North Carolina HB 720: Insurance Guaranty Association Act Revisions.

Bill Text

GENERAL ASSEMBLY OF NORTH CAROLINA
SESSION 2025
H 1
HOUSE BILL 720

Short Title: Insurance Guaranty Association Act Revisions.-AB (Public)
Sponsors: Representatives Humphrey, Setzer, and Balkcom (Primary Sponsors).
For a complete list of sponsors, refer to the North Carolina General Assembly web site.
Referred to: Insurance, if favorable, Finance, if favorable, Rules, Calendar, and Operations of
the House
April 3, 2025
*H720-v-1*
A BILL TO BE ENTITLED 1
AN ACT ENACTING REVISIONS TO THE INSURANCE GUARANTY ASSOCIATION 2
ACT, AS RECOMMENDED BY THE DEPARTMENT OF INSURANCE. 3
The General Assembly of North Carolina enacts: 4
SECTION 1. G.S. 58-48-10 reads as rewritten: 5
"§ 58-48-10. Scope. 6
This Article shall apply to all kinds of direct insurance, but shall not be applicable to: 7
... 8
(5) Insurance Other than coverages that may be set forth in a cybersecurity 9
insurance policy, insurance of warranties or service contracts; 10
...." 11
SECTION 2. G.S. 58-48-20 reads as rewritten: 12
"§ 58-48-20. Definitions. 13
As used in this Article: 14
... 15
(4) Covered claim. – An unpaid claim, including one of unearned premiums, 16
which is in excess of fifty dollars ($50.00) and arises out of and is within the 17
coverage and not in excess of the applicable limits of an insurance policy to 18
which this Article applies as issued by an insurer, if that insurer if the policy 19
was issued by an insurer that becomes an insolvent insurer after the effective 20
date of this Article and (i) the claimant or insured is a resident of this State at 21
the time of the insured event; or (ii) the property from which the claim arises 22
is permanently located in this State. "Covered claim" includes claim 23
obligations that arose through the issuance of an insurance policy by a member 24
insurer, which are later allocated, transferred, merged into, novated, assumed 25
by, or otherwise made the sole responsibility of a member or nonmember 26
insurer if (i) the original member insurer has no remaining obligations on the 27
policy after the transfer, (ii) a final order of liquidation with a finding of 28
insolvency has been entered against the insurer that assumed the member's 29
coverage obligations by a court of competent jurisdiction in the insurer's state 30
of domicile, (iii) the claim would have been a covered claim, as defined in this 31
subdivision, if the claim had remained the responsibility of the original 32
member insurer and the order of liquidation had been entered against the 33
original member insurer, with the same claim submission date and liquidation 34

General Assembly Of North Carolina Session 2025
Page 2 House Bill 720-First Edition
date, and (iv) in cases where the member's coverage obligations were assumed 1
by a nonmember insurer, the transaction received prior regulatory or judicial 2
approval. "Covered claim" shall not include any amount awarded (i) as 3
punitive or exemplary damages; (ii) sought as a return of premium under any 4
retrospective rating plan; or (iii) due any reinsurer, insurer, insurance pool, or 5
underwriting association, as subrogation or contribution recoveries or 6
otherwise. "Covered claim" also shall not include fines or penalties, including 7
attorneys' fees, imposed against an insolvent insurer or its insured or claims 8
of any claimant whose net worth exceeds fifty million dollars ($50,000,000) 9
on December 31 of the year preceding the date the insurer becomes insolvent. 10
(4a) Cybersecurity insurance. – Includes first and third-party coverage, in a policy 11
or endorsement, written on a direct, admitted basis by a member insurer for 12
losses and loss mitigation arising out of or relating to data privacy breaches, 13
unauthorized information network security intrusions, computer viruses, 14
ransomware, cyber extortion, identity theft, and similar exposures. 15
...." 16
SECTION 3. G.S. 58-48-35 reads as rewritten: 17
"§ 58-48-35. Powers and duties of the Association. 18
(a) The Association shall: 19
(1) Be obligated to the extent of the covered claims existing prior to the 20
determination of insolvency and arising within 30 days after the determination 21
of insolvency, or before the policy expiration date if less than 30 days after 22
the determination, or before the insured replaces the policy or causes its 23
cancellation, if he does so within 30 days of the determination. This obligation 24
includes only the amount of each covered claim that is in excess of fifty dollars 25
($50.00) and is less than five hundred thousand dollars ($500,000). However, 26
the Association shall pay the full amount of a covered claim for benefits under 27
a workers' compensation insurance coverage, and shall pay an amount not 28
exceeding ten thousand dollars ($10,000) per policy for a covered claim for 29
the return of unearned premium. In no event shall the Association be obligated 30
to pay an amount in excess of five hundred thousand dollars ($500,000) for 31
all first and third-party claims