North Carolina recognizes a statutory right to bring a private cause of action for bad faith. NC Gen, Stat. 75-1.1; NC Gen Stat. 58-63-15(11).
The state also recognizes through case precedent first party bad faith. In Dailey v Integon, 75 N.C. App. 387, 331 S.E. 2d 148 (1985), the Court of Appeals reversed the trial court, finding the evidence supported the conclusion that the defense efforts to settle the claim consisted of requiring the plaintiff to obtain expert estimates that defendant had no intention of considering. Defendant was further found to have inordinately delayed settlement and offered half of the amount owed anticipating that plaintiff had neither the will nor the resources to refuse it. Also, the defendant’s agent told plaintiff’s neighbors that plaintiff had his house burned “for insurance purposes.” Likewise, in Von Hagel v. Blue Cross, 91 N.C. App. 58, 370 S. E. 2d 695 (1988), the appeals court again confirmed bad faith by the insurer where the insurer had engaged in prohibited trade practices by general practice, the insured relied on the insurer to his detriment, and the insurer demonstrated intentional and calculated conduct toward the insured. The court then reversed the trial court’s dismissal of the insured’s case of action for breach of duty to act in good faith and deal fairly.
In Lovell v Nationwide Mut. Ins. Co. 108 N.C. App. 418, 424 S.E. 2d (1993), that court reiterated that the state recognizes a tort of bad faith refusal to settle. And in Martinez v Nat’l Union Fire Ins. Co., 911 F. Supp. 2d 331 (2012) the Lowell decision was somewhat modified as to punitive damages, holding that the insured must still demonstrate a valid claim and bad faith, before showing of aggravating conduct is considered.
Overall, an action for bad faith may be brought by a policyholder as a breach of contract or in tort. If the latter, the plaintiff must demonstrate: 1) a refusal to pay a valid claim; 2) the refusal was not based on an honest disagreement or innocent mistake; and 3) aggravating or outrageous conduct. Id.
North Carolina does not recognize third party bad faith.
Chartwell Law represents the interests of insurers and employers, as such, we continue to continue to monitor the legal landscape. If you have any questions about issues associated with right of action for bad faith claims, our attorneys are available to help. Please contact your Chartwell Law attorney.