Can North Carolina insurance companies just decide not to sell insurance in certain ZIP codes or counties, and can the General Assembly force them to cover the whole state?

Plain-English summary

Representative David Redwine and Senator Patrick Ballantine asked the AG five questions about insurance availability:

1. Do insurance companies generally have the option of choosing not to write insurance in certain geographic areas of the State?
2. If yes, what limits apply?
3. Do insurance companies generally have the option of not appointing agents in certain geographic areas?
4. If yes, what limits apply?
5. Can the General Assembly either require insurers to write statewide and appoint agents statewide, or prohibit them from withdrawing from particular areas?

Senior Deputy AG Reginald Watkins and Special Deputy AG Ted Williams handled the response. Questions one through four had already been answered in a 1995 AG opinion to Commissioner of Insurance James Long, dated October 27, 1995. The AG attached that opinion to this response and reaffirmed it. The 1995 opinion's basic answer: yes, insurers can decline to write or appoint agents in certain areas, but with various limits under existing statutes and regulations.

The new question, fully addressed here, was question five: can the General Assembly force insurers into a statewide writing posture?

The AG's answer was yes, with substantive limits.

The starting point is North Carolina constitutional law. Moore v. Knightdale Board of Elections (1992) confirms that the General Assembly can legislate as long as the legislation does not offend a specific constitutional provision. Butler v. Peters (1981) restates the police-power test for occupational regulation: a statute that curtails the right to engage in an occupation must be reasonably necessary to promote public health, morals, order, safety, or general welfare. Indemnity Co. v. Ingram (1976) sharpened that test for insurance specifically. The North Carolina Supreme Court there held that the General Assembly could not require all general-liability insurers to also write medical malpractice insurance. The Court said legislative interference with the right to use property must have a reasonable relation to the legislative purpose and must not be unreasonable in degree compared with the probable public benefit.

Applying that framework to the geographic-availability question: the General Assembly can require statewide writing, but the requirement has to be tailored. The mismatch in Ingram was that an insurer writing routine commercial general liability had not built up underwriting expertise or financial reserves for medical malpractice. Forcing the company to write the malpractice line without that infrastructure was too coarse a measure for the public-benefit objective. By contrast, requiring an insurer that already writes a kind of insurance to make it available statewide is a smaller intrusion. The insurer already has the expertise and reserves; the only question is geographic deployment.

The General Assembly had already delegated the power to compel availability to the Commissioner of Insurance through Chapter 58, Article 42. Section 58-42-1 lets the Commissioner, after an Article 3A administrative hearing, find that a kind of insurance authorized by § 58-7-15(4) through (22) is not readily available in the voluntary market and that the public interest requires availability. The Commissioner can either promulgate a plan to cover the unavailable risks or call upon insurers to prepare plans. Section 58-42-10 then makes participation mandatory: every insurer licensed to write that kind of insurance in the state must participate, every licensed agent who represents those insurers for that kind of insurance must participate, and every rating organization that makes rates for that kind of insurance must participate. The Commissioner can exclude an insurer if participation would impair its solvency.

Inherent in this Article 42 delegation, the AG noted, is the requirement that insurance companies write insurance in various geographic areas of the State.

The catch: Article 42 was scheduled to expire on July 1, 2001 (per § 58-42-55). The AG said the General Assembly could extend the article or directly exercise the same power with appropriate findings of need.

The practical takeaway in 2001: insurers had geographic discretion subject to existing law, but the General Assembly held a constitutionally available tool (Article 42 or its direct equivalent) to force statewide availability of any line of insurance not readily available in the voluntary market. The legislature could not arbitrarily impose unrelated obligations (like Ingram's general-liability-must-write-malpractice rule), but it could legitimately address geographic redlining.

Currency note

This opinion was issued in 2001. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. North Carolina's insurance availability statutes have been amended substantially since 2001. The General Assembly extended and revised Article 42 of Chapter 58; the Insurance Department's market-conduct examinations have been expanded; and federal flood and wind insurance backstops have changed the substance of what is "available in the voluntary market." Anyone facing a current geographic availability question should consult current Chapter 58 statutes and current Department of Insurance bulletins.

Background and statutory framework

Why geographic availability matters. Coastal North Carolina counties, certain low-income urban areas, and other parts of the state have historically faced limited insurance availability, especially for homeowners and small-business property coverage. Insurers can choose where to write, and they sometimes withdraw from high-risk areas after major losses (hurricanes, fires). That leaves residents and businesses without coverage. The legislative question is whether the state can require insurers to keep writing.

