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 Administrator of the North Carolina Private Protective Services Board asked the AG about a company that held itself out as being in the business of investigating insurance claims (personal injury, workers' compensation, death claims, hospital bill audits, group claims, subrogation, surveillance) and testifying about its findings. The company served only insurance companies as clients. Was the company required to hold a Chapter 74C private investigator license, and could it qualify for the statute's adjuster exemption?

Associate Attorney General Kim Ledford Cramer answered: yes the company needs a license, and no the adjuster exemption does not apply.

Chapter 74C, the Private Protective Services Act, requires a license for any person engaging in the "private protective services business." The definition of "private detective" or "private investigator" in § 74C-3(a)(8) is broad. It catches anyone who investigates for the purpose of obtaining information about:

• crime or wrongs against the United States or any state;
• the identity, habits, conduct, business, occupation, honesty, integrity, credibility, knowledge, trustworthiness, efficiency, loyalty, activity, movement, whereabouts, affiliations, associations, transactions, acts, reputation, or character of any person;
• lost or stolen property;
• the cause or responsibility for fires, libels, losses, accidents, damages, or injuries to persons or to properties (with a carve-out for scientific research laboratories and consultants);
• securing evidence to be used before any court, board, officer, or investigation committee;
• protection of individuals from serious bodily harm or death.

The company's described work fit squarely within the definition. Personal injury, workers' comp, and death claims investigation falls within subsection (d) (cause or responsibility for losses, accidents, damages, or injuries). Hospital bill audits and group claims investigation involve the conduct, transactions, and acts of persons, which is subsection (b). Subrogation services and litigation testimony fall within subsection (e) (securing evidence for use before a court).

The AG then turned to the exemptions in § 74C-3(b). The most relevant was § 74C-3(b)(1), which exempts insurance adjusters whose investigative activities are "connected only with adjustment or claims against an insurance company." The exemption was clearly written for in-house adjusters: an employee of State Farm investigating a State Farm claim does not need a PI license. But the company at issue was not an in-house adjuster of any particular insurer. It was an independent contractor providing claims investigation services to multiple insurance company clients. The adjuster exemption requires direct or exclusive employment, which the company did not have.

The other exemption candidate was § 74C-3(b)(3), covering persons engaged exclusively in financial rating, credit worthiness, or consumer reports. The company's broader portfolio (claims investigation, surveillance, court testimony) put it outside the exclusive-financial-investigation scope of that exemption.

The AG relied on two New York cases interpreting a similar PI statute, because no North Carolina court had construed the statute's definition. In Norwood v. Ward (1930) the federal district court held that a New York company investigating the reliability of charities and publications for solicited contributors was subject to New York's PI licensing law. In Cole v. State (1942) the New York Court of Claims specifically held that independent adjusters investigating fire losses for multiple insurance companies were "investigators" within the licensing statute, distinguished from regular employees of any single insurance company. The Cole holding tracked the language of New York's adjuster exemption, which (like North Carolina's) limited the exemption to persons "regularly employed as special agent, detective or investigator exclusively by one employer in connection with the affairs of that employer only."

Because the company served insurance companies but was not employed by any one of them, it fell outside the adjuster exemption and had to be licensed.

Currency note

This opinion was issued in 1987. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here. Chapter 74C has been amended several times since 1987, with new categories added for security consultants, alarm systems, and electronic countermeasures. The "private detective" and "investigator" definitions remain broad. The adjuster exemption in § 74C-3(b)(1) has been updated; current practitioners should verify the exact text. The PPSB now (under modern naming, sometimes Private Protective Services Board / Alarm Systems Licensing Board structure) continues to require licensing for the kind of company described in this opinion.

Background and statutory framework

The Private Protective Services Act was enacted in 1981 to set licensure and training standards for the security and investigation industry. North Carolina, like most states, treats this industry as one needing regulation because investigators and security guards routinely engage in conduct that, done badly, can cause significant harm: surveillance, evidence handling, use of firearms, access to private homes and businesses. The Board's licensing process screens applicants for criminal records and bad moral character, and the firearms-permit process under § 74C-13 requires training course completion.

The statutory definition of "private detective" is the broadest investigator definition in North Carolina law. It is meant to catch nearly any commercial investigative activity that could otherwise be done without scrutiny. The exemptions are narrow and serve specific purposes:

• The in-house adjuster exemption (§ 74C-3(b)(1)) avoids forcing every insurance employee with investigative duties to hold a separate license. It does not extend to third-party contractors.

• The credit / financial rating exemption (§ 74C-3(b)(3)) carves out the credit-reporting industry (now regulated separately under federal law and state law as a financial services activity), but only when financial investigation is the exclusive activity.

• Other exemptions in § 74C-3(b) (not central to this opinion) include scientific research labs and consultants, certain government investigators, and certain attorneys investigating in connection with legal representation.

The exemptions are interpreted strictly. The AG's opinion stands for the principle that a third-party investigation company cannot bootstrap into an exemption by limiting its client roster. The exemption looks at the employment relationship and the exclusivity of the work, not at the client mix.

Common questions

What about a sole-proprietor PI who only works for one insurance company most of the time?

The exemption requires "exclusively" employed by one insurer. "Most of the time" is not exclusive. A sole proprietor who works mainly for State Farm but also takes the occasional Allstate file is not exempt and must be licensed under Chapter 74C.

Does the PI license requirement apply to attorneys investigating their own cases?

Chapter 74C has separate exemptions for attorneys and for persons engaged exclusively by attorneys in connection with representing clients. An attorney doing investigation for the attorney's own cases is typically exempt. A standalone investigator who happens to be hired by attorneys still needs a license; the exemption requires the relationship structure, not the client mix.

What about insurance company hospital bill audits?

This opinion specifically lists hospital bill audits as covered investigation work. The AG treats hospital bill audits as inquiries into the transactions, conduct, and acts of providers and patients, which falls within § 74C-3(a)(8)(b). A third-party hospital bill auditor working for multiple insurance companies needs a Chapter 74C license, not just whatever audit credential is required by the insurer.

Are independent loss-adjuster firms licensed under a separate adjuster statute?

The North Carolina Department of Insurance separately licenses insurance adjusters under Chapter 58. That adjuster license may be required in addition to (not instead of) the Chapter 74C license, depending on the scope of the investigation. A firm that does both adjustment (settlement) and investigation may need both licenses.

Does the company's testimony in court require licensure?

The opinion identifies "securing evidence to be used before any court, board, officer, or investigation committee" as a triggering activity. Testifying about the evidence is part of that activity. A company that holds itself out as testifying about claims findings is in the investigation business under the statute.

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