NORTH CAROLINA STATUTES AND REGULATIONS PERTINENT TO CASUALTY INSURANCE

Countersignature of Resident Agent

Resident agents and brokers are not required to countersign insurance applications on behalf of nonresident agents or brokers.

POWER OF THE COMMISSIONER

The Commissioner may examine the affairs of any person engaged in the insurance business in North Carolina to determine whether the person has committed any unfair method of competition or unfair or deceptive act or practice.

PENALTY FOR FALSE STATEMENT

A person who willfully misstates information in a financial statement or other document is guilty of a Class 1 felony. The entity on whose behalf the person made the false statement must pay a fine of between $2,000 and $10,000.

Obtaining Premium Payments through Fraud

An agent, broker, or limited representative who knowingly obtains premium payments through fraudulent representations is guilty of a Class 1 misdemeanor

Exemptions

~A licensee who was granted an exemption from the continuing education requirements before October 1, 2010, continues to be exempt if the person -is 65 or older; -has been continuously licensed in the line of insurance for at least 25 years; and -either holds a professional designation (e.g., CLU, ChFC, or CFP) or certifies that he or she is an inactive agent and does not solicit applications or take part in an agency's day-to-day operations.

Nonresident Licensing

~A person who is not a resident of North Carolina may be licensed as an insurance producer in North Carolina if the following conditions are met: -The person is a licensed producer in good standing in his or her home state. -The person applies for licensure and pays the required fees. -The person provides the Commissioner with a certified copy of the license application from his or her home state or an original Uniform Application. -The person's home state grants nonresident producer licenses to North Carolina on the same basis.

PROOF OF LOSS FORMS

~Upon receiving the claimant's notice of claim, the insurer has 15 days in which to send the claimant the forms for filing proof of loss. If the insurer fails to do so, the claimant can instead provide proof of loss by giving a written statement describing the loss. The claimant has up to 90 days after the loss to file this written proof.

Payment of Premiums by Credit Card (Transacting Insurance without a License)

An insurer, agent, or broker may accept a premium payment by credit card if the insurer, -allows all insureds to pay premiums in this manner (and does not limit the use of credit card payments to certain persons). - and pays the fees imposed by the credit card company for the credit transaction.

License Probation, Suspension, Revocation, or Nonrenewal

The Commissioner may place on probation, suspend, revoke, or refuse to continue a producer's license

Scope

The association covers all kinds of direct insurance except for the following: -life, annuity, accident and health or disability insurance; -insurance offering protection against investment risks, such as mortgage guaranty or financial guaranty insurance; -fidelity or surety bonds or other bonding obligations; -credit insurance; -insurance of warranties or service contracts; -title insurance; -ocean marine insurance; -any transaction between a person and an insurer (or their affiliates) involving the transfer of investment or credit risk unaccompanied by transfer of insurance risk; and -insurance written on a retroactive basis to cover known or unknown losses and for which a claim has already been made.

Carryover Credit

There is no limit on the number of insurance continuing education credits' that can be carried over from one compliance period to the next biennial compliance period.

IMMUNITY FOR REPORTING FRAUD

When acting in good faith, a person who reports insurance fraud is immune from any liability for providing information to or cooperating with the Commissioner or law enforcement agencies. However, a person who does so with malice or in bad faith is not granted the same protection.

Binders (Transacting Insurance without a License)

~A lender that makes mortgage or deed of trust loans on one- to four-family residences must accept a binder issued by an agent, broker, or insurer as evidence of insurance. However, a lender is not required to accept a binder unless it includes the following: -the insured's name and address -the mortgagee's name and address -a description of the insured collateral -the amount of insurance -a provision stating that it may not be canceled except by giving 10 days' written notice to the mortgagee A binder must also be accompanied by a receipt showing that one year's premium was paid. The agent must use his or her best efforts to have the insurance company issue a policy.

LICENSE REQUIRED

~A person may not sell, solicit, or negotiate insurance in North Carolina unless the person is licensed for that kind of insurance. A person who acts as a principal, agent, broker, limited representative, adjuster, or motor vehicle damage appraiser without a license and solicits insurance, collects premiums, or adjusts or investigates losses is guilty of a Class 1 misdemeanor.

