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Delia Kelly v. Hingham Mutual Fire Insurance Company

Held November 5, 2008 - Docket No. INS-08-2110
Decision Issued: November 13, 2008

The insured requested a hearing to contest the company’s intended nonrenewal of her homeowners insurance because the rental exposure of the home does not qualify for homeowners coverage. The company demonstrated that the insured’s primary residence is rented on a short-term basis to vacationers. The company maintained that this type of rental exposure is not eligible for homeowners insurance.

Held: For the insured. The Maine Property Insurance Cancellation Control Act permits nonrenewal of a policy for a reason that is “a good faith reason and related to the insurability of the property or a cancellation ground pursuant to section 3049.” 24-A M.R.S.A. § 3054. Section 3054 further states that a “statement from the insurer that the risk does not meet the insurer’s underwriting guidelines alone is not considered sufficient proof or evidence.” Eligibility requirements for a policy are analogous to underwriting guidelines. Although the company maintained that it does not write homeowners policies for properties with this type of rental exposure, it did nothing to explain how that exposure increases the hazards for which the policy provides coverage. Instead, the company focused on the risk’s lack of compliance with its eligibility guidelines, and also asserted that the business exclusion of its homeowners policy could exclude any potential liability exposure relating to the business of the insured. This argument would seem to negate any increased risk to which the company might be exposed because of the rental exposure. Accordingly, the company has not demonstrated that the reason contained in the notice of nonrenewal is a good faith reason related to the insurability of the property.