Archives: 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 2008

 

FINDINGS AND DECISION
In RE: Gerald & Elaine Seaman vs. Amica Mutual Insurance Company	Hearing 2005-15709 Decision Issued February 11, 2005

This proceeding arose upon a request for hearing made by Gerald & Elaine Seaman (the “Insured”) to contest the pending nonrenewal of homeowners insurance coverage provided by Amica Mutual Insurance Company (the “Company.”) On December 1, 2004, the Company mailed a notice of nonrenewal effective January 9, 2005, citing as the grounds for nonrenewal: “[t]his action is being taken due to the substantial change in the risk which increases the risk of loss after insurance coverage has been issued or renewed. Specifically, there is substantial water damage to the building posts and other parts of the structure.” Pursuant to 24-A M.R.S.A. § 3054, the Insured's hearing request was made within the statutory time period.

A hearing in this matter was held on February 3, 2005, pursuant to 24-A M.R.S.A. § 3054 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 nonrenewal. Emily McEntee, Branch Sales Manager, represented the Company at the hearing. Gerald Seaman represented the Insureds.

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

1. The Company has provided the subject policy since January 9, 2003.
2. In July 2004, the Insured notified his account representative of three issues that had recently occurred and asked if any of them constituted a claim under the policy. The representative submitted the three issues as claims. The issues concerned the failure of the septic system, cracks found in the foundation, and water damage caused by leaking skylights
3. There was no coverage for the failure of the septic system or for the cracks in the foundation.
4. The Company paid approximately $2,000 for the water damage.

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." 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. Section 3051 states that the reason for nonrenewal must be explicit, and that explanations such as "underwriting reasons," "loss record," and similar insurance terms are not by themselves acceptable explanations of an insurer's intended nonrenewal.

Ms. McEntee testified that the nonrenewal action was predicated on the most recent loss, which involved water damage from wind-driven rain around the skylights. She stated that other conditions were brought to the Company’s attention as a result of this loss. She further testified that it is the Company’s policy to nonrenew a policy when the claims activity exceeds the Company’s average. She submitted a report to demonstrate that the Company’s average is for a policyholder to have one loss every 20 years. She also cited a national industry average of one loss in ten years. She testified that the Insured submitted three claims in one year. She argued that the Insured was duly notified of the true reason for nonrenewal through correspondence with the account representative as well as herself.

When questioned about evidence of the stated reason for nonrenewal, Ms. McEntee conceded that there was no evidence of water damage to the building posts, and stated that “rafters” should have been listed instead. She further stated that it was possible that damage to the rafters had occurred from the water leakage, but that damage would not be known unless part of the roof was removed.

Mr. Seaman argued that the Company did not have evidence of any damage to the posts. He also testified that the account representative had told him a policy could be nonrenewed for having more than three claims in one year, but noted he did not have more than three.

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 not established adequate grounds for policy nonrenewal.

The plain language of the statute requires the insurer to inform the insured of the explicit reason for the nonrenewal action. The explicit reason must accompany the notice of intent not to renew. See § 3051. It is not acceptable to provide the “real” reason at a later date. The explicit reason given to the insured with the notice of the Company’s intent not to renew was the “substantial water damage to the building posts and other parts of the structure.” No evidence was presented to demonstrate water damage to the building posts, and the Company even admitted that this allegation was incorrect. The notice of nonrenewal also referenced water damage to “other parts of the structure,” but this language is vague, and the Insured had no prior knowledge of the Company’s concern with water damage to the rafters. Accordingly, this language fails to encompass water damage to the rafters as a reason for nonrenewal. However, even if it did, the Company presented insufficient evidence to demonstrate that any water damage to the rafters in fact occurred. Lastly, I decline to address whether the Insured’s loss frequency would meet the standard for nonrenewal, as the stated reason does not mention that issue.

INDEX OF RECORD:
Company Exhibit 1 – Nonrenewal Notice and Post Office Certificate of Mailing
Company Exhibit 2 – Copy of Policy
Company Exhibit 3 – Claim Frequency Analysis
Company Exhibit 4 – Correspondence regarding reason for nonrenewal
Company Exhibit 5 – Adjuster’s notes

Insured Exhibit 1 – July 2004 e-mails
Insured Exhibit 2 – Notice of Nonrenewal
Insured Exhibit 3 – December 2004 e-mails
Insured Exhibit 4 – 12/22/04 e-mail from Emily McEntee to Insured, explaining reason for nonrenewal
Insured Exhibit 5 – Estimate of damages from skylight loss
Insured Exhibit 6 – Hearing Request

ORDER AND NOTICE OF APPEAL RIGHTS
The intended nonrenewal is not approved. AMICA Mutual Insurance Company is directed to renew the policy on the same terms as the expiring policy, with appropriate adjustments for changes in filed rates and forms. If a subsequent valid notice of cancellation of the policy was effected in accordance with applicable law, the order to renew the coverage is negated. If a cancellation has taken effect, the policy will instead terminate on the date stated in the subsequent 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 February 11, 2005                                             Alessandro A. Iuppa
                                                                                    Superintendent of Insurance

                                                                                    ____________________________________
                                                                                    by Connie Mayette
                                                                                    Designated Hearing Officer

 

---

Return to Cancellation / Nonrenewal Hearing Decisions

Maine.gov | Professional and Financial Regulation | Privacy | Accessibility | Disclaimer