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Bearnstow v. Markel Insurance Company
Docket No. INS-06-2113, 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 allegations.

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.