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In RE:

This proceeding arose upon a request for hearing made by Charles Sarchi to contest the pending nonrenewal of automobile and homeowners insurance coverage provided by York Insurance Company of Maine. On October 11, 2002, the insurer mailed a notice of nonrenewal effective February 7, 2003 on Custom-Pac policy number YMKD14758, citing as the grounds for nonrenewal: “conditions were discovered on the property that increase the likelihood of claims occurring.  Those conditions include: garage built over old foundation-resulting in floor giving away, leading to cracking and lifting. Increasing exposure to collapse.” Pursuant to 24-A M.R.S.A. §§ 3051 and 3054, York Insurance Company of Maine provided the insured with proper notice with regard to the homeowners coverage, and the insured's hearing request was timely.  Pursuant to 24-A M.R.S.A. §§  2917 and 2920, however, no notice regarding the reason for nonrenewal of the automobile coverage was given.

A hearing in this matter was held on December 5, 2003 with Connie Mayette sitting as designated hearing officer pursuant to 24-A M.R.S.A. §§ 210 and 3054.  The purpose of the hearing was limited to establishing the existence of proof or evidence given by the insurer to support its reason for policy termination.  Staff representing York Insurance Company of Maine appeared at the hearing.  Charles Sarchi represented himself at the hearing.

FINDINGS OF FACT:

1. York Insurance Company insures the home and automobiles of Charles Sarchi under Custom-Pac policy #YMKD14758. No reason was given for termination of the automobile insurance coverage.
2. On 2/13/02, a claim was reported involving the collapse of the garage floor. It appeared from the testimony that there is an old collapsed barn underneath the floor of the garage; its continued deterioration and resultant settling of the ground caused the cement slab of the garage to crack and sink. The company denied the claim under the earth movement exclusion, determining this did not qualify under the policy’s collapse coverage.
3. As of the hearing date, the floor and building had not been repaired. Mr. Sarchi testified that the contractor building his new house was going to do this, but there was no written contract.  He stated he would provide one.
4. The hearing record was held open until December 16, 2002, for a contract to be supplied.  It was faxed to the Bureau on December 17, after the record was closed.

ANALYSIS AND CONCLUSION OF LAW

24-A, M.R.S.A. § 3051 states that the reason for nonrenewal must be a good faith reason rationally related to the insurability of the property, and § 3054 requires the insurer to establish the proof or evidence of its reason for nonrenewal.

Heather Rosewall, Personal Lines Senior Underwriter at York, testified that the underwriting department received an advisory from the adjuster regarding the condition of the garage floor.  She submitted the underwriter’s notes and photos showing the section of the concrete slab that had cracked through, settled and shifted. She submitted Activity Notes indicating the underwriter had requested in July 2002 for the agent to determine if repairs had been made and to provide evidence of same. As no evidence was received, she stated that the insurer issued a nonrenewal as the current condition increased the exposure to collapse of the building and also increased the liability exposure due to the potential of injury to another party.

Mr. Sarchi disputed that information had been sought regarding repairs.  He also argued that the policy excludes coverage for neglect, therefore the insurer has no exposure to any claims from this situation. He also stated that the building has been secured, as he doesn’t want the garage to come down.  Ms. Rosewall argued that an insurer would have a difficult time proving neglect if measures had been taken to secure the building.  She further stated that the neglect exclusion applies only to the coverage for the building, not to the liability coverage.

Mr. Sarchi testified that he had contacted a contractor to make repairs, but that the contractor had been unable to do so yet. He indicated it is the same contractor who is building his new house for him, and that (at the time of the hearing) there was no written contract for the repairs.  He stated he would provide one after the hearing.  It was agreed to hold the record open until December 16 for submission of that information to be included as part of the record; the information was sent by facsimile to the Bureau on December 17 after the record was closed, and is therefore not part of the record.

Mr. Sarchi also testified that the claim should have been covered, but that issue is outside the scope of this proceeding.  It is noted that the provisions cited by the insurer in its denial would reasonably apply to this situation.

The Superintendent of Insurance has jurisdiction over this matter pursuant to 24-A M.R.S.A. §§ 2920 and 3054.  York Insurance Company of Maine bears the burden of proof for establishing that the statutory grounds for policy nonrenewal exist.  Based on the evidence presented at the hearing, the Superintendent hereby concludes that York Insurance Company of Maine has established adequate grounds for nonrenewal of the homeowners coverage.

Although the policyholder may have been in the process of obtaining a contract for repair at the time of the hearing, ten months had elapsed since the claim had been reported to the insurer. The submitted documents indicate the floor had dropped about a foot, and also caused the metal roofing to pop from the pressure exerted by the twisting. Additionally, photos show a vehicle-sized section of the slab broken and sunken, with cracks radiating out across the rest of the floor. The company has demonstrated its reasonable concern over the exposures presented by this condition.

The company failed, however, to provide the insured with notice of the reason for nonrenewal of the automobile coverage as required by 24-A M.R.S.A. § 2917. Nonrenewal of an automobile policy must be based upon one of the grounds authorized by 24-A M.R.S.A. § 2916-A. York Insurance Company of Maine presented no evidence of any grounds for nonrenewal of the automobile coverage.

INDEX OF RECORD:
Exhibit 1 – Copy of Policy
Exhibit 2 – Postal Proof of Mailing
Exhibit 3 – Claims Advisory Notice
Exhibit 4 – Activity Notes
Exhibit 5 – Claims Summary

Order and Notice of Appeal Rights

The intended nonrenewal of the homeowners coverage is hereby approved.  York Insurance Company of Maine is directed to continue coverage until 12:01 a.m. on June 12, 2003 to allow Mr. Sarchi to obtain other coverage. 

The intended nonrenewal of the automobile coverage is denied. York Insurance Company of Maine is directed to renew that coverage on a policy if the policyholder requests the coverage.

This Decision and Order is a final agency action within the meaning of the Maine Administrative Procedure Act.  It is appealable to the Superior Court in the manner provided in Title 24-A M.R.S.A. § 236 and M.R. Civ. P. 80C.  Any party to the hearing may initiate an appeal within 30 days after receipt of this notice.  Any nonparty whose interests are substantially and directly affected may initiate an appeal within 40 days of the effective date of this Decision and Order.

Dated May 28, 2003                                                    Alessandro A. Iuppa
                                                                                    Superintendent of Insurance

                                                                                    ____________________________________
                                                                                    Connie Mayette
                                                                                    Designated Hearing Officer

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