                        UNPUBLISHED

UNITED STATES COURT OF APPEALS
                  FOR THE FOURTH CIRCUIT


WESTCHESTER FIRE INSURANCE             
COMPANY,
                 Plaintiff-Appellee,
                  v.
CARL W. JOHNSON; CARL W.
JOHNSON FAMILY TRUST, d/b/a The               No. 00-1175
Cotton Mill Square; LANDIN LIMITED,
             Defendants-Appellants,
                  and
JOSEPH BALDWIN,
                         Defendant.
                                       
WESTCHESTER FIRE INSURANCE             
COMPANY,
                Plaintiff-Appellant,
                  v.
CARL W. JOHNSON; CARL W.
JOHNSON FAMILY TRUST, d/b/a The               No. 00-1214
Cotton Mill Square; LANDIN LIMITED,
              Defendants-Appellees,
                  and
JOSEPH BALDWIN,
                         Defendant.
                                       
           Appeals from the United States District Court
       for the Middle District of North Carolina, at Durham.
                James A. Beaty, Jr., District Judge.
                          (CA-98-715-1)
2             WESTCHESTER FIRE INSURANCE CO. v. JOHNSON
                     Argued: October 30, 2000

                     Decided: February 28, 2001

    Before WILKINS and KING, Circuit Judges, Frank J. MAGILL,
      Senior Circuit Judge of the United States Court of Appeals
             for the Eighth Circuit, sitting by designation.



Affirmed in part, vacated in part, and remanded by unpublished per
curiam opinion.


                            COUNSEL

ARGUED: John Joseph Korzen, ANDERSON & ASSOCIATES,
P.C., Kernersville, North Carolina, for Appellants. C. Michael John-
son, FELLOWS, JOHNSON & LA BRIOLA, L.L.P., Atlanta, Geor-
gia, for Appellee. ON BRIEF: James Howard Kelly, Jr.,
KILPATRICK STOCKTON, L.L.P., Winston-Salem, North Carolina,
for Appellants. Patrick D. Conner, FELLOWS, JOHNSON &
LA BRIOLA, L.L.P., Atlanta, Georgia; William G. Ross, Derek J.
Allen, BROOKS, PIERCE, MCLENDON, HUMPHREY & LEON-
ARD, Greensboro, North Carolina, for Appellee.



Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).


                             OPINION

PER CURIAM:

   Westchester Fire Insurance Company ("Westchester") filed a
declaratory judgment action in district court, seeking a declaration
that Carl Johnson’s insurance policy with Westchester was void
             WESTCHESTER FIRE INSURANCE CO. v. JOHNSON                3
because Johnson allegedly made misrepresentations concerning his
losses or, alternatively, seeking to limit coverage under the policy.
Johnson filed a counterclaim, alleging that Westchester had engaged
in unfair trade practices in violation of N.C. Gen. Stat. § 75-1.1. The
district court granted Johnson’s motion for partial summary judgment
on Westchester’s misrepresentation claim, but also granted Westches-
ter’s motion for partial summary judgment limiting coverage and dis-
missed Johnson’s unfair trade practices claim. The parties cross-
appeal, and we affirm in part, and vacate and remand in part to allow
the district court to reconsider its dismissal of Johnson’s unfair trade
practices claim in light of Gray v. North Carolina Insurance Under-
writing Ass’n, 529 S.E.2d 676 (N.C. 2000).

                                   I.

   Johnson owns the Cotton Mill Square, a shopping center in Greens-
boro, North Carolina. Westchester and Johnson agreed to an insur-
ance policy (the "Policy") that covered Cotton Mill during the period
in question. On February 3, 1996, Cotton Mill lost electrical power
due to an ice storm. Johnson hired Joseph Baldwin, an electrician, to
restore power. Baldwin’s attempt to restore power resulted in a fire
in a circuit panel, causing damage only to the panel itself. However,
because the damaged panel served all of Cotton Mill, Cotton Mill and
its tenants were left without heat, electricity, and lighting. Johnson
then hired Bowman Electric to supply temporary power to Cotton
Mill, but the temporary service was insufficient to operate the entire
facility. Westchester approved a bid submitted by Bowman to rebuild
the damaged circuit panel and eventually paid Johnson $100,000,
which is the approximate amount it would have cost Bowman to
restore permanent electrical service to Cotton Mill. However, by this
time many tenants had already left, so, in April 1996 Johnson decided
not to reopen Cotton Mill.

