Negligence, legal liability, damages and the structure of liability policies are covered in the national Casualty Insurance Basics guide. This guide covers the North Carolina law behind those concepts that the Casualty and Personal Lines exams test. The headline is North Carolina's contributory negligence rule.

Contributory negligence

• North Carolina is one of the few states that keeps pure contributory negligence. A plaintiff who is even slightly at fault generally can't recover damages from the other party.
• The party who raises contributory negligence as a defense has the burden of proving it (G.S. 1-139).
• North Carolina doesn't reduce damages by the plaintiff's share of fault the way comparative negligence states do. The plaintiff's own negligence is a complete bar.

This makes first-party coverages, such as UM/UIM and medical payments, especially important to North Carolina insureds.

Key definitions

• Casualty line of authority (58-33-26(c1)(2)): insurance against legal liability, including liability for death, injury, disability, or damage to property.
• Contract of insurance (58-1-10): an agreement by which the insurer is bound to pay money or its equivalent, or do an act of value, as indemnity for a loss to something in which the other party has an interest.
• Statements in an application are representations. An untrue statement prevents recovery only if it's material or fraudulent (58-3-10).

Rules that apply to casualty policies

• Proof-of-loss forms (58-3-40). If the insurer requires proof of loss but doesn't furnish the form within 15 days after notice, the claimant complies by giving written proof within the policy's time limit.
• Commercial cancellation and nonrenewal (Article 41, 58-41-15 to 58-41-25):
  • After 60 days, a commercial policy may be canceled midterm only for listed reasons, starting with nonpayment. The insurer gives 15 days' notice stating the reason.
  • A new policy may be canceled for any reason in its first 60 days, with the same 15 days' notice and reasons.
  • A credit card chargeback is treated as nonpayment, and the cancellation is effective back to the payment date.
  • Failing to notify a mortgagee or loss payee voids the cancellation only as to that party.
  • Nonrenewal, or renewal on less favorable terms, needs 45 days' notice. If the insurer misses it, the insured keeps the old terms until 45 days after notice.
  • An insurer that lowers limits or raises deductibles or rates midterm on its own gives 30 days' notice.
  • Article 41 doesn't apply to Rate Bureau lines (homeowners, private passenger auto, workers' comp).
• Rate Bureau lines (58-36-45). An insurer-initiated coverage or rate change on these policies needs 15 days' written notice, copied to the producer. Workers' comp is excepted.
• Guaranty protection (58-48-35). The North Carolina Insurance Guaranty Association pays covered claims over $50 and under $500,000, and workers' comp claims in full.

Common exam traps

• North Carolina uses contributory, not comparative, negligence. Any fault by the plaintiff generally bars recovery.
• The defendant must prove contributory negligence.
• Commercial (Article 41) cancellation needs 15 days' notice. Nonrenewal needs 45 days'.
• Auto termination follows 58-36-85 instead: 15 days for nonpayment and 60 days for other reasons.