Archives: 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011| 2012

Harbor Club, Inc., v. Massachusetts Bay Insurance Company/Hanover Insurance Company
Hearing #2005-15869/2005-15870, Decision Issued May 10, 2005.

The insured requested a hearing following receipt of a notice of cancellation of a commercial package insurance policy issued by Massachusetts Bay Insurance Company and a notice of cancellation of a commercial umbrella/excess policy issued by Hanover Insurance Company, each citing the failure to comply with loss control recommendations. At hearing, the companies maintained that multiple recommendations were made to the insured and the insured indicated either that it would not comply with them or that it intended compliance in several years. The insured argued that there is no current risk because the club is closed and will not open until June. The insured further maintained that the companies failed to demonstrate that repairs had not been made. However, the insured’s witness stated that the insured was unwilling to follow one of the recommendations because the changes would alter the character of the club.

Held: For the companies. Title 24-A M.R.S.A. §§ 3007(2)(D) and 2908(2)(D) permit an insurer to cancel a policy for failure to comply with reasonable loss control recommendations. Although the insured argued that the exposures are not new and have existed since at least the time of policy inception, there is no requirement that loss control recommendations involve new hazards only. It is permissible to require an insured to minimize the hazards that increase exposure to injury when liability exposure is covered under a policy. The commercial package policy insures against liability claims. One of the recommendations is a reasonable attempt to minimize that exposure, and both the insured’s witness and attorney have stated that the insured is unwilling to comply. This is enough in itself to establish a failure to comply with reasonable loss control recommendations. Therefore, cancellation of the commercial package policy is permitted under § 3007(2)(D).
Although the loss control recommendation letter sent to the insured focused upon the commercial package policy, in light of the affiliation between the two companies and the type of coverage offered by the umbrella/excess policy, the insured had notice that the recommendation discussed above pertained to the umbrella policy as well. Accordingly, the insured has failed to comply reasonable loss control recommendations impacting the umbrella/excess policy, and cancellation of that policy is permitted under § 2908(2)(D).

Return to Cancellation / Nonrenewal Hearing Decisions