A recent decision by the North Carolina Supreme Court allows insurers more freedom to provide information to law enforcement authorities regarding an insured without fear of being exposed to a malicious prosecution claim. (See The North Carolina Farm Bureau Mut. Ins. Co. v. Cully’s Motorcross Park, Inc.). Based on this decision, there must now be an element of malice on the part of an insurer to “willfully and maliciously” initiate criminal proceedings against its insured, and to subvert the independent investigation of law enforcement in North Carolina.
To prove a claim of malicious prosecution in North Carolina, the insured must prove that the insurer “initiated” the proceeding against the insured. In applying this element, the North Carolina Supreme Court rejected the more liberal “but for” test because it didn’t account for the fact that law enforcement officials use their own discretion to investigate and prosecute based on the information provided. As such, the Court adopted a test that demands a heightened analysis of whether the insurer actually used or manipulated the process in a willful and malicious manner beyond simply providing law enforcement with information that later proved inaccurate or incomplete.
The Court’s decision now allows an insurer to work with and make reports in good faith to law enforcement officials without the fear of opening the insurer up to retaliation by way of lawsuits claiming malicious prosecution.
While the North Carolina Supreme Court did not rely on the law of other jurisdictions to formulate its analysis, its decision is in accord with other jurisdictions that have addressed this issue, including Alabama, Florida, Michigan, Montana, and Pennsylvania.