The homeowners forms (HO-2, HO-3, HO-5, HO-4, HO-6, HO-8), Coverages A through F, perils, exclusions and loss settlement are covered in the national Homeowners guide. This guide covers the Montana statutes that govern how a homeowners policy is underwritten, rated, canceled and paid. Montana has no Personal Lines exam, so these rules are tested on the Property exam.

Cancellation and nonrenewal

Owner-occupied homes have their own rule (Mont. Code Ann. 33-23-401):

• To cancel or nonrenew for any reason other than nonpayment, the insurer gives 45 days' written notice stating the specific reasons.
• To cancel for nonpayment, the notice may not be less than 20 days.

General property and casualty rules (33-15-1103 to 33-15-1107) also apply:

• New policies. A policy in force less than 60 days isn't subject to the midterm cancellation limits. It still needs 10 days' notice.

• Midterm cancellation is allowed only for listed reasons. These include:

  • nonpayment
  • material misrepresentation
  • a substantial change in the risk
  • a substantial breach of contractual duties
  • the insurer's financial impairment, or a commissioner determination

  A rate increase isn't a reason. A midterm premium increase or coverage reduction outside the law is an unfair trade practice (33-15-1121).

• Nonrenewal. At least 45 days' notice, with a copy to the producer.

  • No notice is needed if the insured got coverage elsewhere, agreed to the nonrenewal, or the policy was expressly nonrenewable.
  • Nonrenewal based on a single loss is allowed only if the insurer disclosed that standard in writing beforehand.

• Renewal on worse terms. A higher rate or less favorable terms take effect at renewal only with 45 days' notice. This doesn't apply when the rate changes because the risk was reclassified.

• Renewal premium notice. Sent no more than 60 and no less than 30 days before the due date.

• Reasons for the decision. An insured who asks in writing within 60 business days of a cancellation or nonrenewal notice gets the information the insurer relied on within 21 days.

Claims history, inquiries and underwriting limits

• Inquiries aren't claims. A call asking whether something is covered can't be used to decline, nonrenew or surcharge, or be reported to a database (33-15-1105(5)).
  • A contact becomes a claim only when a payment is made, a reserve is set or adjustment expense is incurred, or a formal written denial is issued.
• An insurer may not consider claims or inquiries that produced no payment, except claims tied to a fraud action (33-18-210(13)).
• An insurer may not refuse, surcharge or limit coverage based solely on adverse loss experience 7 years old or older (33-18-210(11)(c)).
• Age of the home or geographic location can be a reason to refuse or limit coverage only for a non-pretextual business purpose, or when the law requires it (33-18-210(7), (8)).
• Licensed day care. A homeowner who runs a day care that meets state requirements can't be denied, canceled or nonrenewed mainly for that reason. The insurer may still exclude or limit business pursuits (33-15-1111).
• Loss-prevention discounts. A premium reduction for preventive measures under 33-24-110 isn't an illegal rebate (33-18-210(3)).
• Credit information (33-18-605, 33-18-608):
  • Credit can't be the sole factor for an adverse decision.
  • Scores can't use income, zip code and similar factors.
  • Medical collections can't count against the applicant.
  • An adverse action notice must give up to four primary reasons.

Paying a total loss

• Valued policy law (33-24-102):
  • For a total loss of insured buildings and improvements, the amount of insurance stated in the policy is conclusively their value, unless the insured is criminally at fault.
  • The insurer may still assert fraud in obtaining the policy.
  • Paying the premium is prima facie evidence that the payer owns the property.
• Unless the policy states a value or a better basis, indemnity under fire insurance is the cost to replace the property in its condition at the time of loss (33-24-101).
• A scheduled item of personal property (other than a motor vehicle) that is totally lost is paid at its stated value, less only the deductible (33-24-103).
• If property taxes are unpaid, the taxing entity has a lien on the fire insurance proceeds for that amount (33-24-104).

Common exam traps

• An owner-occupied home needs 45 days' notice to cancel or nonrenew with specific reasons, or 20 days for nonpayment.
• An inquiry isn't a claim and can't be held against the homeowner.
• The loss-history limit for homeowners is 7 years. Private passenger auto is 3 years, and commercial auto is 5.
• Under the valued policy law, a total loss of a building pays the policy amount.