Jay and Luisa Carver, an expectant couple whose homeowner insurance policy was canceled by State Farm Fire and Casualty Co. when they recently added a second story to their Arlington home, got an apology and an offer of reinstatement from the firm this week.

But both were too late and insufficient for Jay Carver, who instead signed on with Cambridge Mutual, an insurance firm based in Andover, Mass. Cambridge Mutual made one of what he said were "dozens" of offers of coverage from other insurance companies after State Farm's unusual action was made public. Moreover, Carver said he also canceled his State Farm car insurance.

"I don't take a lot of satisfaction that they've reversed their decision in my case, because I've heard from a lot of people . . . who may not be protected adequately from this so-called regulated industry," Carver said.

Don Zimmerman, State Farm's regional vice president, said, "We sent him a letter of apology, because that's not the way we do business."

The firm initially sent the Carvers a letter on Jan. 27 informing them it was canceling, effective March 1, the insurance policy they had had for 16 years on their house at 3406 N. 3rd St.

State Farm said then that the ongoing work involved in adding a second story to their home in the Ashton Heights neighborhood had substantially increased the risks covered by the policy. State Farm's letter came in response to Jay Carver's request for increased coverage on the house, which was appraised at $133,000 before he made an estimated $80,000 in improvements.

The firm's decision plunged the Carvers into a homeowner's nightmare because other insurance companies refused to give them coverage, citing corporate policies against insuring someone who has been canceled by another company -- policies the Virginia insurance bureau said are illegal.

In addition, the Carvers faced the possibility of foreclosure because the mortgage company that refinanced their home was demanding proof of insurance coverage as required for the loan.

The Carvers, who had decided to expand their tiny house after learning a third child was on the way, were baffled by State Farm's decision, one that ran counter to the experience of neighbors who had added second stories to their houses without losing their home insurance.

Carver noted that his general contractor for the expansion, T. W. Lawrence, had insurance to cover any liabilities arising from the work, which is now virtually completed.

Learning of the contractor's insurance persuaded State Farm to reverse its decision, Zimmerman said. Because the contractor was "reputable" and the work nearly done, State Farm decided to withdraw its cancelation notice.

Asked why State Farm did not investigate the contractor's insurance coverage before sending the cancelation letter, Zimmerman defended the firm's action, saying, "Procedurally, there are things that have to be done."

Zimmerman said he met with the Carvers' insurance agent and State Farm's underwriting officials last week and decided to reevaluate the January decision.

"Once we got the information we needed to properly evaluate and underwrite the risk, we made a decision to continue the policy and cover the risk," he said.

Zimmerman also expressed concern over news accounts of the Carvers' plight, saying the reports came after State Farm reversed its decision and wrote the Carvers a letter dated Feb. 12 offering reinstatement. Carver, however, said he did not receive the letter, postmarked Feb. 14, until last Tuesday.

Referring to the firm's motto, "Like a good neighbor, State Farm is there," Zimmerman said the news reports "made us look like we're not the good-neighbor company, and we are. . . . We regret this, and it shouldn't have happened."

Nonetheless, Carver, who said he never filed a claim or made a late payment to State Farm, was not appeased.

"I'm still not satisfied that an ordinary citizen going through an ordinary renovation is going to be protected," said Carver, who is director of the District's Pretrial Services Agency, which makes background reports for the courts on suspects seeking bail.

He said he received "dozens and dozens of calls" from persons with similar problems and from insurance companies and independent brokers offering coverage. Two of those calls were from insurance companies that had rejected his request for coverage.

After his ordeal with State Farm, he decided he was undercovered and increased his policy from the $107,000 covered by State Farm before the remodeling to $165,000 for the new five-bedroom house, he said. The increased coverage will raise the annual premium from $258 to $406.

" 'Knowing all that we know now, what should I have done or somebody else do when remodeling a house?' " Carver said he asked a State Farm official this week.

Carver said the official told him homeowners should contact their insurance agent, point out that there is a general contractor, and give an estimate of the time necessary for the work and the extent of the renovation.

"I said 'I did every single one of those things and it didn't help me out, did it?' " Carver recalled. "He said 'no.' "