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Cancellation / Nonrenewal Docket No. INS 05-15713 Decision
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This proceeding arose upon a request for hearing made by Kevin Perry (the “Insured”) to contest the pending nonrenewal of homeowners insurance coverage provided by Peerless Insurance Company (the “Company.”) On December 8, 2004, the Company mailed a notice of nonrenewal effective February 7, 2005, citing the following as grounds for nonrenewal: “failure to comply with reasonable loss prevention recommendations which included having mold/mildew remediated by a specialist; to engage a contractor to stabilize the structure; to engage a contractor to prevent moisture from entering the residence and to engage a window specialist to prevent moisture not be trapped between panes of glass allowing mold/rot/mildew to build up.” Pursuant to 24-A M.R.S.A. § 3054, the Insured’s hearing request was timely. A hearing in this matter was held on January 26, 2005, pursuant to 24-A M.R.S.A. § 3054 with Pamela Stutch sitting as designated hearing officer pursuant to 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. Stephanie Davis, Personal Lines Team Leader for the Company, and Anita Smith, Senior Personal Lines Underwriter, represented the Company at the hearing. The Insured represented himself at the hearing. FINDINGS OF FACT
The proposed nonrenewal of the policy subject to this proceeding is governed by the Maine Property Insurance Cancellation Control Act, 24-A M.R.S.A. §§3048-3056. Effective July 30, 2004, § 3051 provides 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 3049(10) permits cancellation of a homeowners policy for an insured’s failure to comply with reasonable loss control recommendations within 90 days after notice from the insurer. Stephanie Davis testified that the Company proposed to nonrenew the subject policy for failure to comply with recommended loss prevention measures thereby increasing the Company’s exposure to physical damage under the Limited Fungi, Wet or Dry Rot, or Bacteria coverage portion of the policy. She noted that the required loss control measures included contacting a mold/mildew specialist and having all traces of mold removed from the home, retaining a contractor to stabilize the structure, retaining a contractor to prevent water/moisture from entering the residence, and retaining a window specialist to ensure that moisture would not be trapped between the panes of glass in the home. She noted that confirmation of this work on contractors’ letterheads was required prior to October 5, 2004. She stated that the Company was not notified that the Insured had entirely completed these recommendations, and therefore, the Company issued its notice of nonrenewal. Mr. Perry testified that on February 7, 2004, he noticed a leak in his living room, and he was concerned because he had just put up a new roof on that area of the home. He stated that he took the ceiling panels off and discovered that the old roof had been inadequately vented so that condensation was allowed to build up in the ceiling. He maintained that he contacted his nephew, Roger Perry, who was employed as a carpenter by BBI Builders in Brunswick, Maine. Mr. Perry stated that together, he and his nephew and some friends ripped out the ceiling. Mr. Perry noted that he subsequently filed a second claim regarding similar damage to the foyer area. Mr. Perry testified that he searched the telephone book for a mold specialist and was unable to find one. He noted that he came across one company, Coastline Home Inspection, which provided mold and air testing. He stated that he engaged that company to perform air and strip tests of his residence, and test samples were sent to Air Quality Management Sevices in Gray, Maine. He noted that he sent the resulting report to the Company, and at that point, he received no objection from the Company as to the qualifications of the experts he had retained to assist him. He noted that he then contacted a company called Servpro to help him. He stated that Servpro looked at the impacted areas, gave him some tips for sealing off the rest of the house and told him that he was remediating the mold issue because he was ripping out the problem areas. He testified that he ripped out the foyer area entirely, re-did the living room and reinforced the structure. He noted that the mold test of May 24, 2004, indicated a high concentration of stachybotrys, a problem-causing mold. He stated that a subsequent mold test revealed no presence of stachybotrys in the home. Mr. Perry stated that when a Company representative came to investigate the claim regarding the foyer area, he questioned her as to the recommendation involving a window specialist. He stated that the representative explained that the problem lay with one of the windows in the atrium. He testified that he subsequently ripped the entire atrium area out, including the window, and the structure was no longer there. Mr. Perry then testified that on October 19, 2004, he received a letter from Cross Insurance, his insurance agent, stating that the information provided to the Company so far was insufficient to renew the policy, and he questioned the Company as to why this was the case. Ms. Smith explained that the claims representative who had visited the property advised the Insured to retain an Industrial Hygienist to address the mold issue, and the person retained by the Insured to perform the tests was not a licensed Industrial Hygienist. Mr. Perry then noted that he was unable to find an Industrial Hygienist, and he even contacted Cross Insurance and asked for their help in recommending such a specialist. He noted that he received no response from the agency and therefore, he retained what he thought to be the next best thing, a company to perform tests on his home and advise him. Mr. Perry emphasized that he did the best he could and made a good faith effort in light of the services available to him. Ms. Smith and Ms. Davis then indicated that the Company did not know that any repairs had been made to the property since the photos were taken in February and May of 2004. Ms. Smith and Ms. Davis stated, however, that they were unwilling to rescind the notice of nonrenewal because the Company had not been given the appropriate documentation of the repair and remediation efforts, and concerns existed that another claim would be filed. The Company’s evidence at the hearing was based primarily upon photographs of the residence taken in February and May of 2004, before work was performed towards the Company’s loss control recommendations. The Insured presented evidence that he was unable to locate the mold remediation specialist recommended by the Company and instead, he chose to rip out the portions of the home containing mold to resolve the problem. The Insured also presented evidence to demonstrate that the sunroom/atrium containing the problem window no longer exists. The evidence further indicates that the Insured’s nephew, a professional carpenter, assisted the Insured in making the needed repairs. Although the Company raised questions about the structural integrity of the home and alleged that part of the problem was due to surface water entering though the back entrance, the Insured maintained that the problem was due to inadequate ventilation of the prior roof and that the previous owner had not properly sealed off various key areas. I accept the Insured’s testimony that he has performed everything that the Company has asked of him, removed all of the mold in the home, and fixed all problems associated with the cause of the mold. The Company presented no evidence to demonstrate otherwise. Accordingly, in light of the evidence presented, I find that the Company has not demonstrated that the Insured failed to comply with reasonable loss control recommendations within 90 days following the Insured’s receipt of the agent’s May 11, 2004, recommendation letter. See § 3049(10). I further find that the Company has failed to demonstrate that its stated reason for nonrenewal constitutes a good faith reason related to the insurability of the property. See §§ 3051, 3054. Although the Company maintained that it issued its notice of nonrenewal because it did not receive notification on contractor letterhead that all of its recommendations had been satisfied, the Company did not make such an allegation in its nonrenewal notice. Since § 3051 requires the notice of nonrenewal to be specific, any reason given for the action at hearing but not articulated in the norenewal notice may not be used as a reason to nonrenew the policy. Accordingly, I decline to address the issue of whether by itself the failure to obtain contractor documentation of the work performed would provide a basis for nonrenewal of the policy at issue. 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. INDEX OF RECORD Insured Exhibit 1 – Hearing Request and Nonrenewal Notice ORDER AND NOTICE OF APPEAL RIGHTS This Decision and Order is a final agency action within the meaning of the Maine Administrative Procedure Act. It may be appealed 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 and who is aggrieved by this decision may initiate an appeal within 40 days of the date of this Decision and Order.
Dated February 10, 2005
Alessandro
A. Iuppa
By his Designated Hearing Officer,
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