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This proceeding arose upon a request for hearing made by Elizabeth G. Sienko (the “Insured”) to contest the pending cancellation of property insurance coverage provided by State Farm Fire and Casualty Company (the “Company.”) On November 30, 2004, the Company mailed a notice of cancellation effective January 4, 2005, citing as the grounds for cancellation: “This insurance coverage is no longer acceptable to State Farm Fire and Casualty Company because you have not taken corrective action on all the mandatory requirements outlined in our recommendation letter dated May 4, 2004.” The Insured’s hearing request was timely.

A hearing in this matter was held pursuant to 24-A M.R.S.A. § 3007(6) on January 19, 2005, with Pamela Stutch 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 cancellation. Jeff Raber, Commercial Field Underwriter, represented the Company at the hearing. The Insured attended the hearing in person, and she called Sean Ball as a witness.

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

1. The Company has insured the subject premises under a commercial property insurance policy since October 28, 2001. The property consists of an apartment building which is connected to a main house.
2. A Company claims representative visited the property in response to a claim made in December 2002. The claim involved extensive water damage to the apartment building but was unrelated to the condition of any roof.
3. Based upon the visit, the Company issued a recommendation letter in May 2003 stating the following: “The roof on the dwelling appears to be in need of repair. A qualified roofing contractor should inspect and make the needed repairs. Contact your agent when repairs are completed.”
4. After receiving the recommendation letter, the Insured retained Mr. Ball, a professional construction contractor who also lives on the insured premises, to inspect the various roofs. Mr. Ball inspected all roofs on the premises and concluded that both the apartment and main house roofs should be re-shingled. However, he found that neither roof was in critical disrepair and that other repairs to the property were more pressing. No repairs have been made to any roof on the property since the recommendation letter was issued.

ANALYSIS AND CONCLUSION OF LAW

Title 24-A M.R.S.A. § 3007(2)(D) permits cancellation of the subject policy for “[f]ailure to comply with reasonable loss control recommendations.”

Mr. Raber testified that a claim regarding the premises was submitted in December 2002 and in response to the claim, a claim representative visited the property. He stated that as a result of the visit, the Company issued a recommendation letter to the Insured on May 5, 2003, regarding roof repairs. He noted that the Company followed up with the agent in August of 2004 and the agent indicated that the Insured intended to have repairs completed by November 1, 2004. Mr. Raber concluded by stating that the Insured has made no roof repairs, and as a result, the Company issued its cancellation notice.

The Insured questioned Mr. Raber as to his personal knowledge of the condition the roofs on the property. Mr. Raber responded that he had not personally seen the buildings or reviewed any pictures of them, and he had no knowledge of which roof the Company was referencing in its recommendation letter. The Insured testified that although she realizes that the roofs on both the apartment and main home are old and should be attended to, neither roof has ever leaked. The Insured also noted that the insured property consists of two buildings with separate roofs attached by a partition with its own roof, and there that there is no way to discern which roof the Company finds objectionable.

Mr. Ball testified that he inspected the roofs of the apartment house and the main house, and he submitted an estimate to the Insured in 2003 to re-shingle both roofs. He stated that the roof on the main house has 4 to 5 layers of shingles on it and water would be unable to get through. He described the structural integrity of the roof, stating that the shingles are almost worn out and should be replaced but the roof is not in critical condition yet. He noted that a portion of the apartment building roof was repaired by a contractor in 1998 following Maine’s ice storm. He indicated that the other portion of the apartment building roof was in slightly worse shape than the shingles on the main house and will need to be replaced soon. Mr. Ball emphasized that he inspected both roofs, found no water leakage, and that other repairs on the property represented safety issues and were far more pressing.

In the cancellation notice and through testimony at the hearing, the Company maintains that its reasonable loss control recommendation was not followed. However, the Company’s recommendation letter stated that “[t]he roof on the dwelling appears to be in need of repair. A qualified roofing contractor should inspect and make the needed repairs. Contact your agent when repairs are completed.” Accordingly, I conclude that the wording of the Company’s recommendation letter instructed the Insured to retain a qualified contractor to inspect the roof who would then determine whether and when any repairs were needed. In compliance with that recommendation, the Insured engaged Mr. Ball to inspect the various roofs on the property, and from that inspection Mr. Ball concluded that no condition of any roof was critical enough to require immediate attention. The evidence further indicates that Mr. Ball was given a down-payment to engage him for work including the re-shingling of the main house and apartment roofs, and I find no reason to believe that those re-shingling projects will not be completed. It is also unclear which of the various roofs the Company was referring to in its recommendation letter. The Company merely references “the roof on the dwelling” and the property at issue consists of an apartment house, a main house, as well as a partition connecting the two buildings, each of which has its own roof. Further, at the hearing, the Company was unable to clarify which roof is at issue. Accordingly, I find that the Company has not demonstrated that the Insured failed to comply with reasonable loss control recommendations as required for cancellation of the subject policy.

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 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.

INDEX OF RECORD:
Company Exhibit 1 – May 5, 2003, Recommendation Letter
Company Exhibit 2 – Computer Notes
Company Exhibit 3 – E-Mail Correspondence
Company Exhibit 4 – Proof of Mailing
Company Exhibit 5 – Cancellation Notice
Company Exhibit 6 – Copy of Policy

Insured Exhibit 1 – Hearing Request
Insured Exhibit 2 – Pictures of Subject Premises
Insured Exhibit 3 – Copies of Work Invoices from S.B. Construction

ORDER AND NOTICE OF APPEAL RIGHTS
The intended cancellation is not approved. State Farm Fire and Casualty Company is directed to continue coverage under the subject policy 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.

Dated February 3, 2005                                               Alessandro A. Iuppa
                                                                                    Superintendent of Insurance

                                                                                    By his Designated Hearing Officer,

                                                                                    ____________________________________
                                                                                    Pamela Stutch, Esq.
                                                                                    Staff Attorney

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