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. Re UF AAD * 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 SMM Mmercial mayvcar 2 DOG ; Vit Mae 1 CULE CG Waytare pully, Vu GUC. iil Y¥VU 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 nonrenewal 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 Ko 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). b b ~ } he 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). tad “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). On \oO a > No oO KS No Ow No ro iy CD - r oO m a [5] ag [2] OQ Om XY wn ou A aQ wm + © + a OM OQ © "3 ch my B <i m WW oO [5] O oh WM c ~O a oO WR om O ou > “< 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), tn 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)