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Troy & Sheila Richardson v. Allstate Insurance Company
Docket No. INS-07-2085, Decision Issued October 18, 2007.

The insureds requested a hearing following receipt of a notice of homeowners insurance coverage nonrenewal citing the insureds’ loss history with respect to three losses. At hearing, the company maintained that the nonrenewal action was based upon claim frequency and the insureds’ failure to exercise prudent control over the loss exposure. The insureds maintained that the losses were beyond their control.

Held: For the insureds. The applicable statute, 24-A M.R.S.A. § 3051, provides 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.” Section 3051 also states that “loss record” by itself is not an acceptable reason for nonrenewal. A company must demonstrate a nexus or pattern to illustrate that the cause or nature of past claims is such that similar or continued future claims are likely. Because section 3051 also requires that the reason for nonrenewal be explicit, the company must clearly identify in its notice the connection between the claims and its reason for anticipating that claims will continue.

In the present case, the company identified the occurrence of three claims within a five year period as the reason for nonrenewal, alleging that such loss frequency is above average for the company’s Maine policyholders. The company accused the insureds of failing to exercise prudent control over their property but it did not explain how the insureds could have prevented any of the losses. Moreover, the losses appear to be distinct from one another, and the company did not demonstrate that any of them are casually related. Thus, there is insufficient evidence to conclude that the nature of the past claims is such that continued claims are likely. Finally, in the notice itself, the company articulated no reason for the anticipated continuation of claims other than the fact that past claims have occurred.