Property insurance principles are covered in the national Property Insurance Basics guide: perils and hazards, ACV and replacement cost, coinsurance, other insurance and the loss conditions. North Carolina still writes the standard fire policy into its statutes, at G.S. 58-44-16. Every fire policy on North Carolina property must follow it, except auto physical damage and marine or inland marine policies (58-44-16(b)). This guide covers the standard fire policy's North Carolina terms and the other property statutes in Chapter 58, Articles 43 and 44.

The North Carolina standard fire policy (58-44-16(f))

Coverage basics

• Policy period. Coverage runs from 12:01 a.m. on the inception date to 12:01 a.m. on the expiration date, at the property's location.
• Insuring agreement:
  • It pays actual cash value, but never more than the cost to repair or replace with like kind and quality.
  • It excludes the added cost of repair caused by a building ordinance or law.
• Perils: fire, lightning and removal. Property removed to protect it is covered pro rata for five days at each place it's moved to.

Property and perils not covered

• Never covered: accounts, bills, currency, deeds, evidences of debt, money and securities.
• Covered only if named in writing: bullion and manuscripts.
• Excluded perils: theft, war, and neglect to save property at and after a loss.
• Explosion or riot is covered only if fire follows, and then only for the fire loss.

When coverage is void or suspended

• Concealment or fraud. Willful concealment or misrepresentation of a material fact, before or after a loss, voids the whole policy.
• Coverage is suspended:
  • while the hazard is increased by means within the insured's control or knowledge
  • while the building is vacant or unoccupied beyond 60 consecutive days

Policy administration

• Other insurance may be prohibited or limited by endorsement.
• A waiver is valid only if it's in the policy or written and added to it.
• Assignment needs the insurer's written consent.
• Cancellation:
  • The insurer gives five days' written notice and refunds pro rata.
  • When the insured cancels, the refund is figured on a short-rate basis.
• Mortgagee clause. The mortgagee's interest may be canceled on 10 days' notice to the mortgagee. If the insured doesn't file proof of loss, the mortgagee must do so within 60 days after notice.

After a loss

• Pro rata liability. Each policy pays its share of all the insurance. Example: with $150,000 and $50,000 policies, the $150,000 policy pays 75% of a $40,000 loss, which is $30,000.
• Insured's duties. Give immediate written notice and protect the property. Prepare an inventory, and file a sworn proof of loss within 60 days unless the insurer extends the time in writing. Submit to examination under oath and produce records as often as reasonably required.
• Appraisal:
  • Each side names an appraiser within 20 days of the demand.
  • If the appraisers can't agree on an umpire in 15 days, a judge of a court of record picks one.
  • An award agreed by any two of the three sets the loss.
  • Each side pays its own appraiser and splits the umpire's costs.
• Company's options. An insurer that will repair or replace must give notice within 30 days after receiving the proof of loss.
• No abandonment. The insured can't abandon property to the insurer.
• Payment. The loss is payable 60 days after proof of loss is received and the amount is set.
• Suit. A lawsuit must start within three years after the loss.
• Subrogation. The insurer may require an assignment of the insured's rights of recovery to the extent it paid.

Other North Carolina property statutes

• Binders for fire insurance may not run more than 60 days. They include the standard fire policy terms (58-44-20).
• Coinsurance (58-3-15):
  • A coinsurance clause is void unless the words "coinsurance contract" are printed or stamped on the declarations page or the form.
  • If rates differ with and without coinsurance, both rates must be given to the insured on request.
• Overinsurance and term limits (58-43-5). An insurer may not knowingly issue fire insurance that, with other insurance, exceeds the property's fair value, or that runs longer than seven years. The same section defines functional replacement: property that performs the same function when like-kind replacement isn't practical.
• Total fire loss (58-43-10). Liability is limited to ACV, and the excess premium is refunded with interest.
• Notice to the agent (58-44-30). A signed written notice to the agent about a condition, such as unoccupancy, has the effect of a written agreement added to the policy.
• Undisclosed mortgage (58-44-40). Failing to disclose a mortgage doesn't void a policy, except during the life of the mortgage.
• Late proof of loss (58-44-50). The insured may show that a late proof of loss had good cause and didn't substantially harm the insurer.
• Farm buildings (58-44-55). Coverage for the weight of ice, snow or sleet must be available on request.
• Lines of authority (58-33-26). The property line covers direct or consequential loss to property of every kind.

Common exam traps

• North Carolina's standard fire policy allows three years to sue, not one.
• Vacancy beyond 60 consecutive days suspends coverage.
• Insurer cancellation: five days' notice with a pro rata refund. Insured cancellation is short rate.
• Proof of loss: 60 days. Appraisers named within 20 days, and an umpire is picked after 15 days without agreement.
• A coinsurance clause needs "coinsurance contract" printed on the policy.
• Fire binders can run up to 60 days, and fire policies up to seven years.