Georgia Commissioner Directs Insurers to Pay Sales Taxes on Total-Loss Vehicle Claims

Georgia’s insurance commissioner has issued a directive to auto insurers to include the full amount of sales tax when settling a total-loss vehicle claim.

“When calculating taxes to be paid to an insured on a first-party auto claim, insurers should base the tax payment on the agreed-upon cash value of the vehicle,” Commissioner John King wrote in the recent directive.

An Atlanta TV news report noted that some drivers felt that they had been shorted a few hundred dollars on claim payments after their cars were totaled in accidents. Georgia law requires insurers to pay the vehicle’s negotiated value, along with 6.6% ad valorem taxes, tag and fees.

But one motorist reported that Progressive Insurance paid $25,000 for a 2020 Toyota Corolla, totaled in a collision, but paid only $1,118 in taxes – about $500 less than the 6.6%. The reason is that, for the tax amount, the insurer used the state’s web-based calculator and estimated the car’s value by combining retail and wholesale prices, CBS46 TV news reported.

While the insurer and the insured agreed on a $25,000 replacement value, Progressive used the lower value of $16,950 to calculate the tax amount due in the claim.

“There might not have been clarity in the past, but there is absolute clarity now. And if they continue to engage in this practice, they (the insurance companies) are going to be sanctioned,” King told the news outlet.

King’s March 11 directive can be seen here.

–Insurance Journal staff