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 preaccident 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 preaccident 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 Subparagraphs (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 preaccident value, if in fact such original and any supplemental claim(s) exceed or would exceed 75% of the vehicle's
preaccident 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, 1989.
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 settled.
- 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 to claimants;
- 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.
§ 84-2.1.
"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.)
§ 84-4.
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 Carolina.
(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.)
§ 58-33-70.
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
law.
§ 58-1-10.
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.
§ 58-63-15.
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 insurance policies;
- Failing to adopt and implement reasonable
standards for the prompt investigation of
claims arising under insurance policies;
- Refusing to pay claims without conducting a
reasonable investigation based upon all
available information;
- Failing to affirm or deny coverage of claims
within a reasonable time after proof-of-loss
statements have been completed;
- 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 entitled;
- 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 insureds or claimants a policy
of appealing from arbitration awards in favor
of insureds 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 coverage; and
- 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 policies.
- 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 claim.
- 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.
§ 58-2-161.
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 Chapter.
- Any surplus lines insurer operating under Article 21
of this Chapter.
- Any risk retention group or purchasing group operating
under Article 22 of this Chapter.
- 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 Chapter.
- The North Carolina Joint Insurance Underwriting Association
operating under Article 46 of this Chapter.
- The North Carolina Insurance Guaranty
Association operating under Article 48 of this
Chapter.
- 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 General Statutes.
- 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 damages.
(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.
|
