York Ins. Co. of Maine v. Maine Bureau of Ins.

STATE OF MAINE “Soce ae. -SUPERIOR COURT

CUMBERLAND, ss. pas “CIVIL ACTION

eat re DOCKET NO. AP-02-59

AP-02-65

YORK INSURANCE COMPANY “ea Lo Doe ae

OF MAINE, BS

Petitioner,

Vv.

MAINE BUREAU OF INSURANCE,

DONNA WOOD, AND CRECORY WOOD,

Respondents; Lethe > AROS

ORDER ON 80C APPEALS

YORK INSURANCE COMPANY

OF MAINE,

Petitioner,

V.

MAINE BUREAU OF INSURANCE,

DORI HALLMAN, AND CARL

HALLMAN

Respondents.

York Insurance Company of Maine (Yerk) appeals the Findings and Decision ot

the Superintendent of the Bureau of Insurance in two separate hearings.’ York appeals

both decisions of the Hearing Officer finding that York had not met its burden of

establishing adequate statutory grounds for non-renewal of the homeowners’ policy

for Donna and Gregory Wood (Woods) and Dori and Carl Hallman (Hallmans).*

FACTUAL BACKGROUND

1 The Order on both appeals 1 is consolidated, per agreement of the parties.

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* 24-A M.LR.S.A. § 3051 states in pertinent part:

The reason or reasons for the intended nonrenewal action shall accompany the

notice of intent not to renew and the reason or reasons shall be explicit.

Explanations such as "underwriting reasons," "underwriting experience,” "loss

record,” "location of risk," "credit report" and similar insurance terms are not by

themselves acceptable explanations of an insurer's intended nonrenewal of a policy

insuring property of the kind defined in section 3048. The reason for nonrenewal

shall be a good faith reason rationally related to the insurability of the property.

York has insured the Woods’ residence since June 10, 1994. At that time, there

was not a daycare business on the premises. In 1998, York was asked to write the

ial daycare policy, but declined. The Woods obtained daycare Hability

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notice of non-renewal effective June 10, 2002. The reason stated for non-renewal was

“Daycare Business Conducted on Premises.” The Woods requested a hearing, which

was held on June 6, 2002, before Hearing Officer Mayette.

The Hallmans

York, or its predecessor, has insured the Hallmans’ residence since December 14,

1984. The daycare business did not commence until 1999, at which time the Hallmans

obtained commercial coverage through Empire Fire and Marine Insurance Company.

In May of 2602, a claims adjuster notified.a personal lines underwriter that there was a

daycare business on the premises. On May 24, 2002, York mailed a notice of non-

renewal effective December 14, 2002. The reason stated for non-renewal was

“discovery of a business conducted on the premise [sic], the insured is currently

operating a day care business on the insured premises substantially increasing our

liability exposure.” The Hallmans requested a hearing, which was held on August 6,

2002, before Hearing Officer Mayette.

The Hearings

At both hearings, York’s representatives argued that they perceived a risk with

the company’s duty to defend a potential lawsuit against the insureds, notwithstanding

the policy’s business exclusion and the existence of the separate commercial insurance

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coverage. York asserted that the duty to defend is broader than the duty

the increased activity at the Respondents

potential liability, albeit for defense costs, not benefits. York supported it contention

ME 138, 711 A.2d 1310 in which a homeowner’s insurance company was held to have a

duty to defend when the claim resulted from business activity on the property.

business because of a dispute between the daycare liability insurer and the homeowner

liability insurer.

Taking the arguments, cases, and the instant facts under advisement, Hearing

Officer Mayette concluded that York had not established adequate grounds for policy

non-renewal. The Hearing Officer reasoned;

There is no indication in the four daycare-related court cases [Elliott; and

VA, IL and OH cases] submitted by the company that any of those

insureds had a general liability policy covering their business exposure. It

would seem reasonable that a policy specifically covering the business

- exposure would respond 4o any daycare-related claims, thus.shielding the

homeowners policy, at least in part, from any duty to defend.

York took these appeals.

DISCUSSION

Any party aggrieved by a final agency action shall be entitled to judicial review

in the Superior Court. 24-A M.R.S.A. §236 (appeals from the decision of the

superintendent or his representatives shall be pursuant to the APA, 5 M.R.S.A. § 11001).

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See also M. R. Civ. P. 80C(a). On review, the court may either affirm, remand, reverse,

or modify the agency's decision. 5 M.R.S.A. § 11007 (4). The court's review shall be

limited to the record before the agency upon which the agency decision was based. 5

M.RS.A. § 11006 (1). "The court shall not substitute its judgment for that of the agency

on questions of fact.” 5 M.R.S.A. § 11007 (3).

