Insurance Rules for North Carolina
Helping people Understand their rights
11 NCAC 04.0418
TOTAL LOSSES ON MOTOR VEHICLES
(N.C. Administrative Code)
The commissioner shall consider as prima facie violative of G.S. 58 63 15(11) the failure by an insurer to adhere
to the following procedures concerning settlement of covered "total loss" motor vehicle claims when such failure is
so frequent as to indicate a general business practice:
- If the insurer and the claimant are initially unable to reach an agreement as to the value of the vehicle, the
insurer shall base any further settlement offer not only on published regional average values of similar vehicles,
but also on the value of the vehicle in the local market. Local market value shall be determined by using either
the local market price of a comparable vehicle or, if no comparable vehicle can be found, quotations from at least
two qualified dealers within the local market area. Additionally, if the claimant represents that the vehicle
actually owned by him was in better than average condition, the insurer shall give due consideration to the
condition of the claimant's vehicle prior to the accident.
- Where the insurer has the right to elect to replace the vehicle and does so elect, the replacement vehicle
shall be available without delay, similar to the lost vehicle, and paid for by the insurer, subject only to the
deductible and to the value of any enhancements acceptable to the insured.
- If the insurer makes a deduction for the salvage value of a "total loss" vehicle retained by the claimant,
the insurer, if so requested by the claimant, shall furnish the claimant with the name and address of a salvage
dealer who will purchase the salvage for the amount deducted.
- If a written statement is requested by the claimant, a total loss payment by an insurer shall be
accompanied by a written statement listing the estimates, evaluations and deductions used in calculating the
payment, if any, and the source of these values.
- When a motor vehicle is damaged in an amount which, inclusive of original and supplemental claims, equals
or exceeds 75 percent of the pre accident actual cash value, as such value is determined in accordance with
this Rule, an insurance carrier shall "total loss" the automobile by paying the claimant the pre accident
value, and in return, receiving possession of the legal title of the salvage of said automobile. At the
election of the claimant, or in those circumstances where the insurance carrier will be unable to obtain an
unencumbered title to the damaged vehicle then the insurance carrier shall have the right to deduct the value
of the salvage of the total loss from the actual value of the vehicle and leave such salvage with the claimant
subject to the insurance carrier abiding by Subparagraph's (3) and (6) of this Rule. No insurer, adjuster,
appraiser, agent, or any other person shall enter into any oral or written agreement(s), by and between
themselves, to limit any original or supplemental claim(s) so as to artificially keep the repair cost of a
damaged vehicle below 75% of its pre accident value, if in fact such original and any supplemental claim(s)
exceed or would exceed 75% of the vehicle's pre accident value.
- The insurer shall be responsible for all reasonable towing and storage charges until three days after the
owner and storage facility are notified in writing that the insurer will no longer reimburse the owner or
storage facility for storage charges. Notification to the owner shall include the name, address, and telephone
number of the facility where the vehicle is being stored. Notification to the storage facility shall include
the name, address, and, if available, telephone number of the owner. No insurer shall abandon the salvage of a
motor vehicle to a towing or storage service without the consent of the service involved. In instances where
the towing and storage charges are paid to the owner, the check or draft for the amount of such service shall
be payable jointly to the owner and the towing or storage service.
History Note: Authority G.S. 58 2 40; 58 63 65; Eff. December 15, 1979; Amended Eff. April 1, 1993; April 1,
1989; July 1, 1986
If an insurer ignores the operating guidelines of the estimating system they used to prepare the appraisal of
damage, or if the insurer fails to include ALL necessary
procedures, parts and materials, and these failures result in a suppressed repair figure, it could be
construed as a violation of this law.
11 NCAC 04 .0419
MOTOR VEHICLE REPAIR ESTIMATES
(N.C. Administrative Code)
The commissioner shall consider as prima facie violative of G.S. 58-63-15(11) the failure by an insurer to adhere
to the following procedures concerning repair estimates on covered motor vehicle damage claims submitted when such
failure is so frequent as to indicate a general business practice:
- If the insurer requires the claimant to obtain more than two estimates of property damage, the cost, if any, of
such additional estimates shall be borne by the insurer.
- No insurer shall refuse to inspect the damaged vehicle if a personal inspection is requested by the
claimant. However, if the damaged vehicle is situated other than where it is normally used or cannot easily be
moved, the insurer may satisfy the requirements of this Section by having a competent local appraiser inspect
the damaged vehicle.
