurance agency or agent could charge whatever they wanted for their services.  That conclusion is now open to question if such a broker’s services are considered to be part of the process of obtaining insurance coverage, and thus, covered by the phrase “premiums and charges for insurance” found in the above code section.

That clearly appears to be the Insurance Commissioner’s conclusion with respect to the services performed by excess and surplus lines brokers.   According to the above Bulletin, they can only receive whatever compensation is included within the “premium” or other “charge” specified in a surplus lines insurance policy.  In another section of Georgia’s Insurance Code, “premium” is defined broadly to include “any assessment or any membership, policy, survey, inspection, service, or similar fee or charge in consideration for an insurance contract.”  Such fees or charges for the broker’s services are routinely included in the amount charged by the insurer for a surplus lines policy.

However, in other types of policies such additional fees are not usually included as part of the “premium” that is to be paid for them.  If the Insurance Commissioner believes that the services provided by a broker who has no contact with the insured are part of the process of obtaining any type of insurance coverage, not just excess and surplus lines coverage, then such a broker cannot charge a fee for their services, except to the extent such a charge is included in the “premium” specified for the insurance coverage in question.  In the absence of anything about such a charge in the stated “premium”, the broker would be limited to sharing in the commissions payable for such coverage as compensation for their services.

Until there is clarification on this point from the Insurance Commissioner’s Office, to be safe, a person acting as a broker for any insurance coverage should not charge a separate fee for their services, unless provided for in the stated “premium” for the policy in question.  They should just receive a share of the commission paid for that policy.

Insurance Certificates and Opinion Letters

My last post about insurance certificates was almost two years ago.  At that time, the consensus seemed to be that issues regarding them were declining as all the interested parties became more familiar with Georgia’s law and regulations.  However, I learned from a recent participant in the Free Legal Service program that I run for members of the Independent Insurance Agents of Georgia that six years after they were enacted some people have still not gotten the message.

The agent contacted me about requests that he received “all the time” to provide a letter stating that his agency’s customer “has or can provide the required types and amounts of insurance coverage” specified in a contract to which the customer either was already or would become a party.  The agent was concerned that providing such a letter called for an opinion outside of the scope of his knowledge or duties and thus, could create a potential E&O exposure.  He was correct to be concerned about the potential liability exposure he would create by providing such a letter.  It could be the basis for a claim by the entity to which it was sent if what was said in the letter was not completely accurate.

Avoiding such a potential liability exposure is one reason not to send such a letter, but an even better reason is that it would be illegal to do so and could subject the agent to disciplinary action by the Insurance Commissioner’s Office.   O.C.G.A. Section 34-24-19.1, specifically prohibits anyone from preparing, issuing, or requesting “either in addition to or in lieu of a certificate of insurance, an opinion letter or other document or correspondence that is inconsistent with this Code section.” That law goes on to state that “No certificate of insurance shall contain references to contracts, including construction or service contracts, other than the referenced contract of insurance.”

This prohibition was clarified in the regulations subsequently issued by the Insurance Commissioner’s Office.  Those regulations prohibit the reference in an insurance certificate “to any language or contents in the construction or service contracts.” The only thing that can be referred to in the insurance certificate is “a reference or contract number from the construction or service contract for identification purposes only.” The regulations also flatly state that “Neither an insurer nor a producer shall be required to issue an opinion letter or other document in addition to or in lieu of a certificate of insurance.” Instead, “Insurers and producers may provide the certificate holder with the certificate and an actual copy of the policy, insurance binder or relevant policy provision to demonstrate contractual compliance.”

If an agent can’t refer to contracts other than contracts of insurance in an insurance certificate, then as the regulations make clear, an agent can’t refer to other contracts in an opinion letter or other document that is requested by the certificate holder or anyone else.  If the person requesting such a letter insists on it being provided, the agent should point out to that person that the above law prohibits requesting such a letter or other document, as well as providing it, and that a fine of up to $5,000 can be imposed for its violation.

Is An Agency Required To Obtain A License When Its Agent Must Obtain a Non-Resident License?

My last blog post dealt with the question of when an insurance agent must obtain a non-resident license if they are placing insurance coverage for a risk located in another state.  This post will explore the related question of whether the agent’s insurance agency must also obtain a license from the insurance department of the other state.  As with the first post, it will be limited to the laws of the states adjacent to Georgia.  It will also discuss when an agency must obtain a certificate of authority from the business entity regulator of those states.

With one exception, all the states adjacent to Georgia require a business entity that sells, solicits, or negotiates insurance within their state to obtain a license.  The exception is Tennessee, whose law only states that such an entity may obtain a license as an insurance producer.  Unfortunately, unlike individual insurance producers, the law of all these states does not contain any reference to licenses for non-resident business entities.  That can lead to two possible approaches by the insurance departments in those states.  First, the literal interpretation would be that any business entity no matter where its principal offices are located must obtain a license if it sells insurance coverage for a risk located in that state.  On the other hand, the lack of any reference to licenses for non-resident business entities could be interpreted to mean those entities do not have to obtain a license, since the law does not mention them as it does with individual agents.

