Does a North Carolina company that investigates insurance claims, personal injury, and workers' comp matters for insurance companies need a private investigator license?

Plain-English summary

The North Carolina Private Protective Services Board asked whether a company offering insurance claims investigations, reports, surveillance, and court testimony needed a license under G.S. § 74C. It also asked whether the company’s investigators were exempt when the company served only insurance companies. The AG answered yes to licensing and no to the proposed exemption. The opinion describes a company, not a sole proprietor’s mixed client list.

The statute covers a person who engages in the “private protective services business,” including investigations to learn the cause of losses, accidents, damages, or injuries, or to secure evidence for a court or other body. The AG said the described personal injury, workers’ compensation, and death claims work fell within G.S. § 74C-3(a)(8)(d). The remaining described work fell under subsections (b) and/or (e). The company’s stated activities therefore brought it within the licensing requirement.

The opinion then considered exclusions. It says G.S. § 74C-3(b)(1) excludes insurance adjusters whose investigative activities are connected only with adjustment or claims against an insurer. The company’s investigators did not qualify because they were “not employed directly or exclusively by an insurance company.” The financial-rating and credit-reporting exclusion in subsection (b)(3) also did not fit: the company was not engaged exclusively in those financial investigations. Serving only insurance-company clients did not itself exempt this company.

Currency note

This opinion interprets G.S. § 74C-3 as it stood in 1987. Check the current statute and licensing requirements for work performed now. The opinion does not address later amendments.

Background and statutory framework

The AG looked to two New York decisions because, according to the opinion, North Carolina courts had not construed this statutory definition. Norwood v. Ward involved a business selling reports about publications and charities. Cole v. State involved independent adjusters investigating fire losses for various insurance companies. The opinion describes Cole as distinguishing those investigators from regular employees working directly and exclusively for one insurer. Those cases informed the AG’s reading of the North Carolina statute; the answer still turns on the activities and employment relationship described in the Board’s question.

Common questions

Does a company avoid the license requirement if all its customers are insurers?

No, not on the facts in this opinion. The AG concluded that the company’s investigative activities required a license and that serving only insurance companies did not bring its investigators within the cited exclusions.

What did the AG say about insurance adjusters?

The opinion describes an exclusion for adjusters whose investigative activities are connected only with adjustment or claims against an insurance company. It found that the investigators in the question were not employed directly or exclusively by an insurer, so the exclusion did not apply to them.

Does the opinion decide whether every occasional outside assignment requires a license?

No. It answers the Board’s questions about the described investigation company. It does not analyze a sole proprietor, a primarily exclusive employment relationship, or an occasional assignment for another insurer.

Why did the financial-reporting exclusion fail?

G.S. § 74C-3(b)(3), as described in the opinion, concerns people engaged exclusively in specified financial-rating, creditworthiness, or consumer-reporting work. The AG said this company was not engaged exclusively in those financial investigations.

Source

• Landing page: https://ncdoj.gov/opinions/license-requirement-for-private-investigators/

Citations

• N.C.G.S. § 74C-3(a) (licensing requirement)
• N.C.G.S. § 74C-3(a)(8) (definition of private detective / investigator)
• N.C.G.S. § 74C-3(b)(1) (insurance adjuster exemption, direct or exclusive)
• N.C.G.S. § 74C-3(b)(3) (financial / credit reporting exemption, exclusive)
• Lehon v. Atlanta, 242 U.S. 53 (1916)
• North Carolina Association of Licensed Detectives v. Morgan, 17 N.C. App. 701 (1973)
• Norwood v. Ward, 46 F.2d 312 (S.D.N.Y. 1930)
• Cole v. State, 37 N.Y.S. 2d 1002 (Ct.Cl. 1942)

Original opinion text

Requested By:

James F. Kirk, Administrator

N.C. Private Protective Services Board

Questions:

• (1)
• Does a company which represents itself as being in the business of investigating, furnishing reports, and testifying in court concerning matters involving personal injury, workers' compensation claims, death claims, hospital bill audits, group claims, subrogation services, and surveillance services come under the license requirements of the provisions of G.S. § 74C?
• (2)
• When the company furnishes the services only to insurance companies, are investigators for that company exempt from licensing by G.S. § 74C-3(b)(3)?

Conclusions:

• (1)
• Yes.
• (2)
• No.

