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Bearnstow v. Markel Insurance Company
Docket No. INS-05-2115, Decision Issued October 31, 2006.
The insured requested a hearing following receipt of a notice of cancellation
of commercial package insurance citing the insured’s failure to
comply with loss control recommendations and the property’s condition.
The company provided a copy of the recommendation letter and argued
that the insured did not comply with two of the listed recommendations.
It also argued that the condition of the property and another reason
gave it grounds for cancellation. The insured disputed the company’s
Held: For the insured. At hearing, the company
argued three reasons for cancelling the policy but the notice of cancellation
encompassed at most two. The company is limited to the cancellation
reasons stated in its notice.
A company may cancel a commercial package policy if it can demonstrate
the failure to comply with reasonable loss control recommendations.
24-A M.R.S.A. §§ 2908(2)(C), 3007(2)(C). There is no statute
that permits policy cancellation for issues related to a condition of
the property. The company may have been attempting to characterize a
condition of the property as the failure to comply with a loss control
recommendation. However, there is insufficient evidence to demonstrate
that a recommendation regarding the condition was ever conveyed to the
insured. Thus, the company is precluded from using the failure to correct
the condition as a reason for cancellation.
As for the other recommendations, the company did not prove that the
insured failed to comply. The insured maintained that it adhered to
the recommendations, and the company did not demonstrate anything that
contradicted the insured’s assertion.
Lastly, the company did not provide either a post office certificate
of mailing or testimony to demonstrate when it mailed the cancellation
notice. Pursuant to sections 2908(5)(A), 3007(5)(A), a cancellation
is not effective prior to 10 days after receipt by the insured of a
notice of cancellation. A post office certificate of mailing is conclusive
proof of receipt on the third calendar day after mailing. §§
2908(5)(C), 3007(5)(C). In light of the close proximity between date
of the hearing request and the cancellation effective date, without
the post office certificate of mailing or testimony to establish when
the notice was mailed, the effectiveness of this cancellation action
is in question.