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Mark & Tammy Rutland v. Providence Mutual Fire Insurance Company
Docket No. INS-05-2031, Decision Issued August 10, 2005.

The insureds requested a hearing following receipt of a notice of homeowners insurance coverage cancellation citing lack of compliance with underwriting guidelines due to the presence of foster care on the premises as well as certain conditions. At hearing, the company alleged that photographs taken by the agent revealed hazards not disclosed on the insureds’ insurance application. The company further alleged that the insureds had not disclosed the provision of foster care on the premises. The insured argued that certain of the cited conditions have existed for many years.
Held: For the insured. The company has continuously provided homeowners coverage to the insureds for several years. The company terminated its business relationship with its agent and the insureds were then required to obtain renewal coverage through a different agent. The change in broker does not impact the insureds’ status with the company as continuing customers in the same property. Therefore, in order to cancel the policy, the company must demonstrate that it has complied with the requirements of §§ 3049, 3050.
The company did not identify which of the permitted cancellation ground it is relying upon in this action, but several of those grounds clearly do not apply. As the company referenced issues that were not disclosed on the application and also a “serious and material change,” this decision will focus on the requirements of 24-A M.R.S.A. §§ 3049(4), (5).
Section § 3049(4) concerns a “failure to disclose a material fact in relation to the application for insurance that would, if coverage is effectuated without knowledge by the insurer, substantially alter the terms of the policy.” The company alleged that the insureds failed to disclose the premises hazards in addition to the fact that they were providing foster care. By highlighting the question in the application regarding a business on the premises, the company is implying that the insureds’ status as foster parents should be considered a business. I disagree that foster parenting should be considered a business. Moreover, since the coverage is merely a continuation of the previous policy, the representations made on the 2005 application are irrelevant for the purposes of § 3049(4)(B). In addition, neither application contains any item that would prompt a description of the cited conditions or disclosure of the foster parenting. Therefore, the elements of § 3049(4)(B) have not been met.
Section 3049(5) permits cancellation for physical changes in the property that render the property uninsurable. Although the Company has demonstrated a number of factors that arguably increase the hazards insured against, it has not proven that these conditions represent a change in the property. In addition, the insureds’ status as foster parents does not constitute a physical change in the property. Accordingly, I decline to address whether the property is uninsurable because of these issues. Finally, one minor property condition is easily solvable, and Mr. Rutland has indicated his willingness to attend to it.
The notice of cancellation also did not contain a notification of the right to request a hearing as required by 24-A M.R.S.A. § 3050. Accordingly, it is not a valid cancellation notice.

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