USA – NORTH CAROLINA Trends and Developments Contributed by: Dan Strong, Teague Campbell Dennis & Gorham LLP
is creating additional pressure on claims profession- als, adjusters, and defence counsel. One of the most significant recent developments is the increased use of time-limited settlement demands. In many jurisdictions, plaintiffs create bad-faith exposure by presenting settlement demands with short response deadlines and detailed conditions for acceptance. Although North Carolina has not traditionally devel- oped bad-faith jurisprudence around time-limited demands to the extent seen in some other jurisdic- tions, insurers are nevertheless seeing these demands with greater frequency. Plaintiffs may use the failure to respond or even a response requesting an extension to gather additional information to establish a narra- tive of unfair claim settlement practices. These tactics, when used in conjunction with receiv- erships as explained above, can serve as an end run around the established prohibition on third-party or assigned claims for bad faith. Trend six: North Carolina courts continue to favour policyholders in coverage litigation In addition to statutory developments, insurers must contend with a judicial landscape that continues to generate concerns among insurance professionals and their counsel. Recent decisions have reinforced a trend toward policyholder-friendly interpretations of coverage provisions, particularly in all-risk policies. The continuing impact of North State Deli v Cincinnati Insurance and subsequent decisions demonstrates the willingness of North Carolina courts to closely examine exclusions and interpret ambiguities in favour of insureds. The continuing significance of coverage interpretation principles Courts continue to construe ambiguities against insur- ers. When policy language can reasonably support multiple interpretations, policyholders often receive the benefit of the broader reading. Courts are also scrutinising exclusions closely. Insurers seeking to avoid coverage through exclusionary language face significant challenges when policy provisions are unclear or susceptible to competing interpretations.
For carriers relying on all-risk policy language, the implications are particularly important. Cases con- tinue to demonstrate a willingness to interpret cover- age grants broadly while requiring exclusions to be applied narrowly. The Wake Chapel decision The Fourth Circuit’s decision in Wake Chapel Church v Church Mutual , No 25-1485, 2026 U.S. App. LEXIS 4956 (4th Cir. Feb. 19, 2026) represents a significant development in this area. The Fourth Circuit reinforced North Carolina’s policyholder-friendly approach by concluding that, within the context of the all-risk pol- icy at issue, an exclusion must be the sole cause of loss to defeat coverage. While each coverage dispute remains fact-specific and policy-dependent, the deci- sion highlights the challenges insurers may face when relying on exclusions in situations involving multiple contributing causes. The practical effects of these decisions extend beyond individual cases. First, summary judgment may become more difficult to obtain in certain cover- age disputes. If courts are increasingly willing to iden- tify ambiguity or factual questions regarding causation and exclusions, dispositive motions become less pre- dictable. Second, reservation-of-rights letters assume even greater importance. Because coverage disputes frequently turn on nuanced policy language, insurers must articulate potential coverage defences care- fully and comprehensively. Third, coverage opinions require robust documentation. Claims professionals and coverage counsel should ensure that their analy- ses address not only the applicability of exclusions but also potential counterarguments that policyhold- ers may assert. Although insurers should not assume that every cov- erage dispute will be resolved in favour of policy- holders, recent decisions suggest that courts remain focused on longstanding interpretive principles that often create challenges for carriers. The result is an environment in which careful policy drafting, thor- ough coverage analysis, and detailed documentation become increasingly important components of risk management and litigation strategy.
352 I NSURANCE L I T IGATI O N 2026
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