IN THE COURT OF APPEALS OF NORTH CAROLINA

No. COA17-918

Filed: 20 February 2018

Guilford County, No. 14 CVS 790

USA TROUSER, S.A. de C.V., Plaintiff,

v.

JAMES A. WILLIAMS; NAVIGATORS INSURANCE COMPANY; and 

NAVIGATORS MANAGEMENT COMPANY, INC., Defendants.

Appeal by plaintiff from order and opinion entered 25 July 2016 by Chief Judge 

James L. Gale in the North Carolina Business Court. Heard in the Court of Appeals

22 January 2018.

Law Offices of Matthew K. Rogers, PLLC, by Matthew K. Rogers, for plaintiffappellant.

Cozen O’Connor, by Tracy L. Eggleston and Patrick M. Aul, and Angelo G. 

Savino, pro hac vice, for defendant-appellees.

TYSON, Judge.

USA Trouser, S.A. de C.V. (“Plaintiff” or “USAT”) appeals an order of the North 

Carolina Business Court, granting Navigators Insurance Company’s and Navigators 

Management Company, Inc.’s motions to dismiss. We affirm the trial court’s order. 

I. Background

The record on appeal tends to show the following: 
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USAT is a Mexican company, which manufactures socks and hosiery products. 

USAT sold socks on credit to International Legwear Group, Inc. (“ILG”), a company 

conducting business within North Carolina. 

Navigators Insurance Company (“Navigators Insurance”) had issued a 

directors and officers liability insurance policy (the “Policy”) to ILG for the period

from 31 December 2010 through 31 December 2017. 

In September 2011, USAT filed suit (the “Underlying Action”) against ILG and 

a number of its directors and officers. USAT alleged ILG had failed to disclose its 

worsening financial condition, while continuing to obtain products from USAT upon 

credit. USAT asserted claims for breach of contract; breach of fiduciary duty; 

fraudulent concealment; negligent misrepresentation; unfair and deceptive trade 

practices; breach of implied covenants of good faith and fair dealing; fraudulent 

and/or negligent failure to perform statutory duties; conversion; and fraudulent 

conveyance. A default judgment (the “Judgment”) was entered against ILG for 

$1,993,856.48 in the United States District Court. The plain language of the Policy 

indicates Navigators Insurance had no duty to defend ILG for the claims brought in 

the Underlying Action.

On 2 June 2014, USAT filed suit in Guilford County Superior Court against 

James A. Williams (“Williams”), the CEO and President of ILG, to enforce the 

Judgment. Williams asserted counterclaims against USAT.
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On 20 June 2014, USAT sent Navigators Insurance a copy of the Judgment 

and a letter demanding payment of the Judgment. After Navigators Insurance failed 

to respond to the demand letter, USAT filed an amended complaint purporting to add 

Navigators Insurance Company and Navigators Management Company, Inc. 

(“Navigators Management”) (collectively “Defendants”) as defendants to the suit 

against Williams. The case was designated a mandatory complex business case by 

order of the Chief Justice of the Supreme Court of North Carolina pursuant to N.C. 

Gen. Stat. § 7A-45.4(a). The case was assigned to Chief Judge James L. Gale of the

North Carolina Business Court.

USAT asserted claims against Navigators Insurance and Navigators 

Management for: (1) conspiracy to defraud; (2) bad faith claims settlement practices; 

and (3) “unfair trade practices” pursuant to N.C. Gen. Stat. § 75-1.1. On 17 October 

2014, Navigators Insurance and Navigators Management filed motions to dismiss 

pursuant to Rule 12(b)(6) of the North Carolina Rules of Civil Procedure. Navigators 

Management premised its motion to dismiss on arguments that: (1) it was not a party 

to the Policy between ILG and Navigators Insurance; (2) USAT did not plead its

conspiracy to defraud claims with specificity; and (3) it did not issue the Policy.

In its motion to dismiss, Navigators Insurance argued (1) the Policy did not 

provide coverage for the Judgment; (2) USAT’s lack of coverage under the Policy 

precluded it from acting in “bad faith” by not paying the judgment; (3) the lack of 

coverage precluded USAT’s unfair trade practices claims; (4) USAT did not plead its 
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conspiracy to defraud claim with specificity; and (5) USAT’s lack of coverage under 

the Policy precluded the fraudulent concealment claim.