If you don’t want to expend the time and effort to contact the insurance department in each state to find out how they interpret their state’s law on this question, the safest course of action would be to obtain an agency license in any state where one or more of the agency’s producers have had to obtain a non-resident agent’s license.  If an agent doesn’t have to obtain such a license, it would make no sense for his or her agency to have to obtain one.  But a good argument can be made that if an agent has to obtain a non-resident license, then his or her agency should obtain one, as well, since the agent is a representative of their agency.

A separate, but related question, is whether an agency must obtain a certificate of authority to transact business in a state if it sells an insurance coverage for a risk located in that state.  Such certificates are obtained from the government agency that regulates all business entities in a state, not the state’s insurance department.  This is a very gray area and each state will have it own interpretation of when such a certificate must be obtained.  However, with one exception, all the states adjacent to Georgia have statutes that specifically exempt from the certificate requirement a business entity that sells its products or services in the state through independent contractors or that solicits or obtains orders for goods or services in the state if those orders must be accepted by an entity located outside the state before they become a binding contract.  The exception here is Alabama, which requires any legal entity that would have to obtain a certificate from its Secretary of State if it were created in Alabama to obtain such a certificate.

A good argument can be made that an insurance policy or bond fits within the exemption for orders solicited or obtained that require acceptance outside the state to become binding contracts.  An insurance application must be accepted by the insurance company before a policy or bond will be issued.  As long as the person making the decision to accept the application is not located in the state where the risk to be covered is found, there is no need to obtain a certificate of authority from that state’s business entity regulatory agency.

When Are You Required to Obtain a Non-Resident License?

Unlike most summers, this one has been very busy for my law practice.  I have been involved in the sale of three of my insurance agency clients in the past couple of months, which is one reason I haven’t been as diligent as I should have in making blog posts.  This post concerns an issue that has arisen in each of those sale transactions and about which I sometimes get a question in the Free Legal Service Program I operate for the Independent Insurance Agents of Georgia.  When are you required, as a Georgia resident insurance agent, to get a non-resident agent’s license?  I will address  the related question, are you also required to obtain a license and/or certificate of authority for your agency at the same time in my next post.

Both the above questions are important issues in the context of the sale of an insurance agency, because the buyer will routinely want the selling agency to represent and warrant that it has obtained all the licenses and other governmental approvals required to conduct its business activities.  If those activities involve the issuance of insurance policies covering risks located in other states, which is often the case, the question arises do you, as the agent, need to obtain a non-resident license from the other state’s insurance department, and if you do, what about your agency.  The failure to obtain such a license or licenses when required will not only have a negative impact on the sale of an insurance agency. It can create significant problems for the individual agent and agency with the insurance departments in both their home state and the other state involved.

In late October 2000, the National Association of Insurance Commissioners proposed a model act for the licensing of insurance agents.  This act has largely been adopted by Georgia and the states surrounding it, with one exception noted below.  Under it, the solicitation, sale, or negotiation of insurance coverage by a person in a state is illegal unless that person has the appropriate license for the type of coverage in question, which license has been issued by the insurance department of that state.  The model act contains several exceptions to this requirement.  Unfortunately, only one of them is relevant for the purpose of this post.  It exempts from the license requirement a non-resident insurance agent who sells a commercial lines policy that covers risks located in the state and in other states, as long as the agent is properly licensed by the state in which the insured’s principal place of business is located and the policy covers risks located in that state.

The above exemption is a relatively narrow one, and it is not recognized by Florida.  In Florida, the sale of insurance coverage for any risk located there requires a license that has been issued by its insurance department.  The law of the other surrounding states, Alabama, Tennessee, North Carolina, and South Carolina, will not permit the sale of an insurance policy that covers a Georgia insured’s out of state vacation home or any other personal lines risk located out of state without a license issued by their state’s insurance department.  The same thing is true for any commercial lines risks of a Georgia insured that do not fit within the above exemption.

Fortunately, it is not difficult to obtain a non-resident agent’s license in the states that surround Georgia.  All those states permit the issuance of a non-resident license for any type of insurance for which the non-resident is properly licensed in their home state upon the submission of the required paperwork and license fee, as long as the agent’s home state grants the same privilege to agents who are licensed in the other state, which Georgia does.  When the National Association of Registered Agents and Brokers Reform Act is fully implemented this process will be even easier.  That Act was passed in early 2015 and set a two year time frame for full implementation.  Unfortunately, it seems to have gotten lost in the shuffle of the current political activity in Washington, so its anyone’s guess when it will be fully implemented.

Uninsured Motorist Coverage – Traps for the Unwary

In May of this year, the Georgia Court of Appeals issued two decisions involving uninsured motorist coverage that all agents should be aware of, as both of them create potential E&O exposure.  In the first case, the Court of Appeals held that the insureds had uninsured motorist coverage in the amount of their liability coverage, not the statutory minimum of $25,000, even though the declarations page for their policy stated that was the amount of uninsured motorist coverage.  Under a law that took effect in 2002, an insured who did not affirmatively reject uninsured motorist coverage had such coverage for the same amount as their liability coverage, unless the insured affirmatively elected a lesser amount of coverage.