The 1995 prelude. A 1995 AG opinion to Commissioner Long had addressed insurer discretion and limits on geographic withholding. That opinion's analysis was incorporated by reference here. The 1995 opinion presumably concluded that, under existing North Carolina law, insurers have discretion subject to certain regulatory limits (mandatory participation in residual market mechanisms, rate-and-form-filing requirements, anti-redlining provisions, and similar).

The constitutional police-power framework. Moore v. Knightdale (1992) recognizes legislative supremacy subject to specific constitutional limits. Butler v. Peters (1981) applies the standard test: a statute curtailing the right to engage in an occupation must be reasonably necessary to promote public health, morals, order, safety, or general welfare. Indemnity Co. v. Ingram (1976) is the most directly relevant case because it involved insurance. The court there held that a statutory requirement extending one insurer's writing obligation to an unrelated line was not reasonably tailored to public benefit and therefore exceeded the police power.

How geographic-availability requirements differ from Ingram. Ingram involved a cross-line mandate (forcing general-liability insurers to also write malpractice). Geographic-availability requirements involve a same-line mandate (forcing insurers writing homeowners statewide instead of in only some counties). The same-line mandate keeps the insurer in its existing line of business and underwriting expertise, while expanding geographic reach. That is a narrower intrusion and is more easily justified as reasonably necessary to public welfare. The AG implied (without explicitly saying so) that geographic-availability requirements are easier to defend than Ingram's cross-line requirement.

Article 42's structural design. The General Assembly created Article 42 as a delegated tool. Rather than passing a separate statute every time an availability problem arose, the legislature gave the Commissioner of Insurance authority to act after appropriate fact-finding (a Chapter 150B Article 3A administrative hearing). The findings the Commissioner must make are (a) that the insurance kind is not readily available in the voluntary market in all or part of the State, and (b) that the public interest requires availability. After making the findings, the Commissioner can promulgate a coverage plan or require insurers to prepare one. Participation by every licensed insurer, agent, and rating organization for that kind is mandatory, with a narrow solvency-impairment exception.

The sunset issue. Article 42 had a built-in sunset on July 1, 2001 (under § 58-42-55). The AG was advising before that sunset. The AG's analysis applies equally whether the General Assembly extends Article 42 (delegated mechanism) or directly exercises the power itself (statutory mandate with the same findings). Either path is constitutional if the findings and tailoring are right.

The line between permissible and impermissible legislative intervention. Ingram drew the line at cross-line mandates that pull insurers into business lines they have not built infrastructure for. Geographic mandates within a line, particularly when the legislature finds that the kind of insurance is not readily available in the voluntary market in the affected geographic areas, are on the permissible side. Mandates that interfere with insurer solvency (Article 42's exclusion provision recognizes this) might also exceed the police power if applied to a particular insurer in particular circumstances.

Common questions

Q: Can an insurance company refuse to write windstorm coverage in eastern North Carolina counties?

A: Under the AG's 2001 framework, the company can decline subject to existing law, but the General Assembly can compel statewide writing of windstorm coverage if (a) it makes findings that the line is not readily available in the voluntary market in those counties and (b) the imposition is reasonably tailored. NC has used statutory backstops like the Coastal Property Insurance Pool for windstorm coverage in coastal areas.

Q: Does the same logic apply to auto insurance?

A: Yes. The same constitutional and statutory tools (Article 42's predecessor or successor, plus the legislature's direct authority) apply. North Carolina has used mandatory automobile insurance facilities (the Reinsurance Facility) for similar purposes.

Q: Can the legislature require an insurer to appoint agents in particular counties?

A: Yes, with proper tailoring. Article 42's mandatory participation extends to "all agents licensed to represent those insurers for that kind of insurance." A statute could require statewide agent appointments using a similar tailoring argument.

Q: What did the 1995 AG opinion to Commissioner Long actually say?

A: The 2001 opinion incorporates the 1995 opinion by reference but does not summarize it. Readers wanting the 1995 analysis would need to retrieve that opinion separately. The 2001 opinion treats the 1995 conclusions as still valid.

