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Findings and Decision

This proceeding arose upon a request for hearing made by Sidney Bailey to contest the pending cancellation of property insurance coverage issued by Farm Family Casualty Insurance Company. On September 9, 2003, the insurer mailed a notice of cancellation effective September 25, 2003 on policy number 1814G1598, citing nonpayment of premium as the grounds for cancellation. Pursuant to 24-A M.R.S.A. § 3007, the insured's hearing request was timely.

A hearing on this issue was held on November 20, 2003 with Connie Mayette sitting as designated hearing officer, pursuant to 24-A M.R.S.A. § 3007. The purpose of the hearing was limited to establishing the existence of the proof or evidence given by the insurer to support its reason for policy cancellation. Staff representing Farm Family submitted a sworn statement in lieu of appearance at the hearing. Sidney and Donna Bailey represented themselves at the hearing.

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

1. Farm Family has insured the subject property under a Special Farm Package Policy since July 30, 1990.
2. A renewal bill was issued 6/25/03 for a minimum premium of $192.40 due 7/30/03 for the renewal term. No payment was received.
3. A bill was issued 8/08/03 for a minimum premium of $336.00. No due date was listed, but the bill stated “past due.” No payment was received.
4. A final bill and cancellation notice were issued 9/08/03 for a minimum due of $426 by 9/25/03, or the policy would be cancelled that date. A payment of $420 was received on 9/24/03.

ANALYSIS AND CONCLUSION OF LAW

Title 24-A M.R.S.A. § 3007(2)(A) permits an insurer to cancel a policy for nonpayment of premium. 24-A M.R.S.A. § 3007(1)(C) defines nonpayment of premium as “the failure or inability of the named insured to discharge any obligation in connection with the payment of premium on a policy of insurance subject to this section, whether payments are payable directly to the insurer or its agent or indirectly payable under a premium finance plan or extension of credit.”

Brian Schaffer, Manager of Billing Services and Cash Control for Farm Family, stated in his affidavit that the policyholder was notified by a billing notice processed June 25 that the policy was renewing effective July 30, 2003, with an annual premium of $1,942, and that the minimum amount due by July 30 was $192.40 under the 10-pay plan. He testified that a second billing notice was issued August 8 advising the policyholder that his premium payment was past due, and that the minimum amount now due was $336 under the 10-pay plan. The notice also indicated that $420 was due if the quarterly plan was selected.

He further testified that a third bill and a cancellation notice were processed September 8, advising the policyholder that the policy would be cancelled on September 25 if a payment of $426 was not received by that date. On September 24, a payment of $420 was received.

Donna Bailey testified that she never received the cancellation notice, but also stated that she always waited until she got a cancellation notice to make the payment. Farm Family provided the postal certificate of mailing as required by statute to demonstrate that the cancellation notice was mailed on September 9 to the correct address. Mrs. Bailey stated that she made a payment by check on September 22 for the $420 shown on the bill. Referencing the insurer’s Exhibit 1C, she indicated the amount past due shown in the middle of the bill. There were also additional charges indicated in that area for endorsements that were processed since the prior bill that affected the amount currently due. In larger letters at the top of the bill, and also on the stub to be returned to the company, the minimum amount due to avoid cancellation was shown to be $426.

The Superintendent of Insurance has jurisdiction over this matter pursuant to Title 24-A M.R.S.A. § 3007. Farm Family Casualty Ins. Co. 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 Farm Family Casualty Ins. Co. has established adequate grounds for policy cancellation.

The policyholder was obligated to make a payment due July 30, and failed to do so. Although the insurer provided another opportunity to pay in August and a third in September, the amount received the day before the cancellation was insufficient. Although the difference was only $6, the fact that the insured had failed to pay the premium when it was due on July 30 established the insurer’s grounds for cancellation of this policy.

INDEX OF RECORD:
Exhibit 1 – Affidavit of Brian Schaffer

A – 6/25/03 Billing Notice
B – 8/08/08 Billing Notice
C – 9/08/03 Billing Notice
D – Cancellation Notice
E – Statement showing payment received
F – Billing screen showing total number of cancellations
G through O – Nine Cancellation notices mailed between 6/7/01 and 6/9/03

Exhibit 2 – Postal Certificate of Mailing
Exhibit 3 – Copy of Policy

ORDER AND NOTICE OF APPEAL RIGHTS

The intended termination is hereby approved. Farm Family Casualty Insurance Company is directed to continue coverage until 12:01 a.m. on January 26, 2004, to allow the policyholder an opportunity to obtain other 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.

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