Mr. Peter Kolbe General Counsel North Carolina Department of Insurance
P.O. Box 26387 Raleigh, N.C. 27611
Re: Advisory Opinion -- N.C.G.S. §§ 58-2-60; 58-2-70(c), (d) and (e); 58-63-50 --Scope of Authority of Commissioner of Insurance
Dear Mr. Kolbe:
You have asked for further guidance concerning the proper disposition of monetary payments the Commissioner of Insurance may collect from regulated persons and businesses for failure to comply with North Carolina’s insurance statutes, N.C.G.S. §§ 58-1-1 et seq. You ask whether restitutionary payments collected by the Department which are de minimis, or the owner of which cannot be identified, or which equity otherwise requires to be used for a public purpose, are subject to the escheats law in Chapter 116B of the North Carolina General Statutes. For the reasons outlined below, whether such payments are subject to Chapter 116B depends on the specific facts at hand.
The escheats law, N.C.G.S. 116B-1 through -8, applies only to property of a person who dies intestate, or dies testate but does not dispose of all of his property by will, without leaving any surviving heirs. N.C.G.S. § 116B-2. Accordingly, it does not apply here.
The recently enacted North Carolina Unclaimed Property Act, N.C.G.S. §§ 116B51 et seq. (eff. Jan. 1, 2000), has several provisions that relate more closely to your question. This Act has a two-part framework, first, establishing whether property is considered abandoned, and second, determining whether abandoned property is subject to the custody of the State.
N.C.G.S. § 116B-53(a) provides that property is considered unclaimed:
if the apparent owner has not communicated in writing or by other means
reflected in a contemporaneous record prepared by or on behalf of the holder,
with the holder concerning the property or the account in which the property is
held, and has not otherwise indicated an interest in the property.
Property “held by a court, government, governmental subdivision agency or instrumentality” is presumed abandoned if it is unclaimed by the apparent owner within “one year after it becomes distributable.” N.C.G.S. § 116B-53(c)(12).
The Act defines “apparent owner” as “a person whose name appears on the
records of a holder as the person entitled to property held, issued, or owing by the holder.” N.C.G.S. § 116B-52(1). It defines “holder” as “a person obligated to hold for the account of or deliver or pay to the owner property that is subject to this Chapter.”
- § 116B-52(5). Although the Act lists several types of property subject to its mandates, it generally defines “property” as “tangible personal property physically located within this State or a fixed and certain interest in intangible property that is held, issued, or owed in the course of a holder's business, or by a government, governmental subdivision, agency, or instrumentality, and all income or increments therefrom.”
- § 116B-52(11).
Unclaimed property becomes subject to the custody of the State in a variety of circumstances which may be summarized as demonstrating a sufficient connection between the State and either the apparent owner, the holder, or the property. N.C.G.S. § 116B-56.
These provisions lead to different possible conclusions depending on the facts of each particular case, including the terms of any court orders or settlement agreements. For instance, as a general matter, where the Department of Insurance obtains restitution for a particular consumer, the consumer is identified in Department records and the consumer’s individual interest is fixed and certain, the Department is the “holder” and the consumer is the “apparent owner” of the “property.” If the funds belonging to the particular consumer cannot reasonably be delivered, see N.C.G.S. § 116B-59, the other requirements of establishing a connection with the State are met,
N.C.G.S. § 116B-56, and no other factors appearing, the funds should be delivered to the State Treasurer upon the expiration of one year from the date they became distributable.
In contrast, where, for example, the consumers who may have been harmed by the conduct for which the restitution payment is made cannot reasonably be identified by the Department, the property is not considered unclaimed property and is not subject to the custody of the State under the Unclaimed Property Act. See N.C.G.S. §§ 116B52(1) and -56. Similarly, where a state agency charged with acting on behalf of the public obtains a restitution payment that might otherwise be paid to individual consumers, but the amount for each consumer is de minimis, the costs of identifying the affected consumers and of administering the fund would be high in relation to the amount of the fund, and those costs would be subtracted from the fund before or during the course of disbursement, each consumer has no ownership interest, and there has been no abandonment of property by any person.
The Unclaimed Property Act must be read in light of the particular facts and circumstances at hand, the relevant statutes and the public trust responsibilities of the Department of Insurance. While there are many possible factual permutations which may lead to different results, the foregoing outlines the general principles applicable to the type of restitution recoveries we anticipate may be obtained by the Department of Insurance under its consumer protection powers. If in the future you are faced with a specific circumstance regarding particular restitution funds, we would of course be available for consultation and guidance as to the proper disposition of the funds.
Reginald L. Watkins Senior Deputy Attorney General
Lorinzo L. Joyner Special Deputy Attorney General
Douglas Johnston Special Deputy Attorney General