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Henry & Ruth Gibbert v. Green Mountain Insurance Company
Docket No. INS-07-2100, Decision Issued October 26, 2007.

The insured requested a hearing following receipt of a notice of cancellation of homeowners insurance coverage citing nonpayment of premium as the reason for cancellation. At hearing, the company representative testified that the insureds paid the premium in full at renewal, but the company then determined that the property was greatly underinsured. She stated that the company endorsed the policy to increase the insurance value, resulting in additional premium that the insureds did not pay. The insureds did not appear at the hearing.

Held: For the insured. Under 24-A M.R.S.A. § 3049(1), an insurer may cancel a policy for nonpayment of premium, which is defined as “the failure of the named insured to discharge when due any of his obligations in connection with the payment of premium on the policy, or any installment of a premium…” 24-A M.R.S.A. § 3049.

Section 3059(1) states that “[if] an insurer determines that the stated insured value of a property covered by a policy subject to this subchapter should be increased to depict more accurately its current value and the increase in valuation will result in an increase in premium for the policy, then the increase in the stated insured value and the corresponding increase in premium may be implemented only at the time of renewal.” If an insurer wishes to implement such a valuation increase, “the insurer must provide notice to the named insured on the policy at least 30 days prior to the effective date of the renewal policy stating the reason for the increase in premium and the amount of premium increase associated with the increase in valuation.” § 3059(2).

In this case, the company issued the policy renewal and accepted the premium payment in full. The company then initiated an increase in the dwelling coverage amount 72 days after the effective date of the renewal. Absent the named insured’s consent to a valuation increase, a company may implement such a change only at the time of renewal and only if it gives proper notice of the change. § 3059. There is no evidence that insureds agreed to this valuation increase. Thus, the insureds’ failure to pay the additional premium generated from the valuation increase in not a “failure of the named insured to discharge when due any of his obligations in connection with the payment of premium on the policy…” as set forth in § 3049. Accordingly, this cancellation action is not permitted.