- When the insurer elects to have the claimant's property repaired, the insurer shall, if so requested by the
claimant, furnish the claimant with a legible front and back copy of its estimate. This estimate shall contain
the name and address of the insurer and, if the estimate was prepared by a repair service, the name and address
of that service. If there is a dispute concerning pre-existing damage to the vehicle which the insurer does not
intend to have repaired, the extent of such damage shall be clearly stated in the estimate.
- If requested by a claimant, an insurer shall provide to the claimant copies of the estimate and all
supplements thereto that it uses to offer a settlement.
History Note: Authority G.S. 58-2-40; 58-63-65; Eff. December 15, 1979; Amended Eff. April 1, 1993; April 1,
11 NCAC 04 .0421
HANDLING OF LOSS AND CLAIM PAYMENTS
(N.C. Administrative Code)
The commissioner shall consider as prima facie violative of G.S. 58 3 100 and 58 63 15(11) failure by an insurer to
adhere to the following procedures concerning loss and claim payments when such failure is so frequent as to
indicate a general business practice:
- Loss and claim payments shall be mailed or otherwise delivered within 10 business days after the claim is
- Unless the insured consents, no insurer shall deduct from a loss or claim payment made under one policy
premiums owed by the insured on another policy.
- No insurer shall withhold the entire amount of a loss or claim payment because the insured owes premium or
other monies in an amount less than the loss or claim payment.
- If a release or full payment of claim is executed by a claimant, involving a repair to a motor vehicle, it
shall not bar the right of the claimant to promptly assert a claim for property damages unknown to either the
claimant or to the insurance carrier prior to the repair of the vehicle, which damages were directly caused by
the accident and which damages could not be determined or known until after the repair or attempted repair of
the motor vehicle. Claims asserted within 30 days after repair shall be considered promptly asserted.
- If a release or full payment of claim is executed by a third party claimant, involving a repair to a motor
vehicle, it shall not bar the right of the third party claimant to promptly assert a claim for diminished
value, which diminished value was directly caused by the accident and which diminished value could not be
determined or known until after the repair or attempted repair of the motor vehicle. Claims asserted within 30
days after repair for diminished value shall be considered promptly asserted.
History Note: Authority G.S. 58 2 40; 58 3 100; 58 63 65; Eff. December 15, 1979; Amended Eff. February 1, 1996;
April 1, 1993; April 1, 1989; July 1, 1986.
11 NCAC 04 .0423 ETHICAL STANDARDS
(N.C. Administrative Code)
(a) Every agent, limited representative, broker, adjuster, appraiser, or other insurer's representative shall, when
in contact with the public:
- promptly identify himself and his occupation;
- carry the license issued to him by the Department of Insurance while performing his duties and display it
upon request to any claimant, any repairer at which he is investigating a claim or loss, any department
representative, or any other person with whom he has contact while performing his duties;
- conduct himself in such a manner as to inspire confidence by fair and honorable dealings.
(b) No claims management person, agent, agency employee, limited representative, broker, adjuster, appraiser, or
other insurer's representative shall:
- accept any gratuity or other form of remuneration from any provider of services for recommending that provider
- purchase salvage from a claimant;
- intimidate or discourage any claimant from seeking legal advice and counsel by withdrawing and reducing a
settlement offer previously tendered to the claimant or threatening to do so if the claimant seeks legal advice
or counsel. No adjuster shall advise claimant of the advisability of seeking legal counsel nor recommend any
legal counsel to any claimant under any circumstance;
- cause any undue delay in the settlement of a property damage claim on account of the claimant's choice of a
motor vehicle repair service.
(c) No claims management person, agent, agency employee, limited representative, broker, or other insurer's
representative shall recommend the utilization of a particular motor vehicle repair service without clearly
informing the claimant that he is under no obligation to use the recommended repair service and that he may use the
service of his choice.
History Note: Authority G.S. 58-2-40; 58-33-10; 58-33-25; 58-33-30; 58-35-25; 58-63-65; 58-65-40; Eff. December
15, 1979; Amended Eff. April 1, 1993; April 1, 1989; July 1, 1986.
Re: (4) - When an insurer delays initially inspecting a damaged vehicle, and subsequently delays re-inspection
of damages they missed on the initial appraisal because they have a difficult time getting the repairer to succumb
to their demands, it could be construed as causing an undue delay in the settlement of a property damage claim on
account of the claimant's choice of a motor vehicle repair service.
11 NCAC 04 .0426
LIKE KIND AND QUALITY
(N.C. Administrative Code)
No insurer shall require the use of an after market part in the repair of a motor vehicle unless the after market
part is at least equal to the original part in terms of fit, quality, performance and warranty. Insurers specifying
the use of after market parts shall include in the estimate the costs of any modifications made necessary by the
use of after market parts.