   On April 27, 1998, Johnson submitted to Westchester a sworn
proof of loss ("Proof of Loss") that set out the damages that he alleged
had been suffered. The Proof of Loss claimed that the fire caused
Johnson to lose business income in excess of the Policy limit of
$300,000. In addition, the Proof of Loss stated that Cotton Mill’s "fair
market value has decreased as much as $2.5 million. . . . This damage
resulted from and includes direct physical loss to the electrical system
4             WESTCHESTER FIRE INSURANCE CO. v. JOHNSON
and equipment including switchgear, boilers and piping vessels, heat-
ing, air conditioning, sprinkler system, and plumbing system." John-
son attached estimates for the repair of various systems at Cotton Mill
to the Proof of Loss.

   Westchester initiated this action on August 14, 1998, and subse-
quently filed a motion for summary judgment. Westchester argued
that the Policy was void because Johnson made material misrepresen-
tations in his Proof of Loss when he stated, allegedly without proof,
that the circuit panel fire damaged various Cotton Mill systems. Alter-
natively, Westchester sought to limit coverage under the Policy by
arguing that the Policy only covered direct physical loss caused by the
fire. Johnson filed a motion for partial summary judgment, claiming
that Westchester engaged in a number of unfair trade practices in vio-
lation of N.C. Gen. Stat. § 75-1.1. Additionally, Johnson argued that
the Policy was not restricted to direct physical loss, but instead also
covered the reduced market value of Cotton Mill due to the fire.

   On January 6, 2000, the district court granted Johnson’s motion for
partial summary judgment on Westchester’s misrepresentations claim,
finding that Johnson did not knowingly and willfully make any mate-
rial misrepresentations. However, the court granted Westchester’s
motion for partial summary judgment on its request to limit coverage,
holding that the Policy only covered physical damage to Cotton Mill
and did not cover Cotton Mill’s reduced market value.

   The district court also granted Westchester’s motion for partial
summary judgment on Johnson’s counterclaim that Westchester
engaged in unfair trade practices in violation of § 75-1.1, which pro-
hibits "[u]nfair methods of competition in or affecting commerce, and
unfair or deceptive acts or practices in or affecting commerce." John-
son did not argue in the district court that Westchester violated any
of the provisions of N.C. Gen. Stat. § 58-63-15(11), which provides
a list of various acts that constitute unfair trade practices in the settle-
ment of insurance claims. Nevertheless, the district court, in addition
to finding that Johnson did not present evidence sufficient to support
a claim under § 75-1.1, also held that Johnson failed to state a claim
for unfair and deceptive trade practices under § 58-63-15(11). In
rejecting a § 58-63-15(11) claim, the court cited Gray v. North Caro-
lina Insurance Underwriting Ass’n, 510 S.E.2d 396 (N.C. App. 1999),
             WESTCHESTER FIRE INSURANCE CO. v. JOHNSON                 5
rev’d, 529 S.E.2d 676 (N.C. 2000), for the proposition that a plaintiff
seeking to prove a violation of § 58-63-15(11) must show that the
insurer performed an unfair claim settlement practice "with such fre-
quency as to indicate a general business practice." Id. at 400. Alterna-
tively, the court noted that Johnson did not specifically claim that
Westchester violated § 58-63-15(11).

   Subsequent to the district court’s disposition of this case, the North
Carolina Supreme Court reversed the lower court’s opinion in Gray,
holding that it is unnecessary for a plaintiff bringing an unfair trade
practices claim under § 58-63-15(11)(f) to show that the defendant
engaged in the allegedly unfair practices with such frequency as to
indicate a general business practice. Gray, 529 S.E.2d at 683. The
question thus presented is whether Johnson waived the argument that
Westchester violated § 58-63-15(11) by not raising it until his appel-
late reply brief. We hold that he did not. Generally, an argument made
for the first time on appeal is waived. However, an exception to this
general rule applies

    when there has been an intervening change in the law recog-
    nizing an issue that was not previously available. The inter-
    vening law exception to the general rule that the failure to
    raise an issue timely in the district court waives review of
    that issue on appeal applies when "there was strong prece-
    dent" prior to the change, such that the failure to raise the
    issue was not unreasonable and the opposing party was not
    prejudiced by the failure to raise the issue sooner.

Holland v. Big River Minerals Corp., 181 F.3d 597, 605-06 (4th Cir.
1999) (citations omitted); see also Moorhead v. Mitsubishi Aircraft
Int’l, Inc., 828 F.2d 278, 288-89 (5th Cir. 1987) (remanding to the
district court because a Texas Supreme Court decision changed Texas
law during the pendency of the appeal).

