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John R. Brainard v. State Farm Fire & Casualty Company
Hearing #2005-16124, Decision Issued June 1, 2005.

The insured requested a hearing following receipt of a notice of homeowners insurance cancellation citing physical changes in the property which result in the property becoming uninsurable due to the lack of owner occupancy. At hearing, the company maintained that the dwelling was unoccupied which caused a water damage claim to occur. The insured maintained that he was residing at the home at the time of the loss and disputed the company’s allegations of inadequate precautions and care for the house.

Held: For the insured. The company relies upon 24-A M.R.S.A. § 3049(5) which states that a policy may be cancelled for “physical changes in the insured property that result in the property becoming uninsurable.” Even if the home was unoccupied starting at the time of the loss, becoming unoccupied does not constitute a physical change in the property. Moreover, the company has not demonstrated that the home has become uninsurable due to the lack of occupancy, and the failure to meet underwriting guidelines for the particular policy at issue alone does not make the property uninsurable.
Based on the wording of the cancellation notice, the company also relies upon § 3049(6). That statute, effective July 30, 2004 provides for policy cancellation if a company can demonstrate that an insured property is vacant and custodial care is not maintained. However, the policy submitted by the company does not include the § 3049(6) cancellation ground and accordingly, the company may not utilize § 3049(6) to cancel the policy. Similarly, the company may not rely upon § 3049(4)(A) which permits cancellation upon the discovery of “negligent acts or omissions by the insured substantially increasing any of the hazards insured against.” The earlier version of this statute, 24-A M.R.S.A. § 3049(4), required that the acts or omissions substantially increasing any of the hazards insured against be “grossly negligent,” which corresponds to the language in the subject policy. Even if the company’s allegations are true, the insured’s actions do not rise to the level of being grossly negligent. Moreover, nothing in the wording of the cancellation notice informs the insured that this action is based upon the ground articulated in § 3049(4).

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