History Note: Authority G.S. 58-2-40; Eff. April 1, 1989.
Aftermarket parts generally do not comply with this law. For more information on aftermarket parts, please see
our Aftermarket Parts page
"Practice law" defined.
(N.C. State Statutes)
The phrase "practice law" as used in this Chapter is defined to be performing any legal service for any other
person, firm or corporation, with or without compensation, specifically including the preparation or aiding in the
preparation of deeds, mortgages, wills, trust instruments, inventories, accounts or reports of guardians, trustees,
administrators or executors, or preparing or aiding in the preparation of any petitions or orders in any probate or
court proceeding; abstracting or passing upon titles, the preparation and filing of petitions for use in any court,
including administrative tribunals and other judicial or quasi-judicial bodies, or assisting by advice, counsel, or
otherwise in any legal work; and to advise or give opinion upon the legal rights of any person, firm or
corporation: Provided, that the above reference to particular acts which are specifically included within the
definition of the phrase "practice law" shall not be construed to limit the foregoing general definition of the
term, but shall be construed to include the foregoing particular acts, as well as all other acts within the general
definition. The phrase "practice law" does not encompass the writing of memoranda of understanding or other
mediation summaries by mediators at community mediation centers authorized by G.S. 7A-38.5.
(C.C.P., s. 424; 1870-1, c. 90; 1871-2, c. 120; 1880, c. 43; 1883, c. 406; Code, ss. 27, 28, 110; Rev., ss. 210,
3641; 1919, c. 205; C.S., s. 198; 1933, c. 15; 1941, c. 177; 1943, c. 543; 1945, c. 468; 1995, c. 431, s. 3;
1999-354, s. 2.)
Persons other than members of State Bar prohibited from practicing law.
(N.C. State Statutes)
Except as otherwise permitted by law, it shall be unlawful for any person or association of persons, except active
members of the Bar of the State of North Carolina admitted and licensed to practice as attorneys-at-law, to appear
as attorney or counselor at law in any action or proceeding before any judicial body, including the North Carolina
Industrial Commission, or the Utilities Commission; to maintain, conduct, or defend the same, except in his own
behalf as a party thereto; or, by word, sign, letter, or advertisement, to hold out himself, or themselves, as
competent or qualified to give legal advice or counsel, or to prepare legal documents, or as being engaged in
advising or counseling in law or acting as attorney or counselor-at-law, or in furnishing the services of a lawyer
or lawyers; and it shall be unlawful for any person or association of persons except active members of the Bar, for
or without a fee or consideration, to give legal advice or counsel, perform for or furnish to another legal
services, or to prepare directly or through another for another person, firm or corporation, any will or
testamentary disposition, or instrument of trust, or to organize corporations or prepare for another person, firm
or corporation, any other legal document. Provided, that nothing herein shall prohibit any person from drawing a
will for another in an emergency wherein the imminence of death leaves insufficient time to have the same drawn and
its execution supervised by a licensed attorney-at-law. The provisions of this section shall be in addition to and
not in lieu of any other provisions of this Chapter. Provided, however, this section shall not apply to
corporations authorized to practice law under the provisions of Chapter 55B of the General Statutes of North
(1931, c. 157, s. 1; 1937, c. 155, s. 1; 1955, c. 526, s. 1; 1969, c. 718, s. 19; 1981, c. 762, s. 3; 1995, c.
431, s. 4.)
Special provisions for adjusters and motor vehicle damage appraisers.
(N.C. State Statutes)
(a)It shall be unlawful and cause for revocation of license for a licensed adjuster to engage in the practice of
Contract of insurance.
(N.C. State Statutes)
A contract of insurance is an agreement by which the insurer is bound to pay money or its equivalent or to do some
act of value to the insured upon, and as an indemnity or reimbursement for the destruction, loss, or injury of
something in which the other party has an interest.
(1899, c. 54, s. 2; Rev., s. 4679; C.S., s. 6262; 1945, c. 383.)
A repair contract is a legally binding contract, and the negotiation of such a contract by a third-party
(non-contracting party), of the terms and benefits derived from the contract could be construed as practicing law.
The insurance company does not have a legal right to negotiate a consumer’s repair contract (a contract which the
insurer is not a party to), and if an insurer does so, they could be charged with practicing law without a license.
Additionally, insurance appraisers/adjuster are specifically prohibited from practicing law.
Furthermore, since the contract of insurance (policy) is a legal contract, the negotiation of the terms of the
contract (by "negotiating" how much the insurance company will pay for the repairs with the shop), could be
construed as practicing law as well.
