Insurance Bad Faith

This blog does not create an attorney-client relationship. You should not rely upon this blog for legal advice, but instead should consult an attorney experienced in your area of concern.

Chapter 58 of the North Carolina General Statues prohibits an insurance company from doing certain wrongful acts.  More specifically, the statute is called the Unfair Claim Settlement Practices

N.C. Gen. Stat. Ann. § 58-63-15. 

Unfortunately, these claims cannot be brought against someone else's insurance company, but only your insurance company.  If there is a single violation of the Act, the insured is entitled to recover treble damages and attorney fees under Unfair and Deceptive Trade Practices Act (Chapter 75 of the North Carolina General Statutes).  

 The acts that are prohibited include:

a. Misrepresenting pertinent facts or insurance policy provisions relating to coverages at issue;

b. Failing to acknowledge and act reasonably promptly upon communications with respect to claims arising under insurance policies;

c. Failing to adopt and implement reasonable standards for the prompt investigation of claims arising under insurance policies;

d. Refusing to pay claims without conducting a reasonable investigation based upon all available information;

e. Failing to affirm or deny coverage of claims within a reasonable time after proof-of-loss statements have been completed;

f. Not attempting in good faith to effectuate prompt, fair and equitable settlements of claims in which liability has become reasonably clear;

g. 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;

h. Attempting to settle a claim for less than the amount to which a reasonable man would have believed he was entitled;

i. Attempting to settle claims on the basis of an application which was altered without notice to, or knowledge or consent of, the insured;

j. Making claims payments to insureds or beneficiaries not accompanied by a statement setting forth the coverage under which the payments are being made;

k. 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;

l. Delaying the investigation or payment of claims by requiring an insured claimant, or the physician, of or either,¹ 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;

m. 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

n. 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.

N.C. Gen. Stat. Ann. § 58-63-15 (West)

Avoid pitfalls of the insurance application and claims process

Our firm recently litigated a case where a warehouse was damaged by a tornado.  The damage was estimated to be around $1 Million.  During the course of the investigation of the claim, the insurance company sought certain information from the insured and the insurance agent that procured the policy.  The insurance company then denied coverage after it determined that the information contained in the application was false.

What transpired was a year-long court battle in which the insurance company, insurance agent, and insured argued over which party was at fault in issuing the policy and in completing the application.

It is important that any time you sign an insurance application that you read it carefully.  Even if an agent completes the application, by signing you are attesting to the truthfulness of its contents.  This is vital to any insurance policy because insurance companies can avoid paying a claim if they later determine that the application was incorrect.  Particularly in large loss claims, insurance companies will comb over every piece of your application.

However, because you sign an incorrect application does not mean you have no legal remedy.  First, an insurance company may not be able to void a policy if it issued the policy prior to you signing an application.  Secondly, an insurance agent may also have a duty to assist you in acquiring insurance and in filing a claim.  If the agent is found to have breached his/her fiduciary duty to you in failing to obtain insurance or in presenting false information to the insurer during the investigation of the claim, he/she can be held liable.

Still, you want to avoid lengthy court battles by reading any insurance application before signing and hiring an insurance agent that you trust.


This blog does not create an attorney-client relationship. You should not rely upon this blog for legal advice, but instead should consult an attorney experienced in your area of concern.