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Paul Gerry v. State Farm Fire and Casualty Company

Docket No. INS-06-2062, Decision Issued June 23, 2006

The insured requested a hearing following receipt of a notice of homeowners insurance policy cancellation citing the failure to comply with loss control recommendations as the reason for cancellation. At hearing, the company alleged that it sent a loss control recommendation letter to the insured and it has been unable to ascertain that the requested improvements have been made. The company further charged that the insured is operating an uninsured business on the premises. The insured discussed his responses to the recommendations.

Held: For the insured. The applicable statute, 24-A M.R.S.A. § 3049(10), permits policy cancellation for the failure to comply with reasonable loss control recommendations within 90 days after notice from the insurer.
The evidence indicates that the insured complied with the recommendations as he understood them. There is insufficient evidence to conclude that the company made clear to the insured that the loss control recommendations encompassed certain actions that were not taken.
The evidence further indicates that the company’s own agent advised that the other recommendations were completed. The company then focused on the business, arguing that its operation was rationally related to the insurability of the property, but the business exposure was not addressed in the recommendations, nor was it given as a reason for cancellation. In addition, none of the permissible grounds for cancellation contemplate the operation of a business as a reason for cancellation. Furthermore, the standard of a good faith reason related to the insurability of the property is applicable only to nonrenewal actions. Based upon the evidence presented, the company has not established adequate grounds for cancellation of this policy.