Insurance Required from Lenders

A lender may not require that a borrower purchase insurance from the lender as a condition of making, renewing, or refinancing a loan

Notice of License Suspension or Revocation

The Commissioner must notify an insurer whenever he or she suspends, revokes, or does not renew a license. Insurers must also be notified when a licensee surrenders a license. A licensee must deliver his or her license to the Commissioner within 30 days of terminating residency in North Carolina.

CONTRACT OF INSURANCE

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

INVESTIGATION OF CHARGES

~Commissioner may examine the books & records of an insurer & may question its officers and agents whenever he or she deems it necessary. Commissioner may also examine an insurer & its agents if a person files a complaint stating that the insurer has violated the insurance laws. The insurer is responsible for paying all costs of an examination if Commissioner determines that the company has violated the insurance laws.

Agent's Representative Capacity

Agents represent the insurer, not the insured, in any controversy. Brokers, on the other hand, represent the insured in controversies between an insurer and the insured.

Post Assessment Insurance Guaranty Association: Part 2

Each insurer authorized to transact property and casualty insurance in North Carolina must be a member of the association and must remain a member as a condition of its authority to continue to transact insurance in North Carolina. The association will pay only certain obligations of insolvent insurers, which are defined by statute as covered claims.

PRODUCTION OF RECORDS ON DEMAND

~Anyone who maintains control over an insurer's books and records must give them to the Commissioner when requested. A person who refuses to produce books and records or who knowingly makes a false statement in them will have his or her license suspended or revoked and will be guilty of a Class 1 misdemeanor.

Sanctions for Noncompliance

~Failing to complete the continuing education requirements will cause a person's license to lapse. However, the Commissioner may grant an extension of time if good cause is shown or charge a $75 administrative fee, or both, instead of having the person's license lapse. A person may ask for such an extension of time during or before the last month of the person's compliance year.

Advisory Committees

~The Commissioner appoints an advisory committee to recommend rules concerning the following: -the content of continuing education courses -the accreditation of continuing education sponsors and programs -the accreditation of videotape or other audiovisual programs -the computation of credit for course -special cases and exemptions -general compliance procedures -sanctions for noncompliance

NOTIFICATION OF A CHANGE OF ADDRESS

A person who applies for an insurance producer's license must give the Department a residential address and an e-mail address. If the person changes either address, he or she must notify the Department within 10 days. A person who violates this requirement must pay a $50 administrative fee

NOTIFICATION OF CRIMINAL CONVICTIONS

If a producer is convicted of a crime (other than a motor vehicle infraction), he or she must notify the Commissioner in writing within 10 days after the date of conviction. A conviction includes an adjudication of guilt, a guilty plea, or a plea of nolo contendere (no contest).

License Education Courses

~A person may teach pre licensing and continuing education courses only if he or she is qualified and receives a license from the Commissioner. The Commissioner may suspend or terminate an instructor's authority at any time if -the course material is inaccurate, or -the instructor receives a poor evaluation from a Department monitor and a majority of attendees.

EMBEZZLEMENT & MISAPPROPRIATION

~An insurance agent, broker, or administrator who embezzled or fraudulently converts money or other consideration received while transacting insurance is guilty of a felony. A person will be guilty of one of the following: •a Class H felony, if the amount involved is less than $100,000 •a Class C felony, if the amount involved is $100,000 or more

False Representations in Insurance Applications

An agent, examining physician, applicant, or other person, who intentionally makes a false or fraudulent statement in an insurance application in order to obtain a fee or benefit, is guilty of a Class 1 misdemeanor.

EXAMINATIONS, HEARINGS, & INVESTIGATIONS

Commissioner can investigate any person engaged in the insurance business. They can hire deputies, investigators, actuaries, and examiners to aid in the examination. If they believes that a person is engaged in a criminal act, they can arrest the person with a warrant or have the person arrested.

INJUNCTIVE POWERS

Commissioner may apply to court for a restraining order & injunction to prevent a person from violating the insurance laws if a person is convicted of a criminal violation of the insurance laws or enters a plea of no contest. Their license is automatically suspended until reinstated by Commissioner

MAINTENANCE OF RECORDS

Companies, agents, and brokers must keep records of their insurance transactions, which must show the following information for each policy. •policy number. •date. •policy term. •amount insured. •premiums. •insured's name. The Commissioner may examine the records at any time.

Transacting Insurance without a License

It is unlawful for a person to solicit insurance, accept premiums, or otherwise act as an agent, broker, limited representative, adjuster, or appraiser without a license. A violation of this requirement is considered a Class 1 misdemeanor.

