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This proceeding arose upon a request for hearing made by Amy Dugan to contest the pending nonrenewal of homeowners insurance coverage provided to John Osmond and Amy Dugan (the “Insureds”) by Allstate Indemnity Company (the “Company”). On October 28, 2004, the Company mailed a notice of nonrenewal effective December 15, 2004, citing “[o]ur records show that, because you have not yet acted on our recommendations, the condition of your insured property represents a substantial change in the risk we originally accepted. The siding of your detached garage is missing” as the grounds for nonrenewal. Pursuant to 24-A M.R.S.A. § 3054, the hearing request was timely.

A hearing in this matter was held pursuant to 24-A M.R.S.A. § 3054 on December 16, 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 the proof or evidence given by the Company to support its reason for policy nonrenewal. Roger Worsman, Senior Product Consultant for the Company, submitted a sworn statement in lieu of appearance at the hearing. 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 first issued a homeowners policy for the Insureds effective December 15, 2003.
2. An inspection conducted December 16, 2003, revealed that the detached garaged structure lacked exterior siding. The garage is currently covered with Typar moisture barrier, and Mr. Osmond intends to install vinyl siding over the Typar when he is able.
3. The Company sent a letter dated January 8, 2004, to the Insureds, asking them to document with the agent before September 15, 2004, that the missing siding of the garage had been addressed.

ANALYSIS AND CONCLUSION OF LAW

Effective July 30, 2004, 24-A M.R.S.A. § 3051 states that "the reason for nonrenewal must be a good faith reason and related to the insurability of the property or a ground for cancellation pursuant to section 3049." Section 3049(10) permits an insurer to cancel a policy of homeowners insurance for the failure to comply with reasonable loss control recommendations within 90 days after notice from the insurer. If an insurer's reason for nonrenewal is not based upon a permitted cancellation ground, § 3054 requires the insurer to establish the proof or evidence that the reason is a good faith reason and related to insurability.

Mr. Worsman stated in his affidavit that the Company did not receive any confirmation from the Insureds that siding had been addressed. He submitted a copy of the inspection report and photos, and also a copy of the recommendation letter. He testified that the failure of the Insureds to exercise prudent control over the property’s loss exposures increases the likelihood of loss beyond that for which the coverage is priced or intended.

Mr. Osmond argued that the exterior of the garage is sufficient to prevent any water infiltration or damage to the structure or its contents until such time as he is able to complete the siding. He testified that the building is watertight in its current state, and that he expects to complete the siding by next fall. He also noted that the structure in question is nothing more than a garage, and he questioned why its lack of siding should affect the insurance for his home.

The Superintendent of Insurance has jurisdiction over this matter pursuant to 24-A M.R.S.A. § 3054. The Company bears the burden of proof for establishing that the statutory grounds for policy nonrenewal exist. Based on the evidence presented at the hearing, the Superintendent hereby concludes that the Company has established adequate grounds for policy nonrenewal.

The evidence establishes that the Insureds were notified of the Company’s loss control requirement in January 2004. It also establishes that the condition giving rise to the recommendation, the lack of appropriate exterior siding on the garage, has not been addressed. Mr. Osmond argued that vinyl siding is merely cosmetic and the moisture barrier on the garage is completely watertight. It is not unreasonable, however, for a Company to require proper exterior siding on a structure when the policy in question includes coverage for water damage and collapse caused by hidden decay. Title 24-A M.R.S.A. § 3049(10) permits an insurer to cancel a policy if an insured fails to comply with reasonable loss control recommendations within 90 days, and section 3051 allows nonrenewal of the policy for any permitted cancellation reason. The Company has demonstrated that more than 90 days have elapsed since this reasonable recommendation was relayed to the Insureds, and therefore, nonrenewal of the policy on this basis is permitted.

INDEX OF RECORD:
Company Exhibit 1 – Affidavit of Roger Worsman
Company Exhibit 2 – Post office certificate of mailing
Company Exhibit 3 – Inspection and Photos of December 16, 2003
Company Exhibit 4 – Recommendation letter of January 8, 2004
Company Exhibit 5 – Certified Copy of Policy

ORDER AND NOTICE OF APPEAL RIGHTS
The intended nonrenewal is approved. Allstate Indemnity Company is directed to continue coverage pursuant to M.R.S.A. 24-A § 3054 until 12:01 a.m. on January 27, 2005, to provide an opportunity for the policyholder to obtain other coverage. Coverage shall continue until that date unless a subsequent valid notice of cancellation of the policy has been effected in accordance with applicable law. If such cancellation has taken effect, the policy will instead terminate on the date stated in that cancellation 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 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 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.

Dated January 12, 2005                                               Alessandro A. Iuppa
                                                                                    Superintendent of Insurance

                                                                                    ____________________________________
                                                                                    by Connie Mayette
                                                                                    Designated Hearing Officer

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