Unfair methods of competition and unfair or deceptive acts or practices defined.
(N.C. State Statutes)
The following are hereby defined as unfair methods of competition and unfair and deceptive acts or practices in the
business of insurance:
(11) Unfair Claim Settlement Practices. - Committing or performing with such frequency as to indicate a general
business practice of any of the following:
Provided, however, that no violation of this subsection shall of itself create any cause of action in favor of any
person other than the Commissioner:
- Misrepresenting pertinent facts or insurance policy provisions relating to coverages at issue;
- Failing to acknowledge and act reasonably promptly upon communications with respect to claims arising under
- Failing to adopt and implement reasonable standards for the prompt investigation of claims arising under
- Refusing to pay claims without conducting a reasonable investigation based upon all available
- Failing to affirm or deny coverage of claims within a reasonable time after proof-of-loss statements have
- Not attempting in good faith to effectuate prompt, fair and equitable settlements of claims in which
liability has become reasonably clear;
- Compelling [the] insured to institute litigation to recover amounts due under an insurance policy by
offering substantially less than the amounts ultimately recovered in actions brought by such insured;
- Attempting to settle a claim for less than the amount to which a reasonable man would have believed he was
- Attempting to settle claims on the basis of an application which was altered without notice to, or
knowledge or consent of, the insured;
- Making claims payments to insureds or beneficiaries not accompanied by [a] statement setting forth the
coverage under which the payments are being made;
- Making known to insured's or claimants a policy of appealing from arbitration awards in favor of insured's
or claimants for the purpose of compelling them to accept settlements or compromises less than the amount
awarded in arbitration;
- Delaying the investigation or payment of claims by requiring an insured claimant, or the physician, of [or]
either, to submit a preliminary claim report and then requiring the subsequent submission of formal
proof-of-loss forms, both of which submissions contain substantially the same information;
- Failing to promptly settle claims where liability has become reasonably clear, under one portion of the
insurance policy coverage in order to influence settlements under other portions of the insurance policy
- Failing to promptly provide a reasonable explanation of the basis in the insurance policy in relation to
the facts or applicable law for denial of a claim or for the offer of a compromise settlement.
(1949, c. 1112; 1955, c. 850, s.3; 1967, c. 935, s. 2; 1975, c. 668; 1983, c. 831; 1985 (Reg. Sess., 1986), c.
1027, ss. 18, 20; 1987, c. 787, ss. 1, 3.)
- Re:a) 1) - Making claims and statements such as “this is all we owe” while there are clearly evident
shortages within the insurance estimate could be construed as making misrepresenting pertinent facts. Re: 2) -
Deliberately misleading a consumer that the contract of insurance has certain provisions that it does not
contain could be construed as misrepresenting pertinent facts.
- Re: b) - Deliberately delaying responses to reasonable claims from a consumer regarding relevant issues to
a damage claim could be construed as failing to act reasonably promptly .
- Re: c) - Failing to respond in a reasonable time to conduct a re-inspection of damages could be construed
as failing to implement reasonable standards for the prompt investigation of claims arising under insurance
- Re: d) - Denying additional payment without conducting a thorough investigation of the damages and
pertinent facts could be construed as refusing to pay claims without conducting a reasonable investigation
based upon all available information, especially when the repairer has fully documented all damages.
- Re: f) - Deliberately delaying full claim payment and denying certain reasonable aspect of damage could be
construed as not attempting in good faith to effectuate prompt, fair and equitable settlements of claims in
which liability has become reasonably clear – especially since liability is not an issue in a first-party
- Re: g) - Denying payment, leaving an insured no alternative but to seek legal recourse, could be construed
as compelling [the] insured to institute litigation to recover amounts due under an insurance policy by
offering substantially less than the amounts ultimately recovered in actions brought by such insured.
- Re: h) - When an intelligent person reads a contract that promises an insurer will pay the “amount
necessary to repair or replace the property with other property of like kind and quality” and believes that the
insurer will pay the amount necessary to repair it– as opposed to the amount the insurer thinks may be
necessary, and the insurer refuses to review the repairer’s documentation or consider reviewing and revising
their own appraisal, it could be construed as attempting to settle a claim for less than the amount to which a
reasonable man would have believed he was entitled.
- Re: n) - Refusing to review the insurance company estimate of the damages, especially when the estimate is
prepared based on an electronic estimating system that was not used properly, could be construed as failing to
promptly provide a reasonable explanation of the basis in the insurance policy in relation to the facts or
applicable law for denial of a claim or for the offer of a compromise settlement – especially if the consumer
had requested, in writing, the specific section of the contract or state statute that permitted the insurer to
limit the claim payment or otherwise dictate the repair process.
