Bulletin No. 2003-07-INSSpecific Breed of Dog Exclusions
The Office of Financial and Insurance Services has learned that some insurance companies licensed to sell home insurance in Michigan deny home insurance, exclude coverage, or cancel home insurance policies of "eligible persons" based on the insureds possession of a specific breed of dog. Some of the breeds include Rottweilers, German Sheperds, Doberman Pinschers, Chows, and Bull Terriers. Insurance carriers contend certain dog breeds have a propensity toward violent behavior and therefore, refuse to provide coverage to families who have such an animal as a pet.
MCL 500.2103(2) of the Essential Insurance Act (the Act) defines an eligible person for home insurance, as well as an eligible dwelling. Specifically, section 2103(2)(i) states an eligible person is not, "A person who insures or seeks to insure a dwelling that has physical conditions that clearly present an extreme likelihood of a significant loss under a home insurance policy." Public Act 2002 PA 492 added this section to the eligible person language, effective March 31, 2003. However, any rules used to make an eligible person determination should be filed with the Commissioner for review. The Commissioner takes the position these eligibility rules function as underwriting rules required to be filed under Section 2119 of the code, MCL 500.2119. The implementation of the new section does not allow denying, canceling, or non-renewing coverage based on the insured's possession of a particular breed of dog. The presence of a particular breed of dog does not make a person ineligible for home insurance.
MCL 500.2117 and 2119 of the Act establish allowable underwriting criteria to be used when evaluating an eligible person and an eligible dwelling for the purpose of offering home insurance coverage. In 1980 the Michigan Insurance Bureau issued Bulletin 80-17, which further defined how insurance companies must develop and use the underwriting rules. This bulletin also reiterated the need for home insurance companies to file their underwriting rules with the Commissioner. An underwriting rule may not be used to deny or cancel coverage for an eligible person if the rule has not been filed for review.
However, home insurance carriers may use MCL 500.2117(2)(c)(i) and (ii), which allow the policy to be non-renewed based on the claim history of the person insured or to be insured during the three year period immediately preceding renewal of the policy, if the claim experience has arisen out of the insured's negligence or if the insured after written notice has failed to correct a condition directly related to a paid claim or that presents a clear risk of significant loss. The Commissioner interprets this section to mean an insurer may non-renew a policy or deny coverage if the dog on the premises has bitten a person or attacked another animal and has caused a liability claim to be paid under the policy. The coverage should not be conditioned on the breed of dog present, but only its bite history related to paid claims and after written notice to the policyholder. However, this rule also can be used only if it is filed with the Office of Financial and Insurance Services.
MCL 500.2105(2) governs group home insurance writers and states, "This chapter shall not apply to insurance written on a group, franchise, blanket policy, or similar basis which offers home insurance or automobile insurance to all members of the group, franchise plan, or blanket coverage who are eligible persons." The Commissioner's January 27, 1995 decision in Wood v Citizens Insurance Company of America, unpublished APA decision, Case No. 89-10241-EI, determined that group insurance writers cannot use any criteria found in MCL 500.2117 to underwrite a group policy, but must insure all eligible persons as defined under 2103. This decision means that group insurers cannot use the liability loss language found in 2117 to cancel or deny coverage to an eligible person. However, Section 2103(2)(i) of the Act allows group insurers to deny coverage to any eligible person if the dwelling contains a physical condition that clearly presents an extreme likelihood of a significant loss under a home insurance policy. The mere presence of a specific breed of dog on the premises does not meet the standard established for denial of coverage, and an eligibility rule must be filed with the Office of Financial and Insurance Services before such an action could even be taken against a dog with a biting history. A rule that only addresses a specific breed of dog would not be allowed.
Some home insurance companies have added directly into the policy language exclusions of liability coverage if the insured owns a particular, listed breed of dog. The Commissioner would consider such an action in violation of the Essential Insurance Act since the insurer would be denying coverage to an eligible person based on an unfiled underwriting standard. The policy form containing such an exclusion would also violate MCL 500.2236(5). A liability coverage exclusion based on ownership of a specific breed of dog would be considered a provision in the policy that contains exceptions and conditions that unreasonably or deceptively affect the risk purported to be assumed in the policy. Most home insurance purchasers would reasonably expect coverage under the liability portion of their policy for an accidental action taken by a family pet.
For any of the violations described above, the Commissioner will apply the appropriate sanctions provided in the Insurance Code.
Any questions regarding this bulletin should be directed to:
Office of Financial and Insurance Services
611 West Ottawa
P.O. Box 30220
Lansing, Michigan 48909-7720
Toll Free (877) 999-6442