Revised Law Green-Lights Restitution to Insurers

For many years North Carolina law has prohibited insurers from receiving restitution directly from criminal defendants. That prohibition will end on December 1, 2016. Tucked away in S.L. 2016-78, a bill amending various insurance laws, is a provision repealing G.S. 15A-1340.37(d). That subsection, described in this prior post, said that “[n]o third party shall benefit by way of restitution as a result of the liability of that third party to pay indemnity to an aggrieved party for the damage or loss caused by the defendant.” It has long been interpreted as a rule against ordering a defendant to pay restitution directly to an insurer that was obliged to cover a victim’s losses. (The prohibition didn’t limit restitution to an insurance company that was itself the victim of a crime, like a fraudulent insurance claim.) What was the purpose of the former rule? As discussed by the court of appeals in State v. Stanley, 79 N.C. App. 379 (1986), the idea was to focus restitution on actual victims. The legislature could rationally conclude that third-party indemnitors should be precluded from receiving restitution or reparation from criminal defendants. . . . They are in the business of insuring against anticipated risks, and they derive profit by assuming such risks. Insurers, unlike victims of crime, have voluntarily contracted to assume liability for damage or loss arising out of criminal misconduct. Id. at 383. Be that as it may, the prohibition comes to an end on December 1. (The legislation does not qualify the effective [...]