On 21 July 2016, the trial court issued an order and opinion dismissing all of

USAT’s claims against Navigators Insurance and Navigators Management. On 2 

March 2017, the remaining claims by and between USAT and Williams were 

voluntarily dismissed. USAT filed timely notice of appeal of the trial court’s order.

II. Jurisdiction

Appeal lies of right in this Court pursuant to N.C. Gen. Stat. §§ 7A-27(b) (2013) 

and 1-277 (2017). In 2014, our General Assembly enacted Chapter 102 of the 2014 

North Carolina Session Laws, which, among other things, amended N.C. Gen. Stat. 

§ 7A-27 so as to provide a direct right of appeal to the Supreme Court from a final 

judgment of the Business Court. See 2014 N.C. Sess. Laws 621, 621, ch. 102, § 1.

The effective date of the 2014 amendments to N.C. Gen. Stat. § 7A-27(a)(2) was 

1 October 2014. See 2014 N.C. Sess. Laws 621, 629, ch. 102, § 9 (“Section 1 of this act 

becomes effective October 1, 2014, and applies to actions designated as mandatory 

complex business cases on or after that date.”). 

The present case was designated as a mandatory complex business case on 7

July 2014, prior to the effective date of the 2014 amendments to N.C. Gen. Stat. § 7A27(a)(2). This case is properly before this Court.

III. Standard of Review
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The standard of review of an order granting a [motion to 

dismiss pursuant to N.C. Gen. Stat. § 1A-1, Rule 12(b)(6)] 

is whether the complaint states a claim for which relief can 

be granted under some legal theory when the complaint is 

liberally construed and all the allegations included therein 

are taken as true. On a motion to dismiss, the complaint’s 

material factual allegations are taken as true.

Bissette v. Harrod, 226 N.C. App. 1, 7, 738 S.E.2d 792, 797 (2013) (citations 

omitted).

A motion to dismiss should be granted when: “(1) the complaint on its face 

reveals that no law supports the plaintiff’s claim; (2) the complaint on its face reveals 

the absence of facts sufficient to make a good claim; or (3) the complaint discloses 

some fact that necessarily defeats the plaintiff’s claim.” Wood v. Guilford Cty., 355 

N.C. 161, 166, 558 S.E.2d 490, 494 (2002).

“[W]hen ruling on a Rule 12(b)(6) motion, a court may properly consider 

documents which are the subject of a plaintiff’s complaint and to which the complaint 

specifically refers even though they are presented by the defendant.” Oberlin Capital, 

L.P. v. Slavin, 147 N.C. App. 52, 60, 554 S.E.2d 840, 847 (2001). We review the trial 

court’s dismissal of an action de novo. Grich v. Mantelco, LLC, 228 N.C. App. 587, 

589, 746 S.E.2d 316, 318 (2013).

IV. Analysis

A. Introduction

USAT argues the trial court erred by granting Defendants’ motions to dismiss. 

USAT asserts it became a third-party beneficiary to the Policy upon entry of the 
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default judgment against ILG, obtained the right to payment on the Judgment from 

Defendants, and to sue Defendants directly for their failure to pay. 

B. Third-Party Beneficiary

USAT argues the trial court erred when it dismissed its claims against 

Defendants for unfair trade practices and bad faith claims settlement practices

because USAT is a third-party beneficiary of the Policy. We disagree. 

USAT brings its unfair or deceptive trade practices claim pursuant to N.C. 

Gen. Stat § 75-1.1 and its bad faith claims settlement claim pursuant to N.C. Gen. 

Stat. § 58-63-15(11).

It is well-established in North Carolina that:

[while] a plaintiff generally cannot sue the insurance 

company of an adverse party under G.S. § 75-1.1, if the 

plaintiff achieves the status of an intended third-party 

beneficiary arising from the contractual relationship 

between the adverse party and the adverse party’s 

insurance company, the plaintiff may then bring a claim 

against the insurance company for violating the unfair and 

deceptive practices statute.

