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Steven Addario v. Peerless Insurance Company

Docket No. INS-06-2076, Decision Issued August 4, 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 testified that the insured failed to comply with its loss control recommendation and explained the reasons why the recommendation was reasonable. The insured disputed the need for the requested measure.

Held: For the insured. Although 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, this policy contract does not mirror the statutory language. Instead, the policy permits cancellation for “your failure to comply with reasonable loss control recommendations within 90 days after you receive from us our intent to cancel the policy.” Under this wording, the 90 day period to comply with recommendations does not start until after the insured receives notice of the company’s intent to cancel the policy. An insurer is free to establish terms in its policy contract that are more favorable to the insured than what is provided in the statute. However, an insurer is then bound by such terms and unable to rely upon the actual statutory language in a cancellation action.

The notice of cancellation was to be effective 25 days after receipt by the insured. Nothing sent prior to the cancellation notice could be construed of as giving the insured notice of the company’s intent to cancel the policy. Compliance with the loss control recommendations cannot be assessed until after passage of the 90th day following receipt of the notice of intent to cancel the policy. Since the 90th day has not yet passed, the cancellation action is premature. Accordingly, the company has not met the requirements to cancel this policy at this time.