Availability of Writing of Insurance by Geographical Location

Reply to: TED R. WILLIAMS INSURANCE SECTION

(919) 716-6610 FAX: (919) 716-6757

June 18, 2001

The Honorable E. David Redwine North Carolina House of Representatives 14th District 635 Legislative Office Building Raleigh, NC 27602-1096

The Honorable Patrick J. Ballantine Senate Minority Leader 1127 Legislative Office Building Raleigh, NC 27602-1096

Re: Advisory Opinion – Availability and Writing of Insurance by Geographic Location

Dear Representative Redwine and Senator Ballantine:

You requested an opinion regarding several issues affecting the availability of insurance in certain geographic locations of North Carolina. Those issues are as follows:

1. Do insurance companies in general have the option of choosing not to write insurance in certain geographic areas of the State?

2. If the answer is yes, are there any limitations placed upon the company?

3. Do insurance companies in general have the option of choosing not to appoint agents in certain geographic areas of the State?

4. If the answer is yes, are there any limitations placed upon the company?

5. 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 Honorables Redwine and Ballantine June 18, 2001 Page 2

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 NC 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. 58-715(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:

Honorables Redwine and Ballantine June 18, 2001 Page 3

(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 RLW/TRW/gw

Enclosure