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Andrew & Buffy Patrie v. State Farm Fire & Casualty Company
Docket No. INS-05-2018, Decision Issued July 11, 2005.

The insureds requested a hearing following receipt of a notice of homeowners insurance cancellation citing the discovery of negligent acts or omissions due to the operation of a daycare as the reason for cancellation. At hearing, the company cited York Insurance Company of Maine v. Superintendent of Insurance, 2004 ME 45, 845 A.2d 1155, arguing that a home daycare increases the liability exposure and places an insurer in a position to defend an exposure which is otherwise excluded from the policy. The insureds testified that the business has a separate daycare liability policy.

Held: For the insureds. The company’s stated reason specifically references the discovery of negligent acts or omissions by the insured substantially increasing any of the hazards insured against. See 24-A M.R.S.A. § 3049(4)(A). However, the wording of the policy contract itself requires “grossly” negligent acts or omissions to permit cancellation of the policy. The company has not shown how the operation of a daycare on the insured premises constitutes an act or omission that is grossly negligent or even negligent. Accordingly, there is no need to address whether the operation of the daycare substantially increases a hazard insured against despite the existence of the separate liability policy.
Although the company argues that its cancellation action is a good faith reason related to the insurability of the property, that is not a standard for mid-term cancellation of a homeowners policy. It is a current standard for nonrenewal of such a policy. See 24-A M.R.S.A. § 3051. As the company has failed to substantiate at least one of the required elements to successfully cancel this policy, the cancellation is not permitted.

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