Most people in North Carolina have some sort of insurance. By law, persons operating vehicles are required to have liability coverage. The owners of the cars might also have collision coverage. Most homeowners have homeowner’s insurance, and many renters have renter’s insurance. Many people also have health coverage, whether provided by their employer or purchased directly by the individual. Businesses often have a general liability policy. These and other policies give rise to numerous claims and numerous insurance disputes every year in North Carolina.
Governmental supervision: Insurers are subject to oversight by the North Carolina Department of Insurance (“DOI”). A consumer (or “inured”) can file a complaint against an insurer with the DOI. The DOI is not likely, however, to become heavily involved in a routine dispute between an insured and the insurer. Many statutes (within Chapter 58) regulate the insurance companies, as well as regulations promulgated by the N.C. DOI.
Terms of coverage: The scope of coverage afforded under an insurance policy is determined primarily by the terms of the policy, and also by the applicable North Carolina General Statutes and any regulations by the DOI. When disputes are litigated in the courts, any precedential cases will also affect the interpretation of the policy. Health (and other) policies subject to ERISA may be subject to federal law, which preempts state law.
Duties during claims handling process: Policies typically have provisions that give various rights to the insurer in the claims-handling process. The insured often must submit a “proof of loss” form, in which the loss is described to the insurer. The insured often must produce documents, and must submit to an “examination under oath,” at which the insurer’s lawyer can ask questions of the insured to investigate the claim. If the insured fails to comply with these provisions, then he can lose coverage. (Duties of the insurer are addressed below, in connection with the insurer’s potential liability for bad faith and treble damages.)
Resolution of the claim outside court proceedings: Some aspects of the insurance claim might be subject to arbitration or appraisal (rather than court action). For example, the standard fire insurance policy in North Carolina, governed by statute, provides that the parties can use an appraisal process to value property (N.C. General Statute 58-44-16). A standard underinsured motorist policy in North Carolina contains a provision which allows the insured to demand arbitration.
Resolution of the claim in a court proceeding: Where, however, the insurer and the insured cannot agree on coverage, and the dispute is not subject to arbitration or appraisal, they might have to take their dispute to court. The insured can file a lawsuit for breach of contract, and the insurer can file a suit for declaratory relief. In North Carolina, such suits are often filed in Superior Court in state court. They can also be filed in (or removed to) federal court if diversity jurisdiction is met. (There have, however, been a couple of decisions in our Circuit rejecting such disputes on the abstention doctrine.)
Punitive Damages: In addition to seeking to recover the amount due under the insurance policy, the insured can also pursue a claim for “punitive” damages if the insurer denied the claim in “bad faith.” Punitive damages in this state are governed by statute, and also by case law addressing this claim. According to one case, the insurer is not liable for punitive damages if its position is “neither strained nor fanciful.” Punitive damages are capped by statute in North Carolina, to the greater of $250,000 or three times the actual damages (whichever is greater).
Treble damages for Unfair Conduct: The policyholder can also assert a claim to recover “treble” (i.e. tripled) damages where the carrier’s conduct is unfair or deceptive. Such a claim is often based on the insurer’s violation of a provision in the statutes mandating that insurers handle a claim in various ways, including that they conduct a reasonable investigation, promptly investigate the claim, and provide an explanation of the denial to the policyholder. (N.C. Gen. Stat. 58 63 15.)
Coverage disputes in North Carolina can quickly become very complicated, and the policyholder and often the insurer may need the services of an attorney experienced in insurance matters.