Prince v. Wright, 141 N.C. App. 262, 270, 541 S.E.2d 191, 197 (2000) (emphasis 

supplied). “[A] private right of action under N.C.G.S. § 58-63-15 and N.C.G.S. § 75-

1.1 may not be asserted by a third-party claimant against the insurer of an adverse 

party.” Lee v. Mut. Community Sav. Bank, 136 N.C. App. 808, 810, 525 S.E.2d 854, 

856 (2000) (citation and quotation marks omitted).
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The controlling case regarding direct actions by a third-party plaintiff against 

an insured’s insurer is Wilson v. Wilson, 121 N.C. App. 662, 468 S.E.2d 495 (1996). 

In Wilson, this Court held “North Carolina does not recognize a cause of action for 

third-party claimants against the insurance company of an adverse party based on 

unfair and deceptive trade practices under N.C.G.S. § 75-1.1.” Id. at 665, 468 S.E.2d 

at 497. Shortly after Wilson was decided, this Court created an exception to the 

Wilson rule, and held, “[t]he injured party in an automobile accident is an intended 

third-party beneficiary to the insurance contract between insurer and the 

tortfeasor/insured party.” Murray v. Nationwide Mut. Ins. Co. 123 N.C. App. 1, 15, 

472 S.E.2d 358, 366 (1996) (emphasis supplied) (citations omitted), rev. denied, 345 

N.C. 344, 483 S.E.2d 173 (1997). 

Following Murray, this Court has required the third-party plaintiff, in an 

automobile accident context, to have obtained a judgment against the liability

insurance company’s insured before it may have standing to sue the insurance 

company directly. See Craven v. Demidovich, 172 N.C. App. 340, 342, 615 S.E.2d 722, 

724 (2005) (affirming dismissal of plaintiff’s claims against insurer when insured’s 

liability had not been judicially determined). 

USAT argues Murray holds that a third-party claimant’s obtainment of a 

judgment against the insurance company’s insured ipso facto raises the claimant to 

a retroactive intended third-party beneficiary of the insurance contract, and thereby 

places the third-party claimant in privity of contract with the insurer. We disagree.
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USAT’s argument ignores the fact that the third-party claimant’s privity with 

the insurer is based upon the third-party claimant being an injured party in an 

automobile accident. See Murray, 123 N.C. App. at 15, 472 S.E.2d at 366. The Court’s 

ruling in Murray was premised upon its recognition that an “injured party in an 

automobile accident is an intended third-party beneficiary to the insurance contract 

between insurer and the tortfeasor/insured party . . . and for this reason alone, [the 

plaintiff is] not bound by the third-party restrictions set forth in Wilson.” Id. (emphasis 

supplied). 

In the automobile accident context, an injured party is recognized as a thirdparty beneficiary to the liability insurance policy, because, under the statute, “[t]he 

primary purpose of th[e] compulsory motor vehicle liability insurance is to 

compensate innocent victims who have been injured by financially irresponsible 

motorists.” Nationwide Mut. Ins. Co. v. Chantos, 293 N.C. 431, 440, 238 S.E.2d 597, 

604 (1977). 

Contrary to USAT’s assertions, Murray did not recognize nor implement a 

general rule that judgments against insureds provide claimants with rights to recover 

from insurers directly. Murray recognizes (1) that if a third-party claimant is a party 

to an insurance contract and (2) obtains a judgment against an insurance company’s 

insured, then the third-party claimant would have standing to sue the insurer 

directly. See Murray, 123 N.C. App. at 15, 472 S.E.2d at 366. 
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Murray does not establish that a third-party claimant’s obtainment of a 

judgment against an insured establishes privity with the insurer as a matter of law, 

as USAT asserts we should hold. USAT’s argument also misconstrues language in 

Taylor v. N.C. Farm Bureau Mut. Ins. Co., 181 N.C. App. 343, 638 S.E.2d 636 (2006), 

rev. denied, 345 N.C. 344, 483 S.E.2d 173 (2007), summarizing the holding of Murray, 

to argue the obtainment of a judgment by a third-party against an insured establishes 

privity with the insured’s insurer. 

As quoted by USAT, this Court stated in Taylor, “In [Murray] we found privity 

between the plaintiff and the tortfeasor’s insurer and allowed an excess policy 

coverage claim for unfair and deceptive trade practices based on the insured’s post 

judgment behavior towards the plaintiff.” Taylor, 181 N.C. App. 345-46, 638 S.E.2d 

at 637-38. Taylor does not recognize or summarize Murray as holding that a thirdparty obtains privity with an insurer by obtaining a judgment against its insured.

