Restitution to Insurers and the Insured

Suppose my home is broken into and many things are stolen. My insurance company compensates me for the damage to the house and the items that were taken. Two related questions arise if the person who broke in is charged and convicted. Can the defendant be ordered to pay restitution to my insurance company? And can the defendant be ordered to pay restitution to me even though I have already been made whole by my insurer?

In North Carolina, both questions are answered by G.S. 15A-1340.37(d). Under that law, “[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 . . . .” In other words, restitution may not be ordered directly to the insurer. Our appellate courts have long recognized this rule, which was previously codified in G.S. 15A-1343(d). See State v. Maynard, 79 N.C. App. 451, 453 (1986) (“The court thus cannot order defendant to pay restitution to the insurer.”); State v. Stanley, 79 N.C. App. 379 (1986) (vacating the trial judge’s order of restitution to the victim’s insurer). Cf. State v. Ray, 125 N.C. App. 721 (1997) (upholding a trial court’s recommendation that a defendant pay $82,000 to Medicaid, which had paid the victim’s medical bills, as a condition of the defendant’s post-release supervision).

G.S. 15A-1340.37(d) goes on to say that “the liability of a third party to pay indemnity to an aggrieved party or any payment of indemnity actually made by a third party to an aggrieved party does not prohibit or limit in any way the power of the court to require the defendant to make complete and full restitution to the aggrieved party for the total amount of the damage or loss caused by the defendant.” So, the court can order the defendant to make full restitution to me even though my insurer has already covered the loss—which means I can recover twice as far as the restitution laws are concerned. There is no statutory requirement that the court limit restitution to the amount unrecovered through insurance. However, given the practical reality that many defendants will not have the wherewithal to make full restitution, it is a common practice (and within the discretion of the court) to limit restitution to the victim’s deductible or copay.

Not every state takes the same approach to these issues. For instance, some states expressly allow restitution to insurance companies, on the theory they, too, are “victims” or “aggrieved parties” within the language of the applicable state law. See, e.g., State v. Merrill, 665 P.2d 1022 (Ariz. Ct. App. 1983) (concluding that Arizona’s restitution statute was best fulfilled by interpreting “victim” to include any entity suffering economic loss resulting from a defendant’s criminal activity, including the principal victim’s insurance company). As explained by our court of appeals, our legislature has taken a different path, focusing the restitution law on those “who directly suffered damage or loss as a consequence of criminal misconduct,” and expressly excluding insurers, who are, after all, “in the business of insuring against anticipated risks,” and who “derive profit by assuming [them].” Stanley, 79 N.C. App. at 383.

Regarding the possibility of a double recovery by the victim, that too is a justifiable policy choice by the legislature. Better to allow the victim to recover twice than to let the defendant off the hook merely because his or her victim had the good sense to carry insurance. Moreover, restitution is not just about making the victim whole. It is also viewed as promoting the defendant’s rehabilitation and restoration, and as a deterrent to future crimes.

Though the prohibition on restitution to directly to insurers is clear, an insurer sometimes winds up with the money in any event. Many insurance policies include a clause subrogating the insurer to any collateral recovery made by the insured. In N.C. Farm Bureau Mutual Ins. Co., Inc. v. Greer, 54 N.C. App. 170 (1981), for example, an insurer sought to recover $2,500 paid to an insured under a policy covering loss of a cow by theft. The victim of the crime had also received $7,500 in restitution from the man convicted of stealing his cow. The insurance policy included a clause stating that “no loss shall be paid hereunder if the insured has collected the same from others.” Id. In light of that clause—and the fact that the victim reported the value of the cow as $5,000 in his insurance claim—the court of appeals affirmed the trial court’s award of $2,500 to the insurance company.

4 thoughts on “Restitution to Insurers and the Insured”

  1. I have no problem at all with the “double recovery” provisions of the law.

    What many people fail to understand is that victims of crime are never made whole. What price do you put on the personal violation that comes with having your home broken into? What price do you put on the disruption of your work and home life having to file police reports, file insurance claims, replacing stolen items, repairing damage, spend days in court, and clean up the mess left behind? These issues are not addressed in criminal court and while victims can pursue remedies through civil litigation, that’s going to be another round of disruption in their lives.

    If the scales come closer to balancing through this “double dip” permitted by the law, leave the law the way it is. There are not many other avenues victims can reasonably pursue, particularly if the loss is too small to logically justify pursuing restitution through a civil action.

  2. I agree with Mr. Towler and add to his comments in that typically insurance is going to pay the depreciated value of property rather than actual replacement value. The value of stolen or damaged property at the time of the theft or damage is 100% to the victim, it works or is functional and the victim may have many more years of service from the item thus a loss to him/her is 100%. The victim will probably have a difficult time locating and purchasing an item of equal value for the depreciated amount paid by insurance. The law as it is may be as close to fair for a victim as possible however, the reality of this double compensation seems rare.

  3. Pressure put on defendants to pay restitution while on supervised probation or post release supervision often leads to the commission of more crime. The thief simply commits more break-ins in order to satisfy the restitution from the previous conviction. It is a never ending cycle until the person finally ends up in jail which in my opinion if I was the victim would be better restitution than dirty money. Certain offenders cannot be rehabilitated no matter how hard the state may try.


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