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Bearnstow v. Markel Insurance Company
Docket No. INS-07-2019, Decision Issued April 2, 2007.

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. The company provided a copy of the recommendation letter and argued that it had not received a response from the insured on whether it intended to comply. The insured argued that the recommendations that it has not complied with are either inapplicable to its situation or unreasonable.

Held: For the insured. 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). In order for an insurer to cancel a policy for failure to comply with reasonable loss control recommendations, sufficient evidence must be provided to establish that the recommendations were reasonable for the exposure and circumstances, and that the insured has not complied with either some or all of them. The company did not provide any of the documents from which it developed the recommendations, nor did it explain the nature of the exposure. As proof of noncompliance, the company merely stated that it had not received a response from the insured about the recommendations. Even when recommendations are justified, simply the fact that an insured has not notified a company of the actions taken is insufficient to establish a failure to comply.

The insured testified that several of the recommendations have been addressed. The insured disputed the reasonableness of certain other recommendations and denied the applicability of the rest. As the company failed to provide any evidence supporting its position, there is nothing in the record to dispute the insured’s assertions that the recommendations are either unreasonable, inapplicable or have been adhered to. Therefore, this cancellation action is disapproved.