Bulletin No. 2003-07-INS
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 nonrenewing 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 nonrenewed 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 nonrenew
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
611 West Ottawa
P.O. Box 30220
Lansing, Michigan 48909-7720
Toll Free (877) 999-6442