In this case, the insureds had previously rejected uninsured motorist coverage for a policy that had been continuously renewed since 1986.  However, in 2003, the insureds changed their minds and requested that uninsured motorist coverage be added to their policy.  Unfortunately, for the insurance company, it was not able to produce any documentation of that request, as it had been made over the telephone or possibly, the internet.  Since the law required the insurance company to prove that the insureds had affirmatively elected an amount of uninsured motorist coverage less than their liability limit, the absence of any such documentation proved to be fatal to its case.  The fact that the declarations page for the policy had continuously shown a limit of $25,000 for such coverage from the time it was requested in 2003 until the loss event nine years later was not sufficient proof of an affirmative election by the insureds in the opinion of the court.

A similar lack of documentation also proved to be fatal to the insurance company in the second opinion issued by the Court of Appeals.  In that case, the Court held that the uninsured motorist coverage under the insureds’ umbrella insurance policy had not been properly cancelled.  The major issued decided by the Court was that the cancellation and non-renewal requirements imposed by O.C.G.A. Section 33-24-45 on personal lines motor vehicle insurance policies also applied to umbrella policies that include such coverage.  Thus, those portions of umbrella policies can only be cancelled or non-renewed for the reasons and in the manner specified by that statute.

O.C.G.A. Section 33-24-45 requires that a notice of cancellation or non-renewal be delivered to the insured either in person or by first class mail that is evidenced by a receipt provided by the U.S. Postal Service or such other proof of mailing as would be accepted by the Postal Service.  In this case, the insurance company claimed it had sent the insureds a notice of cancellation of the uninsured motorist provision of their umbrella policy two years before the loss event.  As in the previous case, the declarations pages for the policy issued during that two year period showed their was no uninsured motorist coverage under it.  And like the previous case, the Court held that was not sufficient to overcome the insureds’ denial that they had received any notice of cancellation from the insurance company.  Since the company could not produce a receipt issued by or acceptable to the U.S. Postal Service for the mailing of that notice, the uninsured motorist coverage was still in effect at the time of the loss event.

The lesson of the above two cases for insurance agents is clear.  It is essential in dealing with uninsured motorist coverages that the letter of the applicable law be followed, as the courts will not make exceptions based on the duty of an insured to read their policies.  An agent who does not properly document everything that is done with respect to such coverages is leaving himself or herself open for an E&O claim.

 

Raffles – Can They Be Used to Encourage Referrals? (Updated)

A recent caller to the Free Legal Service program that I run for the members of the Independent Insurance Agents of Georgia asked the above question.  His agency was thinking about running a promotion that gave a raffle ticket for each referral made to the agency during a specified period of time.  The winner would receive a prize having a value of well over $100.00.  With my previous posts on this subject, I thought I had thoroughly covered all aspects of it.  However, I failed to take into consideration the creative ability of independent insurance agents when it comes to thinking of ways to generate more business for their agencies.

The short answer to the above question is YES, if certain requirements are followed.  Those requirements are found in the Georgia Insurance Code and the Georgia Criminal Code.  First, as my regular readers are no doubt well aware, the Georgia Insurance Code prohibits the sharing of commissions with any person or entity that is not properly licensed by the Georgia Insurance Commissioner’s Office.  This means that any fee or other consideration given in exchange for a referral cannot be conditioned on the referral resulting in the sale of an insurance policy or related product.  Under a change to the Insurance Code that took effect on July 1, 2016, agents and agencies are also prohibited from giving “prizes, goods, wares, store gift cards, gift certificates, sporting event tickets, or merchandise” having a value of more than $100 to any customer or potential customer in any one calendar year.

Thus, under the Insurance Code, a raffle can be used to encourage people to make referrals to an insurance agency, as long as the referral does not have to result in the sale of an insurance policy or related product and if the raffle is limited to customers or potential customers of the agency, the value of the prize cannot exceed $100.00.

What does the Georgia Criminal Code have to do with the above question?  Under that Code, a raffle is considered to be a form of gambling, like the Georgia Lottery, and is prohibited with certain exceptions.  The one exception that is relevant to the type of raffle proposed by the caller to the Free Legal Service Program requires that the raffle be conducted as an “advertising and promotional undertaking in good faith solely for the purpose of advertising the goods, ware, and merchandise” of the business in question.  In addition, the raffle cannot require its participants (i) to “pay any tangible consideration” to enter it, (ii) to purchase “anything of value” from the business, or (iii) to “be present or be asked to participate in” any type of sales or other presentation, and (iv) the prize awarded must be something other than cash and cannot be awarded based on the playing of a game on a computer or mechanical or electronic device at a place of business in Georgia (this last requirement was omitted from the original post).

The type of raffle proposed by the caller to the Free Legal Service Program satisfies the requirements of the Georgia Criminal Code because the only thing a person had to do to be eligible to participate in the raffle was supply the name and contact information of a potential customer for the agency’s products and services, which were made known to the participant, and the prize was not cash.  Since there was no requirement that the referral made result in a sale by the agency and it was not limited to customers or potential customers of the agency, the requirements of the Georgia Insurance Code were also met.