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“The standard of review is limi

evidence in the record." Seider v. Board of Examiners of Psychologists, 2000 ME 206, J

I INABA YADA (Ass ana an Sf

555 { UViE. 2UUU) (quotation and citat on Omi

2000 ME 56, 1 9, 748 A.2d 472. "When an agency conch

the burden of proof failed to meet that burden, we will reverse that determination only

if the record compels a contrary conclusion to the exclusion of any other inference."

Hale-Rice v. Maine State Retirement System, 1997 ME 64, ] 17, 691 A.2d 1232) (citing

Dougias v. Board. of Trustees, 66S A.2d 177, 179 (Me. 1996)(equating the.standard.to the

arbitrary and capricious language of the APA)

The courts “have recognized a legislative intent to delegate broad authority .. .,

when the statutory language is ambiguous.” Jasch v. Anchorage Inn, 2002 ME 106, { 9,

Comm'r, Dep't of Educ., 2003 ME 37, J 7, 818 A.2d 1034. To determine the intent of the

Legislature, "we look first to the statute's plain meaning and, if there is ambiguity, we

look beyond that language to the legislative history.” Id. (quotation and citation

omitted).

In the instant case, there are two terms at the center of the dispute: “good faith

reason” and “insurability.”* See supra note 1. The Hearing Officer had to determine

> “Good faith” means:

A state of mind consisting in (1) honesty in belief or purpose, (2) faithfulness to

one’s duty of obligation, (3) observance of reasonable commercial standards of fair

dealing in a given trade or business, or (4) absence of intent to defraud or to seek

unconscionable advantage.

BLACK’s LAW DICTIONARY 701 (7® ed. 1999).

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Insurance companies are in the business of insuring risks. In so doing, the

companies rely on prior and related experiences and actuarial calculations to complete a

risk assessment — to determine insurability. The evidence at the hearing indicates that

York deiermined that the risk was too great to’ continue covering a residenve with

daycare facilities. It is not the province of the Superintendent of the Bureau of

Insurance, through the Hearing Officer, to determine the level of acceptable risks for an

insurance company. The only determination necessary was whether York met its

burden for issuing. a non-renewal notice. The Hearing Officer went too far in weighing

the likelihood that a commercial carrier’s coverage would shield York from liability. The

evaluation of such risks is the primary responsibility of the underwriters for York

Insurance, not the Superintendent of Insurance. The purpose of this Act was not to

conscript the insurance companies conducting business in Maine and commandeer their

autonomous underwriting procedures and principles, but to ensure that Maine

residents would not have property insurance coverage stripped away absent a

““Tnsurability” means “insurable,” or “ab[ility] to be insured.” BLACK’s LAW DICTIONARY 802

(7th ed. 1999),

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purpose was protected.

Robert E. Crowley

Justice, Superior Court

° “The purpose of [the Maine Property Insurance Cancellation Act] is to limit a company’s right

to cancel certain policies covering real property which is used solely for residential purposes and

to contractually obligate a company to give proper notice of nonrenewal and to furnish reasons

for any termination f the contract. L.D. 666, Statement of Fact (106 Legis. 1973). See also 24-A

M.R.S.A. §§ 3048(1)-(3) (limiting the scope of the act to real property used solely for residential

purposes and excluding personal property “used in the conduct of a commercial or industrial

enterprise’).

Date Filed 11-05-02 Cumberland

Docket No, _4P702-59

County

Action __80C Appeal

York Insurance Company of Maine, Inc.

VS.

Maine Bureau of Insurance and

Donna L. Wood and

Gregory Wood

Plaintiff's Attorney

James D. Poliquin Esq.

P.O. Box 4600

Portland, Maine 04112-4600

(207) 774-7000

Date Filed 11-25-02 CUMBERLAND Docket No. APO2-65

County

Action 80C_ APPEAL

YORK INSURANCE COMPANY OF MAINE, INC.

VS.

Defendant’s Attorney

Andrew L. Black

Assistant Attorney General

6 State House Station

Augusta, Maine 04333-0006

MAINE BUREAU OF INSURANCE

CARL HALLMAN

DORI HALLMAN

Plaintiff?s Attorney

James Poliquin Esq.

PO BOX 4600

Portland ME 04112

Defendant’s Attorney

Andrew Black AAG (ME. BUR. OF INS)

6 State House Station

Augusta ME 04333

Dori Hallman (Pro Se)

Carl Hallman (Pro Se)