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This proceeding arose upon a request for hearing made by Wanda Kuklis, successor personal representative of the Estate of Lucy Stillwell, to contest the pending cancellation of property insurance coverage issued by Hanover Insurance Company. The Estate is named as additional insured on the policy, issued to Marie Smith as named insured.

On March 12, 2003, the insurer mailed a notice of cancellation effective April 7, 2003 on policy number FNP5537254, citing as the grounds for cancellation: “Policy being cancelled midterm in accordance with Maine statute 24-A 3049 for substantial change in the risk which increases the risk of loss after insurance coverage has been issued or renewed. Specifically because the home is no longer owner or tenant occupied, under renovation and the dwelling is for sale.” Although the insurer referenced 24-A M.R.S.A. § 3049, the declarations page of the policy indicates it covers a tenant-occupied dwelling; therefore the governing statute is 24-A M.R.S.A. § 3007. Pursuant to that statute, Hanover Insurance Company provided the insured with proper notice and the insured's hearing request was timely.

A hearing on this issue was held on April 10, 2003 with Connie Mayette sitting as designated hearing officer, pursuant to 24-A M.R.S.A. §§ 210 and 3007. 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. Both parties submitted a sworn statement in lieu of appearance at the hearing.

FINDINGS OF FACT

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

1. The subject property has been a rental since 1989 under the control of Mary Smith, who appears to have been the previous legal representative of the estate.
2. Wanda Kuklis was appointed successor personal representative of the Estate of Lucy Bunker Stillwell on October 18, 2002.
3. Ms. Kuklis hired a caretaker to check the property twice daily and also take on minor repairs. The tenants have been removed and the property has been put on the market. It appears these changes occurred shortly after Ms. Kuklis was appointed as representative, prior to the end of 2002.
4. The current policy term is January 28, 2003 to January 28, 2004.

ANALYSIS AND CONCLUSION OF LAW

Title 24-A, M.R.S.A. § 3007(2) states that "no contract of property insurance may be cancelled by an insurer prior to the expiration date of the policy, except for one or more of the following grounds…

"C. Substantial change in the risk which increases the risk of loss after insurance coverage has been issued or renewed...."

Hanover used the wording from this statute in the reason given for cancellation, although the wrong statute was cited. Juliane Anderson, Personal Lines Underwriter for Hanover, stated in her affidavit that it was recently learned that the property belonged to an estate and was being managed by another party. The Estate was listed on the notice of cancellation as an additional insured, but there was no indication of when it was added to the policy. She testified it was also learned that the property “was being fixed up” and is for sale. She stated that the renovations increase the liability exposure, but acknowledged that she did not know what type of renovation was occurring. In addition, she cited the traffic through the home with the property up for sale. She further stated that there is very little control of the property with it being managed by someone out of state. No indication was given as to when Hanover first insured this property or when the cited changes actually took place.

Ms. Kuklis stated in her affidavit that the prior managerof the property had neglected it and allowed undesirable tenants to live there. She testified that she has had the property cleaned up, and hired a caretaker to maintain the property and do minor repairs. She stated the realtor believes the home will sell quickly as a result of these improvements. It appeared from all the evidence submitted that the tenants were gone, the caretaker hired, and the house cleaned, repaired and listed for sale prior to the renewal date of January 28, 2003.

The Superintendent of Insurance has jurisdiction over this matter pursuant to 24-A M.R.S.A. § 3007. Hanover Insurance Company 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 Hanover Insurance Company has not established adequate grounds for policy cancellation.

Section 3007 (2)(C) permits cancellation for a substantial change in the risk that increases the risk of loss after insurance coverage has been issued or renewed. To meet this statute, the insurer must demonstrate three distinct components:

• That a substantial change in the risk has occurred;
• That the stated change increases the risk of loss; and
• That the change has occurred since the policy was issued or renewed.

Although the record indicates that changes have occurred which may increase the risk of loss, Hanover did not provide any evidence as to when those changes took place. Actually, Hanover did not actually provide any independent evidence of the cited changes referenced in testimony, but the estate representative’s testimony corroborated the changes. It appears that the property has belonged to an estate for some years. A successor personal representative was appointed in October 2002, and that representative immediately initiated changes in the property. Those changes, however, all appear to have taken place prior to the renewal date of the current policy; therefore, Hanover has not demonstrated that legal grounds exist for canceling this policy.

INDEX OF RECORD:

Exhibit 1 - Affidavit of Juliane Anderson
Exhibit 2 - Postal Proof of Mailing
Exhibit 3 - Copy of Policy
Exhibit 4 - Affidavit of Wanda Kuklis
Exhibit 5 - Probate Document appointing representative

ORDER AND NOTICE OF APPEAL RIGHTS

The intended cancellation is not approved. Hanover Insurance Company is hereby directed to continue coverage under policy # FNP5537254 without 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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