Citations from the opinion

• N.C. Gen. Stat. §§ 58-7-15(4) through (22)
• N.C. Gen. Stat. § 58-42-1
• N.C. Gen. Stat. § 58-42-10
• N.C. Gen. Stat. § 58-42-55
• N.C. Gen. Stat. Chapter 150B, Article 3A
• Moore v. Knightdale Bd. of Elections, 331 N.C. 1, 5, 413 S.E.2d 541, 543 (1992)
• Butler v. Peters, Comr. of Motor Vehicles, 52 N.C. App. 357, 359, 278 S.E.2d 283, 284 (1981)
• Indemnity Co. v. Ingram, 290 N.C. 457, 466, 226 S.E.2d 498, 504 (1976)
• Opinion of the Attorney General to Commissioner of Insurance James E. Long, dated October 27, 1995 (incorporated by reference)

Source

• Landing page: https://ncdoj.gov/opinions/availability-of-writing-of-insurance-by-geographical-location/

Original opinion text

• Do insurance companies in general have the option of choosing not to write insurance in certain geographic areas of the State?
• If the answer is yes, are there any limitations placed upon the company?
• Do insurance companies in general have the option of choosing not to appoint agents in certain geographic areas of the State?
• If the answer is yes, are there any limitations placed upon the company?
• Can the General Assembly either require insurance companies to write insurance and appoint agents in all geographic areas of the State or prohibit them from withdrawing from certain geographic areas in the State?

After reviewing the questions presented, we note that questions one through four have previously been addressed in an advisory opinion to Commissioner of Insurance, James E. Long, dated October 27, 1995. Having reviewed the analysis presented in that opinion, we conclude that the opinion remains valid. A copy of the opinion is enclosed for your information, in response to questions one through four.

Your remaining question relates to the authority of the General Assembly. This question was not addressed in the October 27 opinion. Since it is now before us for consideration, our analysis must continue.

"[T]he General Assembly is free to implement legislation as long as that legislation does not offend some specific constitutional provision." Moore v. Knightdale Bd. of Elections, 331 N.C. 1, 5, 413 S.E.2d 541, 543 (1992). "The rule is that a statute or ordinance which curtails the right of any person to engage in any occupation can be sustained as a valid exercise of police power only if it is reasonably necessary to promote the public health, morals, order, safety or general welfare." Butler v. Peters, Comr. of Motor Vehicles, 52 N.C. App. 357, 359, 278 S.E.2d 283, 284 (1981). The legislative power is ". . . subject to the general limitation thereof that the interference with individual liberty, or with the right of an owner of property to use it as he sees fit, must have a reasonable relation to the accomplishment of the legislative purpose and must not be unreasonable in degree, in comparison with the probable public benefit." Indemnity Co. v. Ingram, 290 N.C. 457, 466, 226 S.E.2d 498, 504 (1976). In Indemnity Co. v. Ingram, the Supreme Court of North Carolina held that the General Assembly could not require all insurance companies licensed to write policies of general liability insurance to also write medical malpractice insurance.

In Article 42 of Chapter 58 of the North Carolina General Statutes, the General Assembly has in fact authorized the Commissioner of Insurance to establish mandatory or voluntary risk sharing plans for any kind of insurance not readily available in the voluntary market. This Article expires on July 1, 2001. G.S. 58-42-55. The authority granted to the Commissioner is a legal and valid delegation of legislative authority.

As stated in G.S. § 58-42-1:

(a) If the Commissioner finds, after a hearing held in accordance with Article 3A of Chapter 150B of the General Statutes, that in all or any part of this State, any amount or kind of insurance authorized by G.S. 58-7-15(4) through G.S. 58-7-15(22) is not readily available in the voluntary market and that the public interest requires the availability of that insurance, he may either:

(1) Promulgate plans to provide insurance coverage for any risks in this State that are, based on reasonable underwriting standards, entitled to obtain but are otherwise unable to obtain coverage; or

(2) Call upon insurers to prepare plans for his approval.

G.S. § 58-42-10 describes those required to participate, as follows:

(a) Each plan shall require participation:

(1) By all insurers licensed in this State to write the kinds of insurance covered by the specific plan;

(2) By all agents licensed to represent those insurers for that kind of insurance; and

(3) By every rating organization that makes rates for that kind of insurance.

(b) The Commissioner shall exclude from each plan any person if participation would impair the solvency of that person.

Inherent in the power delegated to the Commissioner of Insurance under Article 42 is a requirement that insurance companies write insurance in various geographical areas of the State.

As noted above, G.S. § 58-42-1 is scheduled to expire on July 1, 2001. We see no legal reason the General Assembly cannot extend this legislation. We also see no legal reason the General Assembly could not exercise directly the power it has already delegated to the Commissioner of Insurance provided it makes appropriate findings of the need for insurance in those areas, and further provided that the insurers are licensed to write the kinds of insurance covered. See Indemnity Co. v. Ingram.

We trust that this advisory opinion will be helpful. If you have further questions regarding this matter, please do not hesitate to contact us.

Sincerely,

Reginald L. Watkins Senior Deputy Attorney General

Ted R. Williams Special Deputy Attorney General