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James & Rita Bowman v. Encompass Insurance Company of America

Held August 18, 2010 - Docket No. INS-10-2075
Decision Issued: September 8, 2010

The named insured requested a hearing to contest the nonrenewal of a homeowners policy for usage of woodstoves as primary heat and one horse more than the number permitted by the company. The company argued that the risk did not meet its underwriting guidelines, and raised an additional reason for the nonrenewal at hearing. It also argued that the woodstove use in a cold winter climate increases the risk of fire.

Held: For the insured. 24-A M.R.S.A. § 3051 allows nonrenewal for a reason that is in good faith and related to the insurability of the property. It also states that the reason or reasons given for the nonrenewal must be explicit. Any additional reason not articulated in the notice of nonrenewal is not considered by the hearing officer as the insured was not properly notified of that reasons. § 3054 states that the insurer must establish the existence of its reason for cancellation or nonrenewal and provide proof that it is related to the insurability of the property. 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.” Simply a statement that a condition increases the risk of loss is not sufficient without support for that assertion. In this case, the company failed to meet the statutory requirements to nonrenew the policy.