   Prior to the North Carolina Supreme Court’s decision in Gray, it
appears that there was a long line of precedent holding that to prove
a violation of § 58-63-15(11), the plaintiff must show that the insurer
performed an unfair claim settlement practice "with such frequency
as to indicate an unfair trade practice." Gray, 510 S.E.2d at 400; see
also § 58-63-15(11) ("Unfair Claim Settlement Practices. Committing
6            WESTCHESTER FIRE INSURANCE CO. v. JOHNSON
or performing with such frequency as to indicate a general business
practice of any of the following . . ."); Hagel v. Blue Cross & Blue
Shield, 370 S.E.2d 695, 698 (N.C. App. 1988); Miller v. Nationwide
Mutual Ins. Co., 435 S.E.2d 537, 543 (N.C. App. 1993). Moreover,
Johnson did not prejudice Westchester by raising the issue for the first
time in his appellate reply brief. First, Johnson raised an unfair trade
practices claim in the district court under § 75-1.1. Although Johnson
did not cite any of the unfair settlement practices listed in § 58-63-
15(11), conduct that violates § 58-63-15(11)(f) constitutes a violation
of § 75-1.1 as a matter of law.* Gray, 529 S.E.2d at 683. Second,
Westchester was able to respond to Johnson’s § 58-63-15(11) argu-
ment in its reply brief and at oral argument. Additionally, we note that
North Carolina law presumes that new rules, such as the North Caro-
lina Supreme Court’s decision in Gray, will be given retroactive
effect. Cox v. Haworth, 284 S.E.2d 322, 324 (N.C. 1981); see also
Moorhead, 828 F.2d at 289 (stating that applying intervening changes
in state law "may run afoul of Erie when the intervening change in
state law would not have been applied retroactively by the state courts
themselves").

   Thus, the intervening law exception applies to this case and permits
us to review whether Johnson presented sufficient evidence to show
that Westchester violated § 58-63-15(11) under the standard enunci-
ated in the North Carolina Supreme Court’s decision in Gray. How-
ever, the district court’s familiarity with the underlying factual basis
for Johnson’s claim places it in a better position to make this decision.
We therefore vacate the district court’s decision to grant Westches-
ter’s motion for partial summary judgment on Johnson’s unfair trade
practices claim and remand for reconsideration in light of Gray, 529
S.E.2d 676.

   We also note that, in addition to claiming that Westchester violated
§ 58-63-15(11)(f), Johnson argues that Westchester violated § 58-63-
15(11)(a), (l), and (m). Section 58-63-15(11)(f) states that insurance
companies must attempt "in good faith to effectuate prompt, fair and

   *Given that Johnson alleged a violation of § 75.1-1 in the district
court, and that a violation of § 58-63-15(11)(f) constitutes a violation of
§ 75.1-1 as a matter of law, it is questionable whether Johnson’s failure
to cite § 58-63-15(11)(f) constitutes a waiver at all.
             WESTCHESTER FIRE INSURANCE CO. v. JOHNSON                7
equitable settlements of claims in which liability has become reason-
ably clear." In Gray, the North Carolina Supreme Court held that a
violation of § 58-63-15(11)(f) also constitutes a violation of § 75-1.1
"because such conduct is inherently unfair, unscrupulous, immoral,
and injurious to consumers . . . without the necessity of an additional
showing of frequency indicating a ‘general business practice.’" 529
S.E.2d at 683 (citation omitted). We leave it to the district court to
determine in the first instance whether violations of § 58-63-
15(11)(a), (l), and (m) also constitute violations of § 75-1.1 without
requiring Johnson to show that Westchester engaged in these acts
with a frequency indicating a general business practice.

                                  II.

   We have reviewed the record, briefs, and applicable law, and con-
sidered the oral arguments of the parties, and we are persuaded that
the district court reached the correct result in granting both Johnson’s
motion for partial summary judgment on Westchester’s misrepresen-
tations claim and Westchester’s motion for partial summary judgment
on its request to limit coverage to the physical damage to Cotton Mill.
We therefore affirm these grants of partial summary judgment on the
reasoning of the district court. See Westchester Fire Ins. Co. v. John-
son, No. 1:98-CV-00715 (M.D.N.C. Jan. 6, 2000). However, we
vacate the district court’s decision to grant Westchester’s motion for
partial summary judgment on Johnson’s unfair trade practices claim
and remand for reconsideration in light of Gray v. North Carolina
Insurance Underwriting Ass’n, 529 S.E.2d 676 (N.C. 2000).

    AFFIRMED IN PART, VACATED IN PART, AND REMANDED
