License Requirement for Private Investigators

Subject:

License Requirement for Private Investigators, G.S. § 74C-3

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. § 74C3(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. § 74C3(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