North Carolina Business Court ruled on March 3, 2026, that captive insurer Oxford Insurance Company NC LLC (Series 1) cannot dismiss $116 million bad faith and unfair trade practices claims brought by law firm Watts Guerra LLC.

Judge Julianna Theall Earp’s opinion (2026 NCBC 17) lets those claims proceed while dismissing the underlying breach-of-contract claim (without prejudice).

The Policies & $116 Million Claim

In September 2021, Watts Guerra (a Puerto Rico-based firm) paid ~$7 million in premiums for 12 specialty insurance policies (each $10 million limit) issued by Oxford, a North Carolina-licensed captive insurer owned by Accession Risk Management Group.

The policies were designed to hedge Watts Guerra’s investment in a New York law firm’s mass-tort litigation portfolio (originally valued at >$340 million). They would pay the shortfall if the portfolio failed to return at least $120 million by September 2024.

The portfolio ultimately returned only ~$2 million. Watts Guerra filed:

• First claim (Nov. 2024): ~$118 million
• Second claim (June 16, 2025): ~$116 million (adjusted for additional proceeds)

The Bad-Faith Allegations

Watts Guerra claims Oxford deliberately stalled and obstructed the claims for over a year to protect its parent company’s sale/acquisition. Specific allegations include:

• As early as spring 2024, Oxford’s reinsurer allegedly warned it had “no intention” of paying because of Accession’s sale plans.
• Meetings in which Accession’s lawyer reportedly said Oxford would deny any claim and threaten rescission.
• Repeated requests to delay filing while exploring third-party purchases of the portfolio (which failed).
• Overbroad document demands after filing, even though Oxford had already signaled it wouldn’t pay.
• Oxford’s actions allegedly aimed to “minimize liabilities, improve its AM Best rating, and maximize the acquisition prospects of its parent, Accession.”

The Court’s Ruling (March 3, 2026)

Bad faith & unfair/deceptive trade practices claims (Counts III–VI) survive The judge ruled the allegations of intentional delay tactics — motivated by protecting the parent’s sale — are plausible under North Carolina law. Bad faith can exist based on delay alone (even without an outright denial or breach of contract) when coupled with improper motive.

Breach-of-contract claim (Count II) dismissed without prejudice The policies required the insured to provide “all other information requested by” the insurer during investigation. Watts Guerra submitted only basic claim forms and loss statements but refused broader document requests. The court held this violated a clear condition precedent to suit.

Declaratory judgment partially survives (on bad faith and unfair practices issues).

Why This Matters

• It confirms captive insurers in North Carolina face the same bad-faith exposure as traditional carriers when handling claims.
• The ruling highlights risks when a captive’s decisions appear influenced by its parent’s business goals (e.g., a pending sale).
• The case continues on the bad-faith and statutory claims. Watts Guerra can refile the contract claim once it complies with the information requests.

The full 2026 NCBC 17 opinion is publicly available on the North Carolina courts website. Coverage so far from Insurance Business Magazine and Law360 matches the court record.

This is a significant win for the insured at the motion-to-dismiss stage and a cautionary tale for captive programs tied to corporate transactions. The case is ongoing in the North Carolina Business Court. Let me know if you want the direct PDF link, more on the litigation portfolio, or updates as the case progresses!