What Is The Time for Responding to a Defense Tender?
Insurers must act reasonably promptly upon communications with respect to claims, N.C. Gen. Stat. § 58-63-15. There are no statutes, cases or regulations that further define “reasonable promptly.”
Insurers must affirm or deny coverage within a reasonable time after proof of loss. N.C. Gen. Stat. § 58-63-15. There are no statutes, cases or regulations that further define “reasonable time.”
Does Reserving Rights Create a Conflict of Interest?
No cases found.
Does a Reservation of Rights Create Additional Duties?
No cases found.
What Must Be Done If A Conflict of Interest Exists?
An insured is not required to accept a conditional tender of defense by the insurer under a reservation of rights. National Mortgage Corp. v. American Title Ins. Co., 255 S.E.2d 622, 630 (1979), rev’d on other grounds 261 S.E.2d 844 (N.C. 1980).
Who Is Responsible for Fees of Independent Counsel?
An insured may reject a defense under a reservation of rights and still seek indemnity for the costs incurred in its own defense. National Mortgage Corp. v. American Title Ins. Co., 255 S.E.2d 622, 630 (1979), rev’d on other grounds 261 S.E.2d 844 (N.C. 1980).
What Are Independent Counsel’s Obligations?
No cases found.
What Settlement Duties Exist?
No cases found.
What Actions May Result in a Claim for Bad Faith?
Contract: North Carolina recognizes a claim by an insured for bad faith of an insurer in both contract and tort. Dailey v. Integon Gen. Ins. Corp., 331 S.E.2d 148, 154 (N.C. App. 1985).
To prevail on a contract claim, the insured must show the insurer’s refusal to pay or settle the insured’s claim was not based on honest disagreement or innocent mistake. Dailey v. Integon Gen. Ins. Corp., 331 S.E.2d 148, 155 (N.C. App. 1985).
Statutory: There is no statutory private cause of action by an insured against an insurer for bad faith claims handling, N. C. Gen. Stat. § 58-63-15(11); but violations of the statute may be brought forward as evidence of a private claim for relief under Consumer Protection Statute. N.C. Gen. Stat. § 75-1.1; Belmont Land and Investment Co. v. Standard Fire Ins. Co., 403 S.E.2d 924, 926 (N.C. App. 1991).
To prevail on a claim for unfair or deceptive trade practices, the insured must demonstrate (1) an unfair or deceptive act or practice, or unfair method of competition, (2) which is in or affects commerce, (3) which proximately causes actual injury to the insured or his business, and (4) which the insurer engages in with such frequency as to indicate a general practice. Cash v. State Farm Mut. Auto. Ins. Co., 528 S.E.2d 372, 375 (N.C. App. 2000).
Are Attorney’s Fees Recoverable in Insurer-Insured Dispute?
An insurer that wrongfully refuses to defend may be liable both for the cost incurred by the insured in defending the suit and for other court costs and expenses incurred by the insured in pursuing coverage. Jamestown Mut. Insurance Co. v. Nationwide Mut. Insurance Co., 176 S.E.2d 751, 754 (N.C. 1970).
Are Punitive Damages Recoverable in Insurer-Insured Dispute?
Punitive damages are available to an insured for an insurer’s tortuous refusal to settle, but must prove: (1) a valid claim, (2) bad faith, and (3) aggravating or outrageous conduct. Lovell v. Nationwide Mut. Ins. Co., 424 S.E.2d 181, 184 (N.C. App. 1993).
Punitive damages are capped at three times the amount of compensatory damages or $250,000, whichever is greater. N.C. Gen. Stat. §1D-25.
Alternative Coverage Options
An insurer that receives a demand for a defense should file a coverage suit against its insured seeking a declaration that it does not owe coverage or defend the insured under a reservation of rights. St. Paul Fire & Marine Ins. Co. v. Vigilant Ins. Co., 724 F.Supp. 1173, 1180 (M.D.N.C. 1989), aff’d, 919 F.2d 235 (4th Cir. 1990).
Relevant Statutes
Declaratory Judgment – N.C. Gen. Stat. § 1-253
“Courts of record within their respective jurisdictions shall have power to declare rights, status, and other legal relations, whether or not further relief is or could be claimed. No action or proceeding shall be open to objection on the ground that a declaratory judgment or decree is prayed for. The declaration may be either affirmative or negative in form and effect and shall have to force and effect of a final judgment or decree.”
Unfair Claims Settlement Practices Statute – N.C. Gen. Stat. §58-63-1.
Consumer Protection Act. – N.C. Gen. Stat. §75.1-1.