MAINE NONRENEWALS UPHELD:

The Maine Supreme Court has upheld the right of an insurer not to renew a homeowners policy for insureds operating at-home day care centers, even though the operators had separate commercial policies for their businesses. In York Insurance Co. v. Superintendent of Insurance, Justice Donald Alexander wrote that the insurer’s stated reason that the day care business contributed to higher traffic in the home and presented the insurer with a heightened duty to defend were reasons enough for its non-renewal. The case began with two 2003 administrative rulings in which the insurance superintendent found that York had not met its burden of proving that the reasons for non-renewal were “good faith reason[s] rationally related to the insurability of the property” as required under Maine law. The case involved two homeowners insurance policies issued by York Insurance Company. The policies contain identical business pursuits exclusions and endorsements stating that a home day care is an excluded business. York’s concern was over the potential for exposure to claims against the homeowners policy by users of the daycare business. A York representative testified that the company could be required to defend lawsuits arising from the day care business even though the policy excludes coverage for business-related losses because, under Maine law, an insurer’s duty to defend is broader than the duty to indemnify. The court agreed that York established that a day care business will increase traffic to and at the property covered by its homeowners policy; increased traffic increases the risk that a greater number of claims could arise, compared to what would occur on a normal homeowners property without an associated day care business drawing people to the property; and York would have a heightened exposure to a duty to defend claims arising on the property covered by its homeowners policy, even if those claims arose from the on-premises business activity. Thus, the high court ruled that York met its burden to establish a rational basis for its decision not to renew.