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Joseph & Anne Riley v. Vermont Mutual Insurance Company
Docket No. INS-07-2122, Decision Issued January 7, 2008.

The insured requested a hearing following receipt of a notice of homeowners insurance nonrenewal citing the failure of the property to qualify for a homeowners policy and the presence of a tenant as the reasons for nonrenewal. At hearing, the company maintained that it does not write homeowner policies unless the property is occupied by the insured. When the hearing officer asked the representative to explain how occupancy by a tenant relates to the insurability of the property, he stated that eligibility for a homeowners policy requires occupancy by the insured. In a sworn statement, the insured testified that the company has insured the property for many years, and it has always been tenant occupied.

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.” The company testified that the property is not eligible for coverage under a homeowners policy because it is not owner occupied. The company’s eligibility requirements for a policy is analogous to underwriting guidelines, Therefore, they are insufficient to prove that the insurer’s reason is a good faith reason related to the insurability of the property. Even when directly questioned about the relationship to insurability, the company failed to identify any factor that would support the action. Accordingly, approval for this nonrenewal action is denied.