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Doug Piehl & Kelly Cairns v. Concord General Mutual Insurance Company
Docket No. INS-07-2035, Decision Issued May 21, 2007.

The insureds requested a hearing following receipt of a notice of homeowners insurance nonrenewal citing as the reason for nonrenewal the operation of a business on the property that substantially increased the risk of loss. At hearing, the company stated that it had been advised by the agent that the business operated on the insured premises was no longer incidental. The company representative stated that there are exterior signs at the home identifying the business, employees working at the home and customer traffic. The company representative further argued that the liability hazard presented by the business operations increased the risk of the company having to defend a lawsuit despite the policy’s business exclusion. The insured argued that no change in the use of the property has taken place since it was built and that business has decreased, not increased, over the past few years.

Held: For the company. Title 24-A M.R.S.A. 3051 states that “the reason for nonrenewal must be a good faith reason and related to the insurability of the property or a ground for cancellation pursuant to section 3049.” If an insurer’s reason for nonrenewal is not based upon a permitted cancellation ground, section 3054 requires the insurer to establish proof or evidence that the reason is in good faith and related to the insurability of the property.

Although the company’s testimony indicates that the action was prompted by a change in the business exposure, it appears that the only change is in the company’s knowledge of the exposure rather than the exposure itself. It is clear that a business operates at the insured location. The company representative explained that operation of a business on the premises, complete with an employee and customer traffic, increases the company’s risk of incurring defense costs despite the policy’s business exclusion. In the present matter, the Superintendent of Insurance finds the company’s argument persuasive that its reason for nonrenewal is in good faith and related to the insurability of the property.