This proceeding arose upon a request for hearing made by Michael & Susan McCormick to contest the pending nonrenewal of homeowners insurance coverage provided by Massachusetts Bay Insurance Company. On August 26, 2003, the insurer mailed a notice of nonrenewal effective October 17, 2003 on policy number HVP5840385, citing as the grounds for nonrenewal: “Failure to comply with reasonable loss control recommendations, specifically because the company discovered through an inspection report and made recommendation that the insured upgrade all electrical systems to company requirements of at least 100 amp circuit breakers. The insured has not complied with our request or furnished evidence that the recommendation was complied with.”

A hearing in this matter was held on October 16, 2003 with Connie Mayette sitting as designated hearing officer, pursuant to 24-A M.R.S.A. §§ 210 and 3054. The purpose of the hearing was limited to establishing the existence of the proof or evidence given by the insurer to support its reason for policy nonrenewal. Staff representing Massachusetts Bay Insurance Company submitted a sworn statement in lieu of appearance at the hearing, and was cross-examined by telephone. Michael McCormick represented himself at the hearing.

FINDINGS OF FACT
The following facts have been proven by a preponderance of evidence submitted:

1. Massachusetts Bay has insured the subject property since October 17, 1998.
2. The former 60-amp fuse panel was upgraded to a 100-amp service with circuit breakers in 1985. One older knob and tube branch powers two 60-watt light fixtures in the garage.
3. Following an inspection, the agent of record was notified on October 7, 2002 that the insured must remove the knob and tube wiring. The insured was notified verbally of this requirement.
4. The agency sent a written notification dated March 10, 2003 that the knob and tube wiring must be removed or the policy would be nonrenewed.

ANALYSIS AND CONCLUSION OF LAW
Title 24-A M.R.S.A. § 3051 states that the reason for nonrenewal must be a good faith reason rationally related to the insurability of the property, and 24-A M.R.S.A. § 3054 requires the insurer to establish the proof or evidence of its reason for nonrenewal.

Juliane Anderson, Personal Lines Underwriter for Massachusetts Bay, stated in her affidavit that an inspection revealed active knob and tube wiring in the basement, and that the insured had been given until July 17, 2003 to have it removed. She stated they have received no proof that it was removed. She submitted a copy of the inspection, correspondence to and from the agency, and the agency’s recommendation letter to the insured.

Michael McCormick testified that the inspector sent by the insurer did not examine the integrity of the wires nor did he have any qualifications to determine the status of the wiring. He submitted a report from a master electrician who inspected the service and determined that “the knob and tube wiring is completely safe and does not pose any increase risk to the owner or the insurer.” The report indicated this electrician inspected the full run of the one branch of knob and tube and found the insulation intact, the ceramic insulators in good shape, and the splices properly soldered and wrapped with electrical tape. The electrician also indicated that this branch is properly installed as per the National Electric Code Article 324, and that it represents less than one percent of the total branch wiring in the house.

Mr. McCormick questioned Ms. Anderson as to the inspector’s qualifications. She responded that he was to determine only what was there, not to provide an assessment of the system. She indicated that the circumstances and condition of the knob and tube wiring were irrelevant, as the company would not write any home with this type of wiring present. When asked to specify why his wiring is not safe, Ms. Anderson stated that it is simply the company’s standard for the past year or two and that she believed it was based upon losses other companies have had. A memo included in the company’s correspondence stated that knob and tube wiring has been a leading indicator in wiring losses, but Ms. Anderson was unable to provide any statistics or evidence of that.

Mr. McCormick also submitted a general report on knob and tube wiring from a group of consulting engineers who conduct building inspections. It describes the differences between the older knob and tube wiring and modern wiring, and states that knob and tube on its own is not inherently a problem, it is wiring that has been abused that is potentially dangerous. Another article submitted also compares the two. Both documents indicate that types of abuse include overfusing, improperly spliced additional connections, and blown-in insulation.

Mr. McCormick also testified to the results of research he had been conducting on leading causes of loss for the insurance industry and submitted data from the Alliance of American Insurers (AAI) and the Insurance Information Institute (III). He pointed out that neither organization lists electrical wiring in general or knob and tube wiring in particular as an issue. He argued that the same issue is true for knob and tube as for all wiring in general: it is safe if it is properly installed and in good condition. Ms. Anderson responded that the company has no guidelines to determine if it is safe or not and therefore will not insure any home with any knob and tube wiring.

The Superintendent of Insurance has jurisdiction over this matter pursuant to 24-A M.R.S.A. § 3054. Massachusetts Bay Insurance Company bears the burden of proof for establishing that the statutory grounds for policy nonrenewal exist. Based on the evidence presented at the hearing, the Superintendent hereby concludes that Massachusetts Bay Insurance Company has not established adequate grounds for policy nonrenewal.

The company provided no justification for its position that knob and tube wiring per se automatically provides grounds for nonrenewal. The evidence on the record indicates that the minimal amount of knob and tube remaining in Mr. McCormick’s home is in good condition and should present no greater likelihood of loss than any other properly installed and maintained wiring.

INDEX OF RECORD:
Exhibit 1 – Affidavit of Juliane Anderson
Exhibit 2 – Copy of Nonrenewal Notice & Postal Certificate of Mailing
Exhibit 3 – Inspection report
Exhibit 4 – E-mail correspondence with agent
Exhibit 5 – Recommendation letter 3/10/03
Exhibit 6 – Copy of Policy

Insured Exhibit 1 – Report from CD Electric
Insured Exhibit 2 – Photos
Insured Exhibit 3 – Dunlap-Carson Report
Insured Exhibit 4 – Old House Web
Insured Exhibit 5 – WishTV
Insured Exhibit 6 – Federal Emergency Mgmt. Agency
Insured Exhibit 7 – A.I.I. Data
Insured Exhibit 8 – I.I.I. Data

ORDER AND NOTICE OF APPEAL RIGHTS
The intended nonrenewal is not approved. Massachusetts Bay Insurance Company is directed to renew policy # HVP 5840385 on the same terms as the expiring policy.

This Decision and Order is a final agency action within the meaning of the Maine Administrative Procedure Act. It is appealable to the Superior Court in the manner provided in 24-A M.R.S.A. § 236 and M.R. Civ. P. 80C. Any party to the hearing may initiate an appeal within 30 days after receipt of this notice. Any nonparty whose interests are substantially and directly affected may initiate an appeal within 40 days of the effective date of this Decision and Order.

Last Updated: December 22, 2003