USA – NORTH CAROLINA Trends and Developments Contributed by: Dan Strong, Teague Campbell Dennis & Gorham LLP
The Evolving Landscape of North Carolina Insurance Litigation: What Insurers Need to Know North Carolina insurance litigation continues to evolve in ways that materially affect insurers, claims profes- sionals, and defence counsel. Several developments that have emerged or accelerated over the past year are reshaping claims evaluation, coverage analysis, litigation strategy, and risk management. Among the most significant are the implementation of recent unin- sured and underinsured motorist (UM/UIM) reforms, a series of policyholder-friendly coverage decisions, increased attention to bad-faith and unfair and decep- tive trade practices claims, the emergence of cyber coverage disputes as a mainstream litigation issue, and ongoing legislative activity that could further alter the insurance landscape. For carriers operating in North Carolina, these devel- opments are interconnected. Expanded UM/UIM exposure creates additional opportunities for first- party disputes. Judicial decisions emphasising broad coverage interpretations and scrutiny of exclusions increase the difficulty of obtaining favourable cover- age rulings. At the same time, plaintiffs are increas- ingly pairing coverage disputes with allegations of bad faith and violations of the North Carolina Unfair Claims Settlement Practices Act and North Carolina Unfair and Deceptive Trade Practices Act (UDTPA), thereby creating significant extra-contractual expo- sure. Meanwhile, cyber-related claims continue to emerge as a growing source of both first-party and third-party litigation. From a defence perspective, the most actionable top- ics currently confronting insurers and defence firms are: • the impact of UM/UIM reforms; • defending bad-faith and UDTPA claims; • navigating North Carolina’s increasingly policy- holder-friendly approach to insurance coverage disputes. Understanding these developments and adjusting claims and litigation practices accordingly can help • cyber claims; • receiverships; • the use of out-of-state tactics; and
insurers reduce risk while positioning themselves more effectively in future disputes. Trend one: UM/UIM litigation is reshaping auto insurance defence Among all recent developments, the continuing impact of North Carolina’s UM/UIM reforms may have the most immediate and widespread effect on auto- mobile insurers and defence counsel. The reforms apply to policies issued or renewed after 1 July 2025, and have already begun influencing claim valuation and litigation strategy. The changes signifi- cantly expand the practical availability and scope of UM and UIM coverage while increasing potential exposure in serious injury cases. Key statutory changes Several aspects of the reforms are particularly sig- nificant. First, North Carolina’s minimum liabil- ity limits increased from USD30,000/USD60,000 to USD50,000/USD100,000. This change alone has implications for both claims evaluation and settlement negotiations. Second, UM and UIM coverage have become broader and more readily available. Prior restrictions that limited recovery have been reduced, including set-offs, creating greater opportunities for insureds to pursue additional compensation through their own policies. Third, the reforms are expected to increase the number of disputes between insureds and their own carriers. Historically, many automobile claims focused primarily on liability issues involving third parties. Expanded UM/UIM exposure, however, places insurers in a position where they are more likely to become direct litigation adversaries of their own policyholders. Litigation and claims implications The practical effect of these changes is likely to be substantial. Claims professionals should anticipate higher settlement demands and increased claim val- ues, particularly in catastrophic injury and significant damages cases. Broader coverage availability creates additional sources of recovery, which naturally influ- ences plaintiffs’ expectations regarding settlement. Defence counsel should likewise expect increased litigation involving UIM claims. Questions involving policy interpretation, coverage limits, offsets, and
349 I NSURANCE L I T IGATI O N 2026
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