Insurer Wins Some and Loses Some


Denial for Fraud Not Bad Faith But Contract Claim Remains

Tammy Lou Hope appealed the trial court’s order granting Defendant Integon National Insurance Company summary judgment on her claims in Tammy Lou Hope v. Integon National Insurance Company, No. COA20-265, Court Of Appeals Of North Carolina (December 31, 2020).


Plaintiff sued Integon alleging that Plaintiff purchased from Defendant an auto liability insurance policy and that her vehicle was damaged. She claims that her vehicle was struck by an unidentified vehicle in a hit-and-run accident. Plaintiff’s vehicle was rendered a total loss. Plaintiff surrendered the vehicle to Defendant and sought coverage. Defendant denied coverage, contending that Plaintiff was not entitled to any compensation. because  there was evidence that Defendant’s investigator surmised that the damage was caused by Plaintiff running into a stationary object.

She alleged that Defendant did not pay Plaintiff’s claim; and that Defendant “breached the [insurance] contract.” Plaintiff also alleged an unfair trade practices claim and a claim for breach of the contract’s covenant of good faith, seeking punitive damages.

Defendant specifically noted that, in its investigation of Plaintiff’s claim, it determined that she “struck a fixed stationary object while moving in a forward motion and that none of her damages were consistent with being struck by another motor vehicle.” Defendant, in its response, noted that Plaintiff’s claim was denied for fraud and misrepresentation.

After a hearing on the matter, the trial court entered its order on summary judgment in favor of Defendant and against Plaintiff and taxed costs against Plaintiff.


Certain facts were undisputed: that Plaintiff possessed an insurance policy with Defendant, and that Plaintiff’s vehicle was damaged beyond repair. It is undisputed that Defendant denied Plaintiff’s claim for insurance benefits under the policy.

The Court of Appeals concluded that there is an issue of fact as to whether Plaintiff’s coverage was voided by her misrepresentation concerning the cause of the damage. She claims it was caused by an unidentified driver; Defendant claims that it was caused by her own negligence when she hit a stationary object. Accordingly, since the dispute is factual the court reversed summary judgment as to the claim for coverage under the terms of the policy that must be resolved at a trial.

Regarding Plaintiff’s claims for unfair and deceptive trade practices and for breach of the covenant of good faith and fair dealing, the court affirmed the trial court because Plaintiff offered no evidence to prove that Defendant did anything but act in an honest fashion in investigating her claim.

Defendant’s sworn evidence shows that it conducted an investigation, that it found the cause of Plaintiff’s vehicular damage differed from her account, and that it denied the claim on the basis of fraud and misrepresentation. Defendants records show that it considered Plaintiff’s version of the accident, but concluded after investigation that the accident likely did not occur as Plaintiff claims.

“Bad faith” means not based on honest disagreement or innocent mistake.  That is, an honest disagreement between parties does not constitute bad faith. With regard to Plaintiff’s claim for unfair trade practices, Plaintiff failed in her burden to produce evidence showing that Defendant acted in any unfair or deceptive way.  Accordingly, the trial court’s grant of summary judgment for Defendant on the bad faith and unfair trade practices claims, including Plaintiff’s claim for treble and punitive damages was affirmed. The issue of cause and fraud were returned to the trial court to determine whether Plaintiff attempted to defraud the insurer and the true cause of the destruction of the car.


When investigation by a professional claims person or Special Investigative Unit investigator determines the evidence establishes that the vehicle was destroyed by the insured running it into a stationary object and not by an unidentified hit and run vehicle there is a genuine dispute between insured and insurer. At trial the insurer will present its expert testimony and will either establish an insured against cause or that the claim presented was a fraud. Regardless, a good faith statement of decision, a disputed set of facts, is not sufficient to even consider a tort of bad faith or unfair trade practices and the court agreed.

© 2020 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at and

Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.

Over the last 53 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

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