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North Carolina Appeals Court Rules No Duty to Defend for Insurer

Case Study

North Carolina Appeals Court Rules No Duty to Defend for Insurer

Finding that the words “willful” and “knowing” have the same meaning, the North Carolina Court of Appeals has delivered a favorable opinion to a North Carolina insurance carrier represented by Goldberg Segalla, affirming a trial court’s finding that the carrier does not have a duty to defend an insured personal injury law firm in underlying litigation over allegations the firm unlawfully obtained and used drivers’ personal information.

The Appeals Court concluded that the willful violation of a criminal statute exclusion in the insurance contract barred coverage because the law firm was alleged to have “knowingly” violated the federal Driver’s Privacy Protection Act of 1994 (DPPA), which criminalizes such violations, by acquiring and using the information.

“We conclude that the words ‘willful’ and ‘knowing’ carry essentially the same or equivalent meanings,” the opinion states. “An allegation of a ‘knowing’ violation of the DPPA is an allegation of a ‘willful’ violation of the DPPA.”  As a result, the insurer has no duty to defend nor indemnify the insured.

In the underlying class-action litigation in the Middle District of North Carolina, the law firm―and other law firms named in the suits―are alleged to have violated the DPPA by regularly using protected personal information, including names and addresses from collision records and state drivers’ license databases, in connection with advertising for legal services without the consent of the drivers.

Pointing out that the opinion is a win for both our client and the insurance industry, Martha P. Brown, partner in Goldberg Segalla’s Global Insurance Services group, explained that the underlying lawsuit alleged statutory violations that carry significant liquidated damages per use.

David L. Brown, co-chair of the firm’s Global Insurance Services group, noted that, while other insurers have litigated coverage actions arising out of the DPPA litigation in federal court, this declaratory judgment action is the only one in state court. Therefore, this case was the first opportunity for the North Carolina appellate division to weigh in on whether the alleged DPPA violations are covered under commercial general liability policies.


Goldberg Segalla is one of the premier law firms advising and representing the global insurance and reinsurance industry. Its 75-lawyer Global Insurance Services group, which Law360 ranks among the largest in the United States, exists to serve insurers, reinsurers, and all others operating in the insurance arena.