See id.

USAT asserts it can bring direct claims against Defendants for unfair or 

deceptive trade practices and bad faith settlement practices, based upon this Court’s 

reversal of a trial court’s dismissal of a negligence claim against an insurer in Prince 

v. Wright. In Prince, the personal representative of the estate of a minor child killed 

by a fire in a rental house caused by an electrical problem brought claims against the 

landlord for negligence, breach of statutory duties, and wrongful death. Prince, 141 

N.C. App. at 264-65, 541 S.E.2d at 194-95. The personal representative also brought 
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claims against the landlord’s insurance company for negligence and unfair and 

deceptive trade practices. Id. 

The insurance company had undertaken to conduct an inspection of the rental 

house “for the purpose of detecting and detailing the suitability of the house for 

residential purposes, including but not limited to, damage or potential damage to the 

electrical system[.]” Id. at 267, 541 S.E.2d at 196. The personal representative 

alleged in her negligence claim against the insurer that the insurer had failed to warn 

the residents of the potential fire hazard created by water damage to the electrical 

system. Id. In reversing the trial court’s dismissal of the negligence claim against 

the insurance company, this Court determined, that even though the plaintiff was 

not in privity with the landlord’s insurer, the plaintiff could maintain the negligence 

action against the insurer because “[the insurer] may have created for itself a duty to 

plaintiff which it breached by first expressly undertaking to conduct an inspection of 

the suitability of the house for residential purposes and then by failing to warn 

tenants of the dangerous conditions it discovered during that inspection.” Id. 

On the personal representative’s claims for unfair or deceptive trade practices, 

this Court cited Wilson and Murray and held the personal representative did not have 

standing to bring the unfair or deceptive trade practices claim. Id. at 269-70, 541 

S.E.2d at 197.

The Court determined the personal representative was not an intended thirdparty beneficiary of the landlord’s insurance contract with the insurer, because the 
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insurer insured the house against loss or damage for the benefit of the landlord, and 

the landlord did not enter into the insurance policy for the benefit of potential

residents living in the house, “but rather paid for the coverage to reduce or eliminate 

loss caused by circumstances such as a house fire.” Id. at 270, 541 S.E.2d at 198. The 

Court affirmed the trial court’s dismissal of the unfair or deceptive trade practices 

claim because the personal representative was not in privity with the insurer to bring 

a direct action under the policy. Id. 

Unlike the plaintiff in Prince, USAT has not asserted a claim against 

Defendant-insurers for negligence. See id. The Court’s holding in Prince with regards 

to the negligence claim does not support USAT’s argument that it has standing to 

bring an unfair or deceptive trade practices claim and bad faith settlement practices 

claim directly against Defendants. This Court’s review and disposition of the 

negligence claim in Prince is irrelevant to USAT’s claims, especially in light of the 

Court’s ruling in Prince that the plaintiff did not have standing to bring an unfair or

deceptive trade practices claim against the insurer, because she was not an intended 

third-party beneficiary of the insurance contract between the insurer and insured

defendants. Id. 

USAT also argues the recent case of Nash Hosps., Inc. v. State Farm Mut. Auto. 

Ins. Co., __ N.C. App. __, 803 S.E.2d 256 (2017), supports its contention “that the rule 

in Wilson is not applicable when privity is established by judgment or settlement.” 

In Nash., a not-at-fault motorist injured in an automobile accident incurred 
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treatment costs with several medical providers, including the plaintiff, Nash 

Hospitals. Nash, __ N.C. App. at __, 803 S.E.2d at 259. State Farm, the insurer for 

the at-fault driver, received notice of Nash Hospitals’ medical liens under N.C. Gen. 

Stat. §§ 44-49 and -50 from Nash Hospitals’ counsel. Id. State Farm entered into a 

settlement agreement with the not-at-fault driver and provided her with a check 

payable to herself, Nash Hospitals and another medical provider. Id. Nash Hospitals

was not notified of the settlement nor presented with the check for endorsement or 

payment. Id. Nash Hospitals eventually sued State Farm, asserting that N.C. Gen. 

