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Stephen & Joan Castellano v. Vermont Mutual Insurance Company
Docket No. INS-06-2142, Decision Issued December 27, 2006.

The insureds requested a hearing following receipt of a notice of homeowners insurance nonrenewal citing an increase in liability exposure as the reason for nonrenewal. At hearing, the company maintained that a resident of the insureds’ household presents a liability increase due to past events. The insureds maintained that the person mentioned in the notice does not live in their home.

Held: For the insureds. Title 24-A M.R.S.A. § 3051 permits policy nonrenewal 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.” Section 3051 also requires that the reason or reasons for nonrenewal be explicitly stated in the notice of nonrenewal. This nonrenewal notice is ambiguous and based upon the wording there are several possible interpretations. Because it is unclear what the precise reason for the company’s action is, it is arguable that the company did not provide adequate notice under § 3051 of its reason for nonrenewal. However, we shall address each possible interpretation.
Section 3049(2) permits nonrenewal for the conviction of a named insured of a crime having as one of its necessary elements an act increasing any hazard insured against. The person mentioned in the notice is not a named insured. Furthermore, the resolution of the incident at issue is not analogous to a conviction of a crime. Because the company has not demonstrated that its reason for nonrenewal is based upon a cancellation ground, the company must establish proof or evidence that its reason is a good faith reason and related to insurability to prevail in this action.
If the company’s reason for nonrenewal is an increase in liability exposure due to the presence of the person in the household, the company has not proven that the person is a household resident. The insureds maintained that the person is not a resident and provided some evidence to support their position. The company did not present sufficient evidence to support its position.
Even if the person is a resident of the household, the company did not explain how his presence affects the insurability of the property. All incidents to which the company referred involved intentional acts. The policy specifically excludes bodily injury or property damage that is expected or intended by an insured. In light of this exclusion, there is insufficient evidence to demonstrate that the insurability of the property is impacted.
If the company’s reason for nonrenewal is the increase in exposure due to insureds’ liability for the person’s actions, even if the person at issue is a resident of the household, the insureds are not responsible for his supervision.
The reason contained in the company’s notice is ambiguous in violation of the explicitness requirement of § 3051. The company has also not proven the viability of any possible interpretation of its notice. The company has not demonstrated that it may nonrenew this policy.