Federal Court In North Carolina Dismisses Unfair And Deceptive Trade Practices Claims Against Insurer

A federal court in North Carolina held that recitation of the statutory language of the Unfair and Deceptive Trade Practices Act (UDTPA) is insufficient to make a claim without also alleging a sufficient factual basis for the claim. Neshat v. Nationwide Mut. Fire Ins. Co., No. 5:20-cv-664-D, 2021 U.S. Dist. LEXIS 100154 (E.D.N.C. May 27, 2021).

An insured filed suit for unfair and deceptive trade practices under North Carolina law after a fire at the insured’s home. The insured alleged that the insurer did not attempt to settle in good faith, compelled the insured to file a lawsuit, attempted to settle the claim for less than a reasonable person would have believed he was entitled to and refused to fully pay without conducting a reasonable investigation. The court noted that the insured needed to plead factual allegations showing a failure to effectuate “prompt, fair and equitable settlement” of the claim and that the insurer’s liability was reasonably clear. Simply noting that a claim is disputed is not sufficient to prove that an insurer’s liability is “reasonably clear.” 

Next, the court noted that an insured must identify specific failures of an insurer to pay or how those failures damaged an insured to make a claim that the insurer refused to pay without conducting a reasonable investigation. Instead, the complaint suggested that the insurer conducted a full and reasonable investigation and conducted multiple investigations, and issued additional payments. The insured simply alleged a dispute as to the amount due, not that any additional amounts were due. Furthermore, the insureds failed to allege any “aggravating factors” which would elevate a breach of contract claim to an UDTPA claim.

The court found that if an insured receives less than the insured hoped to recover, it is not necessarily an actionable underpayment. Accordingly, the court dismissed the claim.