Stat. § 44-50 “specifically requires the liability insurer to retain out of any recovery, 

before any disbursements, a sufficient sum to pay lien holders,” and State Farm’s 

failure to comply with §§ 44-49 and -50 constituted an unfair trade practice. Id. 

State Farm argued Nash Hospitals did not have standing to bring an unfair or 

deceptive trade practices claim, because its suit did not involve a dispute over an 

insurance contract. Id. at __, 803 S.E.2d at 262. This Court determined that State 

Farm and the not-at-fault driver, who was not State Farm’s insured, were in privity 

upon them entering into the settlement agreement, and that Nash Hospitals was in 

privity with State Farm, reasoning: 

Once a claimant and an insurance company enter into a 

settlement agreement, they are therefore in privity. And by 

enacting N.C. Gen. Stat. §§ 44-49 et seq., the General 

Assembly expanded the scope of privity to hospitals and 

medical service providers. As discussed supra, the purpose 

of N.C. Gen. Stat. §§ 44-49 et seq. is to protect hospitals and 

other health care providers that provide medical services 
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to injured persons who may be unable to pay at the time 

the services are rendered, but who may later receive 

compensation for their injuries. Smith, 157 N.C. App. at 

602, 580 S.E.2d at 50. As a result, Nash Hospitals’ privity 

became effective the moment Defendant received notice 

from Nash Hospitals of its assertion of a valid lien 

pursuant to N.C. Gen. Stat. § 44-49 and reached a 

settlement agreement with [the injured driver].

Id. at __, 803 S.E.2d at 263 (emphasis in original). 

This Court held, in part, that Nash Hospitals had standing to sue State Farm 

for unfair or deceptive trade practices because of the statutory privity provided to 

hospitals and medical service providers by N.C. Gen. Stat. § 44-49. Id. 

Contrary to USAT’s contention, this Court in Nash did not make a general 

determination “that the rule in Wilson is not applicable when privity is established 

by judgment or settlement[,]” but that N.C. Gen. Stat. § 44-49 operates to grant a 

medical service provider privity with regard to a settlement agreement between an 

injured person “who may be unable to pay at the time the services are rendered[]” 

and an insurance company. Id.

USAT attempts to assert an alternative argument for the first time on appeal 

that certain provisions of the Policy should be interpreted as making it an intended 

third-party beneficiary. USAT failed to raise or make this alternative argument 

within its responsive briefing to Defendants’ motions to dismiss before the trial court, 

at the hearing on Defendants’ motions before the trial court, or allege it in its 

complaint. USAT cannot assert a new theory for the first time on appeal. Weil v. 
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Herring, 207 N.C. 6, 10, 175 S.E. 836, 838 (1934) (“An examination of the record 

discloses that the cause was not tried upon that theory, and the law does not permit 

parties to swap horses between courts in order to get a better mount [on appeal].”); 

see State v. Sharpe, 344 N.C. 190,195, 473 S.E.2d 3, 6 (1996), cert. denied, 350 N.C. 

848, 539 S.E.2d 647 (1999) (“[I]t is well settled in this jurisdiction that [a party] 

cannot argue for the first time on appeal [a] new ground . . . that he did not present 

to the trial court.”). This alternative argument is dismissed. 

USAT has not cited any authority, binding upon this Court, which tends to

establish a trade creditor is in privity with its debtor and the debtor’s insurer with 

respect to a directors and officers liability insurance policy, merely by virtue of the 

trade creditor’s obtainment of a judgment against the insured debtor. It is 

undisputed and admitted that USAT is not specifically and expressly named in the 

Policy. 

Treating the allegations in USAT’s complaint as true, USAT has failed to 

establish the privity required by Murray for it to have standing to assert claims for 

unfair or deceptive trade practices and bad faith claims settlement. Without privity, 

the general rule that “a private right of action under N.C.G.S. § 58-63-15 and N.C.G.S. 

§ 75-1.1 may not be asserted by a third-party claimant against the insurer of an 

adverse party[,]” prevails. Lee, 136 N.C. App. at 810, 525 S.E.2d at 856 (citation and 

quotation marks omitted). USAT does not have standing to assert its unfair or 

deceptive trade practices claim and bad faith settlement claim. See id. 
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USAT has failed to state an unfair trade practices claim or a bad faith

settlement claim upon which relief can be granted. N.C. Gen. Stat. § 1A-1, Rule 

12(b)(6) (2017). USAT’s unfair trade practices claim and bad faith settlement claim

were properly dismissed. USAT’s arguments are overruled.