Temporary License

~A person can obtain a temporary insurance producer's license that is valid for up to 180 days. No examination is required. A temporary license can be granted to the following individuals: -the surviving spouse or court-appointed personal representative of a licensed producer who dies or is mentally or physically disabled, in order to sell the producer's insurance business or allow enough time for the producer (if merely disabled) to recover and return to the business or to allow enough time to train people to run the producer's business; -a member or employee of an agency that is licensed as an insurance producer; -a person designated by a licensed producer who is entering active service in the armed forces; or any person whose licensure the Commissioner believes will best serve the public interest.

Appointment of Producer as Agent

~An insurer can appoint any number of producers it wants to transact insurance business on its behalf. The insurer must file a notice of appointment with the Commissioner within 15 days after receiving the first insurance application from the producer. The insurer pays a fee for every appointment and for every appointment renewal. An appointment continues as long as the agent is licensed and the insurer is authorized to transact business in North Carolina, unless the appointment is canceled. Insurers must renew each producer's appointment and pay the renewal fee by April 1 each year.

Application for License

~To qualify for a license, an applicant must apply to Commissioner using the Uniform Application and declare that the statements on the application are accurate to the applicant's knowledge, under penalty of license denial, suspension, or revocation. The Commissioner must determine that the applicant -is at least 18 years of age; -has not been convicted of a felony or misdemeanor involving dishonesty, breach of trust, or moral turpitude (acts that violate common standards of justice, honesty, or good morals); -complete at least 20 hours of prelicensing education for each line of authority; -pay the required licensing fees; and -pass the state examination for the lines of authority for which the application is made. An insurance agency may also be licensed if it -pays the required licensing fees, and -appoints a person to be responsible for the business's compliance with state insurance laws

Notice of Terminated Appointment

~When an insurer terminates a producer's appointment, the insurer must notify the Commissioner within 30 days of the termination. If the producer was terminated for cause (dishonesty, breach of trust or fiduciary duty, or committing an illegal act), the Commissioner may ask the insurer to give additional documentation related to the producer's termination. Within 15 days after notifying the Commissioner of the termination, the insurer must mail a notice of the termination to the producer at his or her last known address. The producer may file written comments concerning the termination within 30 days of receiving the notice. These comments become part of the Commissioner's file on the producer.

Unauthorized Insurers

~A person who transacts insurance or acts as a third-party administrator for an insurer not licensed to do business in North Carolina will be personally liable on all insurance policies he or she unlawfully sells on behalf of the unauthorized insurer. The person will be liable up to the limit of coverage in the policies. Selling insurance on behalf of an unauthorized insurer is considered one of the following: -a Class 1 misdemeanor if the person or entity does not know that the insurer is an unauthorized insurer -a Class H felony if the person or entity knew or should have known that the insurer is an unauthorized insurer The Commissioner may also bring a civil action, revoke a license, or initiate a criminal action against a person who transacts insurance on behalf of unauthorized insurers.

Waiver

~A producer who cannot comply with the continuing education requirements due to military service or long-term medical disability may request a waiver. The Commissioner will grant an exemption from the continuing education requirements for up to one year if the producer submits the following. -deployment orders from the United States Department of Defense -a notarized statement from a physician stating the individual is unable to work as a producer

INSURANCE BUSINESS RECORDS

~An insurance agency must appoint one person to be responsible for maintaining its books and records. If a person or entity does not keep records of his or her insurance transactions, the Commissioner may suspend or revoke the person's license •from one to six months for a first offense, or •for one year for a second offense. The Commissioner can examine the affairs of a producer or insurer at any time. Agents, brokers, adjusters, appraisers, and producers who refuse to be examined will have their licenses revoked or refused.

Additional or Coinsurance Clause

~An insurance policy covering property in North Carolina may not contain any clause or provision requiring the insured to take or maintain a larger amount of insurance than that expressed in the policy. In addition, a clause or provision that holds the insured liable as a coinsurer with the company issuing the policy for any part of the loss or damage to the property described in the policy is considered null and void and has no effect. A coinsurance clause or provision, however, may be written in or attached to a policy when the words "coinsurance contract" are printed or stamped on the declarations page of the policy or on a form approved by the Commissioner. If there is a difference in the rate for the insurance with and without the coinsurance clause, the rates for each must be provided if requested by the insured.

