New Guidance Clarifies Bad Faith Claims Against Insurers in North Carolina
North Carolina's legal standards for bad faith and UDTPA insurance claims are outlined.
Why it matters: Understanding state-specific requirements helps policyholders and risk managers protect interests and structure policies effectively amid litigation risks.
- North Carolina’s UDTPA prohibits unfair or deceptive acts affecting commerce, requiring proof of actual injury.
- N.C.G.S. 58-63-15 defines 14 unfair or deceptive insurance claim practices, including misrepresentations and false advertising.
- A simple breach of contract does not suffice for a UDTPA claim; substantial aggravating circumstances must be demonstrated.
- Neshat v. Nationwide (2021) emphasized the need for specific factual allegations beyond statutory recitations for UDTPA claims.
North Carolina’s Unfair and Deceptive Trade Practices Act (UDTPA) aims to prevent deceptive or unfair acts in commerce, including within the insurance sector. Plaintiffs must prove three elements: an unfair or deceptive act, its occurrence in or impact on commerce, and actual injury resulting from the act.
The state’s insurance-specific statute, N.C.G.S. 58-63-15, identifies 14 unfair claim settlement practices, such as misrepresentations and false advertising. However, a breach of contract by itself does not trigger a UDTPA violation — the act must involve substantial aggravating circumstances beyond mere breach.
Legal experts emphasize that a "practice is deceptive if it has the tendency or capacity to mislead a reasonable consumer," and "unfair if it violates public policy or is oppressive, unscrupulous, or substantially injurious."
In Neshat v. Nationwide Mut. Fire Ins. Co. (2021), a federal court in North Carolina dismissed a UDTPA claim because the plaintiff failed to allege specific factual bases beyond statutory language. The court clarified that stating a claim is disputed does not prove the insurer’s liability is "reasonably clear," which is necessary for such claims.
This guidance highlights the importance for policyholders and risk managers to understand these legal standards clearly to safeguard their rights and effectively handle disputes under North Carolina insurance law.
By the numbers:
- 14 — specific unfair claim settlement practices defined under N.C.G.S. 58-63-15
- 3 — elements required to establish a UDTPA claim (unfair act, commerce impact, actual injury)
- May 27, 2021 — date of the Neshat v. Nationwide dismissal ruling
Yes, but: While the UDTPA provides a path to challenge unfair insurer conduct, courts require detailed factual allegations, not just statutory references, to sustain claims.