The State may regulate the private detective business by establishing license requirements. Lehon v. Atlanta, 242 U.S. 53, 37 S.Ct. 70, 61 L.Ed. 145 (1916); North Carolina Association of Licensed Detectives v. Morgan, 17 N.C. App. 701, 19 S.E.2d 357 (1973). The courts generally have recognized the State's legitimate interest in assuring the integrity and competency of those persons engaged in the business of discovering and reporting matters concerning the personal character or business transactions of others.

Under G.S. § 74C-3(a) a license is required for any person who engages in the "private protective services business". Included in the statute coverage are private detectives or investigators which are defined as follows:

• (8)
• "Private detective" or "private investigator" means any person who engages in the business of or accepts employment to furnish, agrees to make, or makes an investigation for the purpose of obtaining information with reference to:
• a.
• Crime or wrongs done or threatened against the United States or any state or territory of the United States;
• b.
• The identity, habits, conduct, business, occupation, honesty, integrity, credibility, knowledge, trustworthiness, efficiency, loyalty, activity, movement, whereabouts, affiliations, associations, transactions, acts, reputation, or charater of any person;
• c.
• The location, disposition, or recovery of lost or stolen property;
• d.
• The cause or responsibility for fires, libels, losses, accidents, damages, or injuries to persons or to properties, provided that scientific research laboratories and consultants shall not be included in this definition;
• e.
• Securing evidence to be used before any court, board, officer, or investigation committee; or
• f.
• Protection of individuals from serious bodily harm or death.

The North Carolina Courts have not construed the statute's definition of private detectives or investigators, and there are few cases interpreting similar statutes from other jurisdictions. However, the New York courts have reviewed a similar statute. The New York statute which requires licenses for private detectives was challenged in Norwood v. Ward, 46 F.2d 312

(S.D.N.Y. 1930). The statute required licensing for persons engaged in the business of supplying for hire "information as to the personal character of any person or firm, or as to the character or kind of the business and occupation of any person, firm [company] or corporation". The plaintiffs operated a business which investigated and made written reports to persons who may be solicited for advertising or charitable contributions, concerning the reliability and nature of the publication or the charity. The court found that the nature of the plaintiff's business brought it under the licensing requirement of the statute.

The New York statutes were again reviewed in Cole v. State, 37 N.Y.S. 2d 1002 (Ct.Cl. 1942). In Cole, the challenge was from independent adjusters engaged in investigating fire losses who were employed by various insurance companies. The court found that these adjusters were engaged in the business of "investigator" within the meaning of the statute and therefore were required to be licensed.

These persons were distinguished from regular employees who worked directly and exclusively for an insurance company. Those persons were exempted from licensing requirements. The New York statute excluded "any person regularly employed as special agent, detective or investigator exclusively by one employer in connection with the affairs with that employer only."

The North Carolina statute is very similar in its coverage to the New York statute. Therefore, in analyzing our own statute, it is reasonable to consider the interpretation the New York courts have given their statute.

The type of work carried out by the company here in question by its own description would come within the statute's definition of investigative work for which a license is required. G.S. § 74C-3(a)(8). Subsection d. which includes investigation as to the cause or responsibility for losses, accidents, damages or injuries to persons or to properties would cover investigations concerning personal injury, workers compensation claims, and death claims. The remaining activities carried out by the company here would be covered by subsections b. and/or e. Any of the company's activities carried out for "securing evidence to be used before any court, board, officer, or investigation committee" are covered.

As in Norwood, the nature of the activities of the company here brings the company under the licensing requirements of G.S. § 74C-3(a). The remaining question is whether the company comes within one of the exemptions of G.S. § 74C-3(b).

The statute provides several exclusions, including one for insurance adjusters whose investigative activities are connected only with adjustment or claims against an insurance company. G.S. § 74C-3(b)(1). The investigators here are not employed directly or exclusively by an insurance company and would not come under this exclusion for adjusters.

None of the other exclusions would have any application to the company here. G.S. § 74C-3(b)(3) concerns a person engaged exclusively in the business of obtaining and furnishing information as to the financial rating or credit worthiness of an individual and a person who provides consumer reports in connection with credit or consumer transactions. The company here is not engaged exclusively in such financial investigations.

In summary, the company referred to in the question would be required to meet the licensing requirements of G.S. § 74C-3. The company does not come within any of the exceptions recognized in G.S. § 74C-3(b).

Lacy H. Thornburg Attorney General

Kim Ledford Cramer Associate Attorney General