Clarifying Inter-Policy Stacking in UIM Cases
Venango County judge explains differences in recent high court opinions
Daniel E. Cummins
The Legal Intelligencer
May 18, 2010
Venango County Common Pleas Court Judge Robert L. Boyer recently issued an opinion and order that clarifies issues involving inter-policy stacking in UIM cases and explains how two state Supreme Court decisions work together.
As Boyer explained in Heller v. State Farm, which was handed down on April 24, intra-policy stacking involves one automobile insurance policy covering multiple vehicles.
An insured can pay a higher premium to purchase the stacking option, which enables the insured to increase the amount of coverage that he or she can receive in the event of an accident by totaling the UIM coverage for each vehicle on the policy.
For example, in Heller, the injured party had a stacked policy with Erie Insurance on three vehicles. The policy provided for $15,000 in UIM coverage. But since there were three vehicles under the one policy and since the stacking option had been purchased, the injured party had $45,000 in UIM benefits potentially recoverable in the event of an accident.
In Heller, Boyer noted the state Supreme Court, its 2006 decision Craley v. State Farm, recognized another form of stacking — inter-policy stacking. Inter-policy stacking occurs when a single insurance company has issued multiple policies covering separate vehicles in a household.
Craley involved a claimant who was killed in an auto accident. The claimant's husband attempted to recover both under a State Farm policy that had been issued to the deceased claimant on one vehicle in the household as well as under a separate policy that had been issued by State Farm to the husband on a separate vehicle.
The decision in Craley had to do with the fact that both of the State Farm policies included a waiver of the stacking option executed by the insureds. In addition to recognizing the concept of inter-policy stacking, the Craley court also held that the waiver of stacking was valid in both intra-policy and inter-policy situations.
It was therefore determined in Craley that, since stacked coverage was waived, a UIM recovery was only available under the decedent's insurance policy and not the husband's separate policy with the same carrier.
In Heller, Boyer wrote, the injured party had a State Farm policy that provided for non-stacked UIM coverage of $100,000. The plaintiff also had a separate policy with Erie Insurance covering three vehicles with stacking UIM coverage of $15,000, i.e., a total of $45,000 in benefits available.
Erie tendered its $45,000 in UIM benefits to the injured party. State Farm then attempted to limit its exposure under its "other insurance" clause, which provided that, where the injured party had UIM coverage available from more than one policy — regardless of whether the other policies were provided by State Farm or another carrier — the injured party would be limited to the amount of the highest UIM policy limit among all of the available insurance policies, according to the opinion.
Since the highest UIM policy limit at issue in Heller was the $100,000 limits in the State Farm policy, State Farm believed that, pursuant to its "other insurance" clause, it was correct in only having to pay another $55,000 above the $45,000 paid by Erie (i.e., $45,000 + $55,000 = the highest policy limit available of $100,00).
Boyer agreed with State Farm in Heller and, in doing so, distinguished the plaintiff's strong reliance upon the 2008 state Supreme Court case Generette v. Donegal.
Those Who Can't Waive
In Generette, the claimant was injured while riding as a guest passenger in a vehicle. The injured party recovered under the liability policy that covered the tortfeasor's policy and also obtained a tendering of the Nationwide $50,000 UIM policy limits covering the vehicle in which she was located at the time of the accident, according to the opinion.
The injured party in Generette then turned to Donegal Insurance to recover the additionally available $35,000 in UIM limits she had purchased for herself on her personal vehicle. The facts of that case confirmed the injured party had waived the stacking option under her own policy.
Like the State Farm policy in Heller, the Donegal Insurance Company policy in Generette contained an "other insurance" clause that implemented the waiver of stacked UIM benefits. In Generette, Donegal Insurance refused to pay any benefits under this clause, which like the clause in the State Farm policy in Craley, provided that the UIM carrier's maximum exposure across multiple, applicable insurance policies was the highest policy limit stated in any of the policies, according to the opinion.
Since the Nationwide Insurance policy had the highest available limits of $50,000 and since those limits were already paid by Nationwide, Donegal refused to pay any of its lesser amount of $35,000 in available UIM benefits under an application of the "Other Insurance" clause.
In Generette, the state Supreme Court rejected Donegal Insurance's position as being in violation with the public policy of Pennsylvania. First, after a lengthy discussion of the procedural history and statutory definitions, the Generette court rejected Donegal's argument that the injured party was unable to recover on the basis that she had rejected stacking. The court in Generette determined that Section 1738 of the Motor Vehicle Responsibility Law, which only expressly allows an "insured" to waive stacking, did not apply in this case because guest passengers were not "insureds" as that term is defined in the MVFRL.
After ruling that the injured party was not barred from recovering by her waiver of the stacking option, the court then turned to the question of whether Donegal's "other insurance" clause served to preclude a recovery.
The court held the "other insurance" clause, in this context, violated the public policy mandating that UIM coverage be excess coverage rather than gap coverage. In other words, an application of the "other insurance" clause in this scenario would have prevented the injured party from securing the very excess insurance coverage she had paid premiums for in the event that she was injured by a tortfeasor with inadequate insurance coverage.
As such, the Supreme Court found that, in the context of Generette, the "other insurance" clause violated public policy and could not be utilized by Donegal Insurance to limit the injured party's recovery.
A Right to Waiver
Turning back to the case before him, Boyer noted that, while the facts presented in the Heller case were similar to those in the Generette case, the similarities did not reach the level that Generette had to be followed as binding precedent.
Most importantly, Boyer noted that, whereas the court in Generette held that the waiver of stacking was not valid in the case of a guest passenger who did not meet the definition of an "insured," the injured party in Heller was identified by name on the subject insurance policy and, therefore, was an "insured" by definition under the MVFRL. Accordingly, the injured party in Heller could validly waive stacking.
Boyer went on to rationalize that the valid waiver of coverage was the key distinction from the Generette case.
Boyer ruled that, to then find State Farm's "other insurance" clause to be a violation against public policy in spite of a valid waiver of stacking, would require him to rewrite the MVFRL, an option he refused to undertake.
Boyer concluded by noting that, in passing the MVFRL, the General Assembly attempted to contain the spiraling costs of automobile insurance by adopting provisions such as the waiver of stacking statute. Boyer ruled that, by waiving stacking, the injured party paid a lower premium to receive a maximum of $100,000 in UIM coverage under the application of the "other insurance" coverage. •
Daniel E. Cummins is a partner and civil litigator with the Scranton law firm of Foley, Cognetti, Comerford, Cimini & Cummins. Cummins' civil litigation blog, "Tort Talk," may be viewed at www.torttalk.com.