NC court looks at deal that lets homeowners’ insurance rates soar at coast, fall in west

NC court hears challenge to big coastal rate jump

RALEIGH, N.C. — A North Carolina appeals court is weighing whether to freeze or even reverse homeowners’ insurance premiums that soared by up to almost 30 percent along the coast while sliding by a third in counties farthest from the shore.

A three-judge Court of Appeals panel heard arguments Thursday in a lawsuit by coastal communities trying to overturn a deal struck in late 2008 between former Insurance Commissioner Jim Long and the North Carolina Rate Bureau, which represents insurers.

The municipalities argued Long approved the increases before coastal residents knew insurers had requested them and set rates at unreasonably high levels.

Attorneys for the state agency and the Rate Bureau told the judges state law makes the insurance commissioner responsible for representing consumers, and rate settlements can’t be appealed to the court by anyone else.

“Suppose the commissioner gets it wrong?” Judge Linda Stephens wondered.

“I don’t know of anywhere else where an order can be issued and there’s no right to appeal that,” Judge Martha Geer said.

A court ruling could come later this year.

Long’s decision meant that homeowners policies that were written or renewed beginning May 1 for coastal properties from Sunset Beach to Morehead City could jump 29.8 percent. Policy premiums for homes on the Outer Banks counties of Currituck, Dare, Hyde and Pamilco were allowed to rise by 22 percent, a big jump but a bargain compared to the doubling of rates that insurance companies originally sought.

The deal also allowed homeowners in 32 western counties to cut their premiums, in two counties by up to 6 percent.

The rate changes included policies written by both private insurance companies and the Beach Plan, the state’s property insurance provider for coastal properties.

The General Assembly last summer was forced to shore up the overextended Beach Plan by capping potential costs to insurers and putting every property owner in the state on the hook from a disastrous hurricane season. Some insurers had threatened to quit doing business in the state to limit their exposure to Beach Plan losses unless the program was bolstered, current Insurance Commissioner Wayne Goodwin warned last summer.

Despite the rate increases and Beach Plan reforms, State Farm decided to quit the homeowners insurance business on North Carolina’s barrier islands, spokesman Russ Dubisky said Thursday. The company is dropping about 1,600 policies that come up for renewal beginning May 1, he said.

State Farm believes its risks on the exposed islands is too great, and will also retrench in other coastal states, Dubisky said.

“We are looking to manage our exposure in other catastrophe prone areas as well as North Carolina,” Dubisky said.