Restricted License for Rental Car Companies

~The Commissioner may issue a limited license to a rental car company or franchise to act as an agent for an authorized insurer. A rental car company or franchisee may sell only the following: -excess liability insurance, in excess of the standard limits provided by the rental car company in its rental agreement, for liability arising from negligently operating the rental vehicle; -accident and health insurance to renters who die, become dismembered, or incur medical expenses resulting from an accident while renting the vehicle; and -personal effects insurance to renters who suffer loss or damage.

False Pretenses and Cheats

~It is unlawful for a person to obtain or attempt to obtain money, goods, property, or services from another person through false pretenses. Anyone who defrauds another through false pretenses is guilty of a felony. The definition of person includes an individual, a group, business entity, or other organization. If the felony of obtaining property by false pretenses is proved at trial and the same facts constitute larceny or embezzlement, the convicted person may not later be tried on the same facts for larceny or embezzlement. To prove that property was obtained by false pretenses, it is sufficient to allege and prove that the accused party made the false pretense charged with an intent to defraud. It is not necessary to prove at trial that there was an intent to defraud a particular person or that the person to whom the false pretense was made was the person defrauded. Evidence of the failure to fulfill a contract obligation standing alone does not establish the essential element of intent to defraud. If the value of the money, goods, property, or services is $100,000 or more, a person is guilty of a Class C felony. If the value is less than $100,000, the person is guilty of a Class H felony

HEARINGS & PENALTIES FOR VIOLATIONS

~A person who is charged with engaging in an unfair method of competition or committing an unfair or deceptive act or practice is entitled to a hearing before the Commissioner. The person must be notified of the time and place of the hearing in advance. The notice will also specify the offenses and violations with which the person is charged. If the Commissioner determines that a violation has occurred, he or she may •suspend or revoke a license or certificate of authority; •petition a court to impose an order seeking restitution; and/or •impose a fine between $100 and $1,000 for each violation.

FRAUDULENT CLAIMS

~A person who knowingly presents a false insurance claim, with the intent to defraud or deceive, or who assists another in doing so, is guilty of a Class H felony. A person convicted of insurance fraud will also be ordered to pay restitution to the victims for the amount of money that was obtained through fraud. In a civil action for insurance fraud, 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 engaged in a pattern of insurance fraud, the court may award treble damages.

Licensing Requirements

~Agents and brokers may be licensed in the following kinds of insurance: -accident and health or sickness -casualty -limited line insurance -life -Medicare supplement insurance and long-term care insurance -personal lines -property -variable life and variable annuity products -any other kind of insurance permitted by law

Continuing Education

~Each person holding a life, accident and health or sickness, property, casualty, personal lines, or adjuster license must complete 24 hours of insurance continuing education credit (ICEC) every two years. At least three of these hours must be in ethics Those holding one or more property, personal lines, or adjuster licenses are required to complete three hours of insurance continuing education credit on flood insurance and the National Flood Insurance Program every four years. Licensees must submit evidence to the Department showing that they complied with the continuing education requirements before the end of each two-year licensing period. Licensees must keep records of their ICECs for five years, and the Commissioner may inspect them at any time. Licensees who were born in an even-numbered year must complete the continuing education requirements in even-numbered years. Those with odd-numbered birth years must meet the continuing education requirements in odd-numbered compliance years. Nonresident licensees who meet the continuing education requirements in their home states are considered to have complied with North Carolina's continuing education requirements

Reinstatement of License

~If a person's license lapses for failing to fulfill continuing education requirements, the person can reinstate it by completing the CE requirements and paying the $75 administrative fee with four months of the end of the person's previous compliance year. If the person doesn't reinstate the license by then, the person must fulfill the prelicense education requirement again and pass the state licensing examination before the Commissioner will reinstate the license.

COMPLAINT RECORDS

~Insurers and producers must maintain an itemized register of every written complaint received. Complaint records must include the following: •the Department of Insurance's file number •the insured's name •the nature of the complaint •the insured's policy or claim number •a summary of how the complaint was handled Insurers must keep complaint records for at least five years after the final disposition of the complaint. Domestic insurers are required to maintain their complaint records for five years or until the Commissioner has adopted a final general examination report that contains a review of these records, whichever is later

PENALTIES

The Commissioner may issue a cease and desist order to prevent a person from engaging in an unfair method of competition or unfair act or practice. Any person who willfully violates a cease and desist order will be fined between $1,000 and $5,000 for each violation.

