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This proceeding arose upon a request for hearing made by Dino Fonda to contest the pending cancellation of homeowners insurance coverage provided by York Insurance Company of Maine. On November 26, 2002, the insurer mailed a notice of cancellation effective December 23, 2002 on policy number YMSP51183, citing as the grounds for cancellation: “discovery of physical changes in the insured property which result in the property becoming uninsurable. The insureds are building a new home on the property, construction is being done by the insureds, who are not licensed contractors. There is no expected completion date and no commercial general liability coverage on this project. There is also a boat building business on the premises which is not covered commercially.” Pursuant to 24-A M.R.S.A. §§ 3049 and 3054, York Insurance Company of Maine provided the insured with proper notice and the insured's hearing request was timely.

A hearing in this matter was held on January 7, 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 cancellation. Staff representing York Insurance Company of Maine appeared at the hearing. Dino and Catherine Fonda represented themselves at the hearing.

FINDINGS OF FACT

The following facts have been proven by a preponderance of evidence submitted:

1. York has insured the subject property since October 26, 1998. The current policy term is October 26, 2002 to October 26, 2003.
2. Across the street on a separate lot, the policyholders have been building a boat as a family project since 1991. That lot has been leased to another family which is also building its own boat with Mr. Fonda’s guidance. A general liability policy through Commercial Union York Insurance Company, now known as York Insurance Company of Maine, has covered the lessor’s risk since 1999.
3. Construction began in 2002 on a new house, immediately behind the current living quarters/insured dwelling. Mr. Fonda is now acting as general contractor for the construction, as he is physically unable to do the work himself due to illness. Friends in the construction business have been donating their time to finish the house.

ANALYSIS AND CONCLUSION OF LAW

Title 24-A, M.R.S.A. § 3049(5) permits an insurer to cancel a policy of this type for physical changes in the insured property that result in the property becoming uninsurable.

Heather Rosewall, Personal Lines Senior Underwriter for York, testified that an inspection report they had received in August 2002 had referenced a new house being built. She stated that they discovered the new home was not being built by a licensed contractor. The agent provided photos of the construction and also indicated that she was not interested in rewriting the coverage for him. Ms. Rosewall testified that the building situation presents an increased exposure to liability if someone helping with the construction gets injured. She also cited an increased exposure to fire if the wiring is not done properly.

In addition to the new home under construction, she also referenced the perceived boat building business on the property. She stated that the company’s duty to defend would apply to any suit brought against the insured for that exposure, even though it might not be in the home, therefore it increases their exposure.

In regards to the home construction, Mr. Fonda testified that he was a licensed contractor in Pennsylvania before moving to Maine, and is experienced in home construction, having built 15 to 20 houses in the past. It is noted that the State of Maine does not license carpenters or other construction contractors at this time. Maine’s licensing requirements in the construction industry apply only to electricians, plumbers and heating contractors. Mr. Fonda stated that a licensed electrician has done the wiring in the home. He also stated that he has had arc fault circuit breakers installed in the home, and explained at length their improved safety and performance over standard circuit breakers.

Mr. Fonda further testified that he is now serving as the general contractor and hiring others to get the work done, in addition to friends in the construction business donating their time. He explained that he is physically unable to do the building work himself now due to illness. It appears that construction began in late summer or early fall 2002, and is expected to be completed in April or May 2003. Mr. Fonda testified that he tried to buy a builder’s risk policy on the house, as he had done when he built the structure on the boat property four years ago, but the agency had told him they did not want to provide the coverage.

Regarding the boat exposure, Mr. Fonda testified that they started constructing a ship as a family enterprise about 12 years ago, and that the project was always known to the agent. He stated they own two separate lots across the street from each other: one lot contains the residence premises, the other has a workshop and the two boats. Another local family had expressed an interest in building a vessel for handicapped children under Mr. Fonda’s tutelage. Mr. Fonda testified that a lease had been drawn up for that lot on the river’s edge for the McKay family, and general liability coverage obtained for the lessor’s risk. The lease, executed May 22, 1999, provided an option of being extended up to 36 additional months. It appears that rent was paid in one payment up front for a four-year term, and Mr. Fonda stated the lease will expire May 22, 2003. He provided a copy of a policy written by Commercial Union York Insurance Company, which is now York Insurance Company of Maine. He further stated that the McKays’ ship is almost completed, and that exposure will be gone as soon as the ship is launched.

The Superintendent of Insurance has jurisdiction over this matter pursuant to 24-A M.R.S.A. § 3054. York Insurance Company of Maine bears the burden of proof for establishing that the statutory grounds for policy cancellation exist. Based on the evidence presented at the hearing, the Superintendent hereby concludes that York Insurance Company of Maine has not established adequate grounds for policy cancellation.

The lot with the two boats under construction is separated from the premises covered by the homeowners policy, and has in fact been leased to another party. A commercial general liability policy issued to SABA Trust, Dino and Catherine Fonda Trustees, is in force, provided by this same insurer. One of the boats is a personal family project, and the other is being constructed by the family who leased the lot. While payment was made for the use of the land, there is no indication that monies for the boat building itself have changed hands.

Regarding the new home construction on the residence premises, the company has put on evidence to show that the exposure increases its liability exposure, but nothing to demonstrate why it renders the property uninsurable. The construction project is nearly complete, and the company’s concern over potentially improper wiring was countered by the insured’s testimony that the wiring was done by a licensed electrician. The section being relied upon in this case, 24-A M.R.S.A. § 3049(5), requires a physical change in the property that renders the property uninsurable. The company has demonstrated the physical change and argued the increase in exposure, but provided no testimony regarding uninsurability; therefore York has not met the standard required in the law.

INDEX OF RECORD:

ORDER AND NOTICE OF APPEAL RIGHTS

The intended cancellation is not approved. York Insurance Company of Maine is directed to continue coverage under policy #YMSP51183 without a lapse. Coverage shall continue unless and until a subsequent valid notice of cancellation or nonrenewal is effected in accordance with applicable law.

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 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.

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