C. Conspiracy to Defraud

USAT also fails to state a claim upon which relief can be granted with respect 

to its conspiracy to defraud claim. North Carolina does not recognize an independent 

cause of action for civil conspiracy. Dove v. Harvey, 168 N.C. App. 687, 690, 608 S.E.2d 

798, 800 (2005) (citation omitted). A civil conspiracy claim must be based on an 

adequately pled underlying claim. Id. The claim underlying USAT’s civil conspiracy 

allegations is fraud. 

Rule 9(b) of our Rules of Civil Procedure requires that “[i]n all averments of 

fraud . . . the circumstances constituting fraud or mistake shall be stated with 

particularity.” N.C. Gen. Stat. § 1A-1, Rule 9(b) (2017). “[I]n pleading actual fraud, 

the particularity requirement is met by alleging time, place and content of the 

fraudulent representation, identity of the person making the representation and 

what was obtained as a result of the fraudulent acts or representations.” Terry v. 

Terry, 302 N.C. 77, 85, 273 S.E.2d 674, 678 (1981). 

“Dismissal of a claim for failure to plead with particularity is proper where 

there are no facts whatsoever setting forth the time, place, or specific individuals who 

purportedly made the misrepresentations.” Bob Timberlake Collection, Inc. v. 
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Edwards, 176 N.C. App. 33, 39, 626 S.E.2d 315, 321 (2006) (citation and internal 

quotation marks omitted). 

Here, the Business Court properly concluded that USAT had failed to plead 

fraud with particularity. In its conspiracy to defraud claim, USAT alleges with

respect to Defendants, the following:

228. Navigators conspired with ILG’s officers and directors 

to commit fraud on the court by intending to cause default 

be entered against ILG purportedly for non-payment of 

legal fees, when Navigators intended to pay for the defense 

of co-defendants and when the ILG Policy covered ILG with 

regard to the acts and omissions of ILG’s officers including 

Williams, and Navigators conspired to dissolve ILG 

without disposing of contingent or known liabilities of 

which Navigators was aware or reasonably should’ve been 

aware. 

. . . 

230. Navigators are conspiring with Williams to avoid 

paying the Judgment despite facts that already establish 

liability of both be established and Trouser is entitled to 

attorney fees as damages relating thereto.

231. Navigators Insurance is conspiring with Navigators 

Management to avoid paying the Judgment in violation of 

North Carolina law. 

The complaint does not: (1) allege the identity of any specific person associated 

with Navigators Insurance or Navigators Management who made 

misrepresentations or omissions; or (2) provide either the specific, or even the 

approximate, “time or place” at which either of the Defendants, together or 

separately, conspired with ILG’s directors. Id. The Complaint contains none of this 
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specific information, but instead asserts only conclusory allegations that Defendants 

are liable for paying the Judgment against ILG, and are engaging in fraudulent acts 

to avoid paying the Judgment. 

Because USAT failed to plead the underlying claim of fraud with particularity, 

the conspiracy to defraud claim was properly dismissed by the Business Court. N.C. 

Gen. Stat. § 1A-1, Rule 9(b); see Edwards, 176 N.C. App. at 39, 626 S.E.2d at 321 (“A 

trial court properly dismisses a claim for failure to plead fraud with particularity 

where there are no facts whatsoever setting forth the time, place, or specific 

individuals who purportedly made the misrepresentations.”). USAT’s arguments are 

overruled.

V. Conclusion

USAT did not become a third-party beneficiary to the Policy upon entry of the 

default judgment against ILG, nor did USAT obtain the right to payment on the 

Judgment directly from Defendants, or to sue Defendants directly for unfair trade 

practices or bad faith claims settlement practices. USAT also failed to plead the 

underlying claim of fraud with particularity and the conspiracy to defraud claim was 

properly dismissed by the Business Court.

Plaintiff’s complaint fails to state a claim upon which relief can be granted. 

The order and opinion of the North Carolina Business Court granting Defendants’ 

motions to dismiss is affirmed. It is so ordered. 

AFFIRMED.
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Chief Judge McGEE and Judge DAVIS concur.