SCOPE OF PROVISIONS

The North Carolina Insurance Code sets forth the procedures and requirements for licensing agents, brokers, limited representatives, and adjusters.

Powers of Duties

The association may -investigate claims brought against it and adjust, settle, or pay covered claims to the extent of the association's obligation and deny all other claims; -handle claims through its employees or through one or more insurers or other persons designated as servicing facilities; -reimburse each servicing facility for obligations of the association paid by the facility and for expenses incurred by the facility while handling claims on behalf of the association; and -pay all other authorized association expenses. Duties of the association include, but are not limited to, the following: -employ persons necessary to handle claims and perform other duties of the association; -borrow funds necessary to allow the association to act in accord with its plan of operation; -sue or be sued; -negotiate and become a party to any contracts necessary to carry out its purposes; -refund contributions to member insurers when necessary; and -act as a servicing facility for any entity recommended by the association and approved by the Commissioner. The association performs its functions under an approved plan of operation and exercises its powers through a board of directors.

Agents Signing Certain Blank Policies

~An agent or limited representative who signs a blank insurance contract or policy is guilty of a Class 3 misdemeanor and, if convicted, may be fined not less than $1,000 or more than $5,000. This does not apply to transportation ticket policies of accident insurance and baggage insurance policies, which may be countersigned in blank for issuance only through coinoperated machines.

REPORTING OF VIOLATIONS

~Anyone who believes that insurance fraud, embezzlement, or a violation of the insurance laws is being or has been committed is required to notify the Commissioner. Insurers and their employees must also notify the Commissioner if they believe that an insurer is financially impaired. A person's license may be revoked or not renewed if he or she willfully fails to comply with this requirement.

Unfair Trade Practices

-Misrepresentation. -Twisting. -False Advertising. -Defamation. -Boycott, Coercion, and Intimidation. -False Financial Statements. -Stock Operations and Insurance. -Company Advisory Board. -Contracts. -Unfair Discrimination. -Rebates and Inducements. -Unfair Claim Settlement Practices.

Restricted License for Those Representing Insurers of Military Personnel

~The Commissioner may issue a military sales agent license to a person who represents a domestic life insurance company in a foreign country on a U.S. military installation or with U.S. military personnel. The insurer must certify that the person is qualified to sell life insurance and that it agrees to be bound by the individual's acts. The Commissioner may issue a restricted license for this purpose. Restricted licenses must be renewed annually.

Statements in Policy or Application

All statements or descriptions in an insurance policy or in an application for a policy are considered representations and not warranties. A representation will not prevent a recovery on the policy unless it is material or fraudulent.

Assessments

For purposes of administration and assessment, the association is divided into three separate accounts: -automobile insurance account -workers' compensation insurance account -account for all other insurance covered by the association -Members are assessed fees separately for each account in amounts necessary for the association to perform its functions. Members are assessed a proportionate amount based upon the individual members net direct written premiums for the preceding calendar year as compared to the net direct written premiums of all member insurers for that same time period. A member may not be assessed in any one year for any account an amount that is more than 2% of the member's net direct written premiums for the preceding calendar year on the kinds of insurance in that particular account.

SURRENDER OF LICENSE

If a licensee is accused of an act, omission, or misconduct, that would be grounds for suspending or revoking a license, he or she may surrender the license. A person or entity who surrenders a license is not eligible for another during the surrender period.

Post Assessment Insurance Guaranty Association

NCIGA protects policyowners and claimants if an insurer fails to perform its contractual obligations because it becomes insolvent. The association also helps the Commissioner detect and prevent insurer insolvencies. It outlines the purposes and procedures of the association.

Obligations

The association's liability is limited to the lesser of the insurer's contractual obligations, if it had not become insolvent, or the amount of each covered claim that is more than $50, but less than $300,000; the full amount of a covered claim for benefits under workers' compensation insurance coverage; and an amount up to $10,000 per policy for a covered claim for the return of unearned premium. The association has no obligation to pay a claimant's covered claim, except a claimant's workers' compensation claim, if: -The insured had primary coverage at the time of the loss with a solvent insurer equal to or more than $300,000 and applicable to the claimant's loss; or -The insured's coverage is written subject to a selfinsured retention equal to or more than $300,000. -If the primary coverage or the self-insured retention is less than $300,000, the association's obligation to the claimant is reduced by the coverage and the retention.