Recent updates to the North Carolina General Statutes in Chapter 58 (insurance) and to a portion of Chapter 42 (landlord and tenant) became law on July 1, 2025, under Session Law 2025-45 (House Bill 737).
These updates include, among others, changes that strengthen protections for policyholders in circumstances when regulated insurers become insolvent and add new insurance laws for residential leases.
Updates to the North Carolina Insurance Guaranty Association Act
The Insurance Guaranty Association is intended to provide a safety net for certain individual and commercial policyholders when a regulated insurance company becomes insolvent.
Several important updates were made to strengthen and modernize the scope under the Act of policy types covered, and by extension, the scope of potentially covered claims, as well as how the Association operates.
These updates include:
Included cybersecurity coverage: The Act now recognizes “cybersecurity insurance” as a covered policy type. For purposes of the Act, it does not matter if the coverage was issued through a standalone policy or as an endorsement.
Cybersecurity's inclusion ensures that first and third-party losses for cyberattacks or data breaches may be eligible for coverage protection from the Association where the issuing insurer becomes insolvent.
Clarified limits for covered claims: While the Association’s maximum obligation for most claims remains $500,000 per claim, the law now specifically caps cybersecurity-related claims at the same $500,000 on a total per incident basis.
The $500,000 cap for those claims applies regardless of the number of claimants arising out of the cybersecurity-related incident and regardless of whether there are both first- and third-party losses arising out of that incident.
Clarified authority to contest questionable claims: The Association can still review and challenge settlements, releases, compromises, waivers, or judgments entered before a company’s insolvency where reasonable care was not used in entering those settlements, etc. or where all reasonable appeals of an adverse judgment were not pursued.
While the Association previously had this review and challenge authority, the statute now makes clear that the Association's authority in this context extends to settlements, etc. entered within 120 days before the order of liquidation is entered. The 120-day period does not apply to limit the Association's authority with respect to reviewing and challenging settlements, etc. that were the result of default, fraud, collusion, or the insurer's failure to defend a claim.
Right of recovery from high-net-worth insureds: If the Association pays a claim on behalf of a business or individual with a net worth over $50 million, it can seek reimbursement from that party of all incurred expenses, to include attorneys' fees and costs of defense.
While this was previously the case, additions to the statutory language were made in order to make clear that in calculating the $50 million, the aggregate net worth of an insured business along with that of all of its subsidiaries and affiliates (as calculated on a consolidated basis) is counted.
Overall, these revisions help keep the Association financially stable while expanding available coverages and keeping policyholder protections strong.
Residential Lease Restrictions for Renters Insurance Requirements
Landlords with leases that require tenants to maintain renters insurance should take note of the added consumer protections for tenants featured in the refresh to Chapter 42, which added a new subsection (l) to § 42-46.
Under the newly added subsection, landlords cannot force tenants to buy insurance from a specific carrier or agent. This change does not preclude requiring that renters carry insurance, but it does preclude landlords from obligating renters to secure insurance through a "designated carrier" or a "designated agent."
Under the new law, where a lease requires a renter to obtain and provide proof of obtaining renter's insurance, the landlord now has a statutory right to obtain the required coverage on the tenant’s behalf and charge the tenant for the actual cost incurred to do so along with a small administrative fee of up to $50.00 per year.
The landlord can only charge the tenant for the insurance costs and the administrative fee if the landlord requests proof from the tenant that the required insurance coverage has been obtained and the tenant does not provide that proof within three business days of the request.
The new statute does not expressly state that the lease has to provide for recovery of the administrative fee, nor does it state that the landlord's request for proof of insurance has to be made of the tenant in writing. Expressly spelling out terms for recovery of the administrative fee in the lease and making the request for proof of insurance in writing can help avoid ambiguities and arguments that may arise between a landlord and tenant as to whether the benefits of the statute are or should be available to a landlord in a given situation.
These changes ensure freedom of choice for renters when purchasing required insurance policies, while balancing some of that associated risk for landlords by making provision for landlords to secure and charge back the costs of the required insurance where tenant's fail to comply with their lease obligations while allowing landlords in those instances to recover a small administrative fee for their troubles.
Why It Matters
Insurance is a highly regulated and nuanced area of the law. It is important for businesses and individual policyholders to keep abreast of changes to insurance law, as insurance is a critical risk management tool employed in the quest to achieve financial stability and strength. Changes in insurance law can impact the effectiveness of how businesses and individual policyholders utilize insurance to manage and leverage risk.
For more information or guidance on how these changes may affect your insurance policies or business operations, contact our Insurance Counseling and Recovery Team. We advise clients throughout North and South Carolina on their insurance portfolios, coverage disputes, and various regulatory matters.
