Co-authored by: Cileena Terra
A recent decision in Connecticut confirmed that substantial changes in property coverage policies are considered a “non-renewal” that requires insurers to give insureds 60 days’ notice. That Court found that the property and casualty insurers’ advance notice requirement for non-renewal of a policy applies to renewals conditioned on acceptance of substantial changes in coverage. While insureds are presumed to be aware of the content of original policies, they are not presumed to have carefully read their renewal policies. Therefore, an insurance company has an affirmative obligation to provide notice to the insured when substantial policy changes occur in order for the policy to be considered in effect.
In Lemieux v. New London County Mutual Ins. Co., Docket No. CV166011231S, (Conn. Super. 2019), an insurance policy dispute arose between the parties concerning whether the faulty concrete that caused the plaintiffs’ walls to deteriorate should be covered under the policy. The parties’ dispute was whether the original or newer, modified version of the insurance policy should represent the agreement between the parties. The original policy was in effect from 2000 to 2007 and contained language more favorable to the insured with respect to a faulty concrete foundation claim. The modified coverage required “an abrupt falling down or caving in of a building or any part of a building with the result that the building or part of the building cannot be occupied for its current intended purpose.” The homeowners argued that the original policy language should be in effect, while the insurance company argued that the later policy, which modified the original without notice to the insureds, should be in effect. The homeowners stated that the change in the collapse coverage initiated by the insurer in the 2007-2008 policy failed to take effect because the insurer did not follow the guidance given by the Insurance Commissioner in a 2004 bulletin published to all insurance companies which required notice prior to a substantial change being made in a policy.
The court agreed with the homeowners that notice was in fact required. The court reasoned that the requirement under C.G.S. § 38a-323(a)(1), that the insurance company is required to provide 60 days’ notice, applies to both non-renewals of existing policies as well as policy modifications that substantively alter the terms of a policy. The court held that a modification of a homeowner’s policy that restricts coverage for collapses caused by latent defects is unenforceable if the insurance company fails to comply with statutorily required 60 days’ notice. The court said that a homeowner has the right, under the C.G.S. §38a-323(c), to opt for coverage at the same costs and under the same terms as the original policy when the insurance company fails to comply with the required 60 days’ notice. Furthermore, the court noted that the continued presence of the modified language in subsequent renewal policies, without the required notification to the insured, results in a continuing right of the insured to opt for additional coverage until said notice is provided.
This holding is significant and it is a reminder to policyholders and insurance coverage counsel that if the policy you are dealing with has been the subject of substantial changes, an inquiry should be made concerning whether the insurance company provided proper notice.
 (1) Collapse means an abrupt falling down or caving in of a building or any part of a building with the result that the building or part of the building cannot be occupied for its current intended purpose. (4) A building or any part of a building that is standing is not considered to be in a state of collapse even if it shows evidence of cracking, bulging, sagging, bending, leaning, settling, shrinkage or expansion. Lemieux v. New London County Mutual Ins. Co., Docket No. CV166011231S, (Conn. Super. 2019), at 6.