North Carolina court holds insurance company responsible for not fulfilling its duty to policyholder

Last week, the North Carolina Court of Appeals issued an opinion reinforcing the duty insurance companies have to stand behind their policyholders. Although insurance companies are quick to accept premium payments, they often hesitate when the time comes to make payments on behalf of their policyholders. As one insurer was recently reminded, an insurance policy is a promise the insurance company must fulfill.

In 2010, a general contractor and his wife were sued by homeowners after a retaining wall collapsed and damaged their residence. Although the contractor had previously purchased liability insurance from two insurance companies, one of the insurance companies (Builders Mutual) refused to defend the contractor and his wife in the lawsuit. The contractor eventually settled the lawsuit with no assistance from Builders Mutual.

Following settlement, in the case of Erie Insurance Exchange v. Builders Mutual Insurance Company, the contractor asked the court to hold Builders Mutual responsible for its failure to defend the lawsuit. Although Builders Mutual attempted to argue that certain technicalities and exceptions within the policy langauge excused it from its duty to defend the lawsuit, the court ruled that an insurance company’s duty to defend is a broad duty that must be honored even when facts appear to be outside coverage or within a policy exception.

Under North Carolina law, insurance companies cannot abandon their policyholders when the unexpected happens, and if they do, they can be held responsible for expenses the policyholder incurs in defending and settling the underlying lawsuit or claim. Unfortunately, with some insurance companies, coverage denials are routine. If you or your business has experienced an insurance company that refuses to honor it policy, you need legal counsel.

At Dozier Miller Law Group, we help individuals and businesses get the benefit of the insurance coverage they paid to receive. We have experience holding insurance companies responsible for their bad faith and unfair insurance practices and would welcome the opportunity to help you or your business recover what is rightfully yours!

Dozier Miller Law Group’s insurance litigation counsel:

• W. Joseph Dozier, Jr.
• Adam S. Hocutt