State RegulationsNC specificDifficulty 2/5
An accident and health policy delivered in Greensboro contains a provision that conflicts with a mandatory requirement of the North Carolina Insurance Code. What is the legal effect?
Select an option to reveal the answer and the full 3-part explanation — free, no signup.
Answer & full 3-part explanation (select an option above, or peek)
Why B is correct
Under G.S. 58-1-10, every contract of insurance issued in this State must be made and construed in conformity with the North Carolina Insurance Code, and no insurer may resort to any subterfuge to evade the Chapter's requirements. A policy provision that violates a mandatory statutory requirement is ineffective to that extent, while the remainder of the contract remains enforceable. Insurers cannot contract around consumer protections by drafting their own terms.
Why the other options are wrong
- A) The statute does not void the whole contract; only the nonconforming provision is ineffective, and the policy is otherwise construed in conformity with the Code under G.S. 58-1-10.
- C) Freedom of contract is limited in insurance: G.S. 58-1-10 requires conformity with the Code regardless of what the parties agreed.
- D) The Commissioner enforces the Code and does not rewrite private policies; the statutory requirement of conformity operates on the contract directly under G.S. 58-1-10.
Memory hook
The Code wins: a bad clause drops out, the policy stays alive.