This proceeding arose upon a request for hearing made by Peter M. Lazas to contest the pending cancellation of property insurance coverage issued to Peter Lazas & Betsy Meister (the “Insureds”) by Cambridge Mutual Fire Insurance Company (the “Company.”) On August 6, 2004, the Company mailed a notice of cancellation effective September 13, 2004, on policy number FP2325556, citing “material misrepresentation or nondisclosure to the company of a material fact at the time of acceptance of the risk: property is a boarding house and was applied for as a 1 family dwelling” as the grounds for cancellation. Pursuant to 24-A M.R.S.A. § 3007, Mr. Lazas’ hearing request was timely.
The hearing was originally scheduled to be held on October 5, 2004, at 11:00 a.m. with Connie Mayette sitting as designated hearing officer pursuant to § 3007. On September 23, 2004, the hearing officer received a letter from the Insureds requesting a continuation of the hearing until October 19th or later. The hearing officer granted the Insureds’ request, and on September 24, 2004, the hearing officer sent a notice to both parties scheduling the hearing to be held on October 19th unless an objection was received by October 1, 2004. By letter dated October 7, 2004, the Company requested a postponement of the hearing. The hearing officer denied the Company’s request, and the hearing was held on October 19, 2004.
The purpose of the hearing was limited to establishing the existence of the proof or evidence given by the Company to support its reason for policy cancellation. Stephen Armstrong, Assistant Secretary, submitted a sworn statement on the Company’s behalf in lieu of appearance at the hearing. He also participated in the hearing by telephone for cross-examination purposes. The Insureds represented themselves at the hearing.
FINDINGS OF FACT
The following facts have been proven by a preponderance of evidence submitted:

1. The Company has insured the property under the subject property since April 5, 2004. The policy term expires April 5, 2005.
2. The property had been operated as a boarding house until the 1980s. Due to code restrictions, the property has not been utilized as a boarding house since that time. Until recently, the sign “Jordan House” remained in front of the building. The Insureds purchased the property in 1999 and have rented it out as a one-family dwelling to individuals with roommates. Only a small section of the large property is occupied.
3. During an unannounced inspection in June 2004, the inspector interviewed the then-tenant of record, who was in arrears with rent payments and was subsequently evicted.

ANALYSIS AND CONCLUSION OF LAW
Title 24-A M.R.S.A. § 3007(2)(B) permits cancellation of a policy for “[f]raud or material misrepresentation made by or with the knowledge of the named insured in obtaining the policy, continuing the policy or in presenting a claim under the policy.”
Mr. Armstrong stated in his affidavit that the application identified the property as tenant-occupied one-family dwelling, but a subsequent inspection determined that the building was occupied as a boarding house. He submitted a copy of the application and the inspection report. He stated that the exposures of a boarding house far exceed those contemplated in the rating for a one-family dwelling.
Mr. Lazas denied that the property is operated as a boarding house, and testified that it has not been operated as such since the 1980s. He stated he purchased the property in 1999, and has only rented it out as a one-family dwelling. Ms. Meister testified that they had left the “Jordan House” sign up as they viewed it as an historical component of the property, which was built in the 1800s. Mr. Lazas stated the sign has now been removed. He also stated that he explained the situation to the agent after receiving the cancellation notice, but that he was told it made no difference as the property value was too high for the Company to reconsider the cancellation. He stated the agent also advised him that the tenant had told the Company it was a boarding house. He argued that the Company should not be able to base its cancellation action upon the word of a problem tenant who could not be questioned at the hearing.
Mr. Lazas questioned Mr. Armstrong about the accuracy of the information received from the tenant. Mr. Armstrong responded that a letter was written to the agency asking for confirmation or denial of the operation of a boarding house. See Company Exhibit 6. He stated that no response was received from the agent, and therefore the policy was cancelled. He further argued that the house is too big to be rented as a one-family dwelling. Mr. Lazas agreed, but testified that much of the building is closed off. He stated he is using a portion of it for storage, and only a small part is occupied by tenants. He also stated that the agent refused to inspect the premises to verify the usage.
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 the Company has not established adequate grounds for policy cancellation.
The inspection report, which is the foundation of the Company’s case, simply states that the property is a boarding house without explanation of how that determination was made. It also identifies the person interviewed, who Mr. Lazas explained was a tenant subsequently required to vacate the premises. Mr. Lazas adamantly denies the allegation that the property is used as a boarding house and has raised valid questions as to the veracity of the Company’s information. The Company offered no proof other than the inspection report to substantiate its allegation of material misrepresentation, and therefore I find that the Company has not demonstrated that the requirements of § 3007(2)(B) have been met to permit cancellation of the policy.
INDEX OF RECORD:
Company Exhibit 1 – Affidavit of Stephen Armstrong
Company Exhibit 2 – Application dated 04/14/04
Company Exhibit 3 – Inspection Report dated 06/02/04
Company Exhibit 4 – Post Office Certificate of Mailing
Company Exhibit 5 – Cancellation Notice
Company Exhibit 6 – 7/27/04 letter to agent with photos
Company Exhibit 7 – Copy of Policy

ORDER AND NOTICE OF APPEAL RIGHTS
The intended cancellation is not approved. Cambridge Mutual Fire Insurance Company is directed to continue coverage under Policy #FP2325556 without lapse. Coverage shall continue unless and until a subsequent valid notice of cancellation or nonrenewal of the policy is effected in accordance with applicable law. If a subsequent termination has taken effect, the policy will terminate on the date stated in the subsequent cancellation or nonrenewal notice.
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 aggrieved nonparty whose interests are substantially and directly affected may initiate an appeal within 40 days of the effective date of this Decision and Order. There is no automatic stay pending appeal; application for stay may be made in the manner provided in 5 M.R.S.A. § 11004.
 
November 15, 2004                                                     Alessandro A. Iuppa
                                                                                    Superintendent of Insurance
                                                                                    ____________________________________
                                                                                    By Connie Mayette
                                                                                    Designated Hearing Officer
 
Last Updated: December 3, 2004