False statement to procure or deny benefit of insurance policy or certificate.
(N.C. State Statutes)
For the purposes of this section:
"Insurer" has the same meaning as in G.S. 58-1-5(3) and also includes:
- Any hull insurance and protection and indemnity club operating under Article 20 of this
- Any surplus lines insurer operating under Article 21 of this Chapter.
- Any risk retention group or purchasing group operating under Article 22 of this
- Any local government risk pool operating under Article 23 of this Chapter.
- Any risk-sharing plan operating under Article 42 of this Chapter.
- The North Carolina Insurance Underwriting Association operating under Article 45 of this
- The North Carolina Joint Insurance Underwriting Association operating under Article 46 of
- The North Carolina Insurance Guaranty Association operating under Article 48 of this
- Any multiple employer welfare arrangement operating under Article 49 of this Chapter.
- The North Carolina Life and Health Insurance Guaranty Association operating under Article
62 of this Chapter.
- Any service corporation operating under Article 65 of this Chapter.
- Any health maintenance organization operating under Article 67 of this Chapter.
- The Teachers' and State Employees' Comprehensive Major Medical Plan operating under Chapter
135 of the General Statutes.
- A group of employers self-insuring their workers' compensation liabilities under Article 47
of this Chapter.
- An employer self-insuring its workers' compensation liabilities under Article 5 of Chapter
97 of the General Statutes.
- The North Carolina Self-Insurance Guaranty Association under Article 4 of Chapter 97 of the
- Any reinsurer licensed or accredited under this Chapter.
- "Statement" includes any application, notice, statement, proof of loss, bill of lading, receipt for
payment, invoice, account, estimate of property damages, bill for services, diagnosis, prescription,
hospital or doctor records, X rays, test result, or other evidence of loss, injury, or expense.
Any person who, with the intent to injure, defraud, or deceive an insurer or insurance claimant:
- Presents or causes to be presented a written or oral statement, including computer-generated
documents as part of, in support of, or in opposition to, a claim for payment or other benefit pursuant
to an insurance policy, knowing that the statement contains false or misleading information concerning
any fact or matter material to the claim, or
- Assists, abets, solicits, or conspires with another person to prepare or make any written or oral
statement that is intended to be presented to an insurer or insurance claimant in connection with, in
support of, or in opposition to, a claim for payment or other benefit pursuant to an insurance policy,
knowing that the statement contains false or misleading information concerning a fact or matter
material to the claim is guilty of a Class H felony. Each claim shall be considered a separate count.
Upon conviction, if the court imposes probation, the court may order the defendant to pay restitution
as a condition of probation. In determination of the amount of restitution pursuant to G.S.
15A-1343(d), the reasonable costs and attorneys' fees incurred by the victim in the investigation of,
and efforts to recover damages arising from, the claim, may be considered part of the damage caused by
the defendant arising out of the offense.
In a civil cause of action for recovery based upon a claim for which a defendant has been convicted under this
section, the conviction may be entered into evidence against the defendant. The court may award the prevailing
party compensatory damages, attorneys' fees, costs, and reasonable investigative costs. If the prevailing party can
demonstrate that the defendant has engaged in a pattern of violations of this section, the court may award treble
(1899, c. 54, s. 60; Rev., s. 3487; 1913, c. 89, s. 28; C.S., s. 4369; 1937, c. 248; 1967, c. 1088, s. 1; 1979,
c. 760, s. 5; 1989 (Reg. Sess., 1990), c. 1054, s. 2; 1995, c. 43, s. 1; 1999-294, s. 3.)
Re: (b) (1) - When an insurer presents multiple appraisals, all of which are deficient, and then knowingly
refuses to fully abide by the operating guidelines for the electronic estimating system used to prepare the
appraisal, if could be construed as presenting a written computer-generated document as part of, and in support of,
a claim for payment pursuant to an insurance policy, knowing that the statement contains false or misleading
information concerning fact or matter material to the claim.
Re: (2) - When two insurance company employees conspire to deliberately, misleadingly, and wrongly claim that
the computer-generated document is in fact accurate when they fully know otherwise, it could be construed as
assisting, abetting, soliciting, and conspiring with another person to prepare a written computer-generated
document as part of, and in support of, a claim for payment pursuant to an insurance policy, knowing that the
statement contains false or misleading information concerning fact or matter material to the claim.
Re: (2) - When an insurer refuses to re-inspect a vehicle based on claims of already having seen enough – even
though the authorized appraiser continuously missed damage on several other occasions – it could be construed as a
violation of this law.