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This proceeding arose upon a request for hearing made by Frank Hallissey (the “Insured”) to contest the pending cancellation of property insurance coverage issued by Cambridge Mutual Fire Insurance Company (the “Company”). On May 24, 2004, the Company mailed a notice of cancellation effective June 8, 2004, on policy number SBP229334401, citing “Underwriting reasons – failure to comply with reasonable loss control recommendations (03-1, 03-3 03-5 and 03-7 – see attached), per insured’s letter to agent dated January 29, 2004, in which insured suggested a reinspection in sixty (60) days” 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 pursuant to 24-A M.R.S.A. § 3007 on June 29, 2004, with Connie Mayette sitting as designated hearing officer. See 24-A M.R.S.A. § 210. The purpose of the hearing was limited to establishing the existence of proof or evidence given by the Company to support its reason for policy cancellation. Sumner Weeks, Jr., District Manager for the Company, appeared on behalf of the Company at the hearing. The Insured represented himself at the hearing and called Robert Hardy, handyman for the property, as a witness. The Insured also submitted an affidavit of his real estate agent, Gregory Walston. The record was held open until July 9, 2004, for the Company to provide copies of the policy and the post office certificate of mailing, which it did.

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

1. The Company insures a six-unit apartment building for the Insured under the subject Businessowners Policy. The policy incepted on September 24, 2003.
2. An inspected performed in December 2003 generated 15 recommendations for reduction of hazard. Only the first seven recommendations were conveyed by the agent to the Insured. Four of those seven recommendations were specifically referenced in the reason given for cancellation of the policy.
3. Recommendation 03-1 referenced inadequate clearance between the smoke vent pipe and combustible materials and requested a heat shield of 22 gauge sheet metal to protect the combustibles. The recommendation did not specify that it applied to a furnace in the basement rather than the wood stoves.
4. Recommendation 03-3 referenced improper installation of wood stoves, and required installation per manufacturer’s specifications or to NFPA 86 – Clearances for heat producing appliances. The wood stoves are set in place, but have been disconnected from the chimney(s).
5. Recommendation 03-5 referenced very poor housekeeping and stated that a dumpster should be installed on the property. The dumpster was placed on the property early in 2004.
6. Recommendation 03-7 related to flaking and peeling paint on the exterior, and requested painting or installation of vinyl siding to prevent further deterioration. The Insured has not addressed this recommendation.
7. The property is for sale and under contract.

ANALYSIS AND CONCLUSION OF LAW

Title 24-A, M.R.S.A. § 3007 2(D) permits an insurer to cancel a policy based upon the insured's failure to comply with reasonable loss control recommendations.

Mr. Weeks testified that an inspection of the premises was completed in December 2003, which generated 15 loss control recommendations. [Company Exhibit 1]. He stated that the information obtained in the inspection prompted the Company to issue a notice of cancellation that was later rescinded. [Company Exhibit 2]. He further stated that the Company was told the issues would be addressed. He also noted that the recommendations had been given to the agent, who apparently conveyed only the first seven to the Insured. Mr. Weeks testified that a follow-up inspection was conducted in May 2004, which revealed that some of the recommendations had not been implemented. [Company Exhibit 3].

Mr. Hallisey testified that the earlier inspection was performed while he was dealing with difficult tenants who have since been evicted. He also stated the winter weather prevented his tenants from getting their trash to the dump, so the trash piled up. He stated that a dumpster has been installed on the premises, eliminating the housekeeping issue. Mr. Weeks disagreed, stating that the second inspection shows the housekeeping is still poor.

Mr. Hallisey argued that the woodstoves are properly installed, but noted that he cannot control how the tenants operate them. He stated that although the woodstoves are still in place at this time, the pipes have been removed from them. He also stated that the new buyers of the property intend to remove the woodstoves completely.

Mr. Hallisey agreed that the building needs painting, but argued that it cannot be painted in the middle of the winter. He stated that he will have the painting completed this summer if required.

The parties disputed the recommendation concerning inadequate clearance from the smoke vent pipe and combustible materials. Mr. Hallisey testified he had believed that the recommendation referred to the wood stove pipes. Mr. Weeks demonstrated by the inspection report that the recommendation related to one of the furnaces in the basement. Mr. Hallisey and Mr. Hardy both stated that the photo submitted by the Company shows the old furnace that does not work. Mr. Hardy stated it was left in the basement as it was too heavy to remove. He also testified that he cleaned up the debris left by the evicted tenants and repaired the damage they had caused.

As stated earlier, 24-A M.R.S.A. § 3007 permits cancellation if the insured fails to comply with reasonable loss control recommendations. The Company maintains that the Insured has failed to comply with four recommendations. The parties disputed the meaning of recommendation 03-1, which referenced a smoke vent pipe but did not state to which heating unit the pipe was attached. As the building contains two furnaces and two woodstoves, it is unclear which to which unit the Company referred. Accordingly, recommendation 03-1 may not be used as a valid reason for cancellation.

Recommendation 03-3 related to the installation of the woodstoves. The inspection report stated that the woodstove on the third floor has inadequate clearance to combustibles and combustible building materials. The Insured argued that the stoves are properly installed, but that he has no control over the tenants’ use of them. Although he stated that the stoves have been disconnected, it would be possible for a tenant to re-install a stove pipe, making the stove operable again. Although the Insured also stated the stoves would be removed, they were still in place at the time of the hearing.

Recommendation 03-5 stated the housekeeping is very poor and a dumpster should be installed. Although the subsequent inspection indicated that boxes and items in the hallways hinder easy passage, the evidence on the record demonstrates that a dumpster was installed as recommended. Accordingly, I find that the Insured has complied with recommendation 03-5.

The final recommendation 03-7 was for the exterior to be painted or covered with vinyl siding. The Insured conceded this was not performed but argued that the weather had been a prohibitive factor. However, there is no indication that steps had been taken to procure a contractor for the work to be done, and the Insured stated he would address this issue only if required.

The evidence on the record indicates that the Insured has failed to comply with recommendations 03-3 and 03-7 cited in the reason for cancellation and I find both recommendations to be reasonable.

The Superintendent of Insurance has jurisdiction over this matter pursuant to 24-A M.R.S.A. § 3007. The 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 Cambridge Mutual Fire Insurance Company has established adequate grounds for policy cancellation.

INDEX OF RECORD:
Company Exhibit 1 – December 2003 Inspection
Company Exhibit 2 – 2/09/04 Cancellation Notice
Company Exhibit 3 – May 2004 Inspection
Company Exhibit 4 – Correspondence with Agent
Company Exhibit 5 – May 2004 Letter to Agent
Company Exhibit 6 – Post Office Certificate of Mailing
Company Exhibit 7 – Copy of Policy

Insured Exhibit 1 – Affidavit of Gregory Walston

ORDER AND NOTICE OF APPEAL RIGHTS
The intended termination is hereby approved. Cambridge Mutual Fire Insurance Company is directed to continue coverage pursuant to 24-A M.R.S.A. § 3007 until 12:01 a.m. on September 8, 2004 to provide an opportunity for the policyholder to obtain other coverage. If a valid subsequent notice of cancellation or nonrenewal has been issued, the policy terminates on the date stated in the subsequent cancellation or nonrenewal notice if it is earlier than September 8.

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 date of this Decision and Order.

Dated August 24, 2004                                                Alessandro A. Iuppa
                                                                                    Superintendent of Insurance

                                                                                    ____________________________________
                                                                                    by Connie Mayette
                                                                                    Designated Hearing Officer

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