Wade Clark Mulcahy LLP

<p style="text-align: justify;">Under Pennsylvania’s Motor Vehicle Financial Responsibility Law (“MVFRL”), an insurer must provide uninsured (“UM”) and underinsured (“UIM”) motorist coverage equal to the bodily injury liability limits under an automobile insurance policy. However, under Pennsylvania law, where an insured executes a valid sign down form, the UM/UIM coverage limits are reduced.</p>
<p style="text-align: justify;">Recently, in <a href="https://www.wcmlaw.com/wp-content/uploads/2019/07/Alcedo-v.-State-Farm-1.pdf"><em>Alcedo v. State Farm</em></a>, the U.S. District Court for the Eastern District of Pennsylvania analyzed whether an automobile insurer must obtain a new writing “signing down” UM and UIM coverage from bodily injury liability limits under § 1734 of the Motor Vehicle Financial Responsibility Law (MVFRL) when an insured adds another vehicle to the policy.</p>
<p style="text-align: justify;">In 2005, State Farm issued an automobile insurance policy to John Alcedo (“Mr. Alcedo”), which covered a Nissan Pathfinder and a Nissan Maxima. The policy provided UM/UIM bodily injury liability limits of $100,000 per person and $300,000 per accident. However, at the time Mr. Alcedo was applying for coverage, Mr. Alcedo signed and executed a sign down form reducing the UM/UIM coverage limits to $25,000 per person and $50,000 per accident. Simultaneously, Mr. Alcedo signed a § 1791 notice, which indicated he acknowledged that higher UM/UIM limits were available under the policy. Some years later, Mr. Alcedo added and removed vehicles to the policy. Although he added new vehicles to the policy, Mr. Alcedo did not execute any additional sign down forms.</p>
<p style="text-align: justify;">The coverage dispute arose when Susan Alcedo (“Mrs. Alcedo”) sustained bodily injury while driving a covered vehicle. When State Farm refused to pay the UIM benefits in the amount of the policy’s stacked bodily injury limits of $400,000, Mr. and Mrs. Alcedo commenced the instant action against State Farm. Subsequently, State Farm filed a motion for judgment on the pleadings. In its motion, State Farm asserted the available UM/UIM coverage for Mrs. Alcedo was the lower coverage limit as set forth in the sign down waiver signed by Mr. Alcedo in 2005 – therefore, arguing State Farm was not required to have Mr. Alcedo execute additional sign down forms when adding vehicles to the policy. In opposition, Mr. and Mrs. Alcedo argued that, since a sign down form was not executed contemporaneously with the newly added vehicle, the policy provided coverage up to the maximum UM/UIM limits of $100,00 per person and $300,00 per accident. To support their argument, Mr. and Mrs. Alcedo relied on cases discussing waiver of stacking coverage under § 1738.</p>
<p style="text-align: justify;">After considering the alleged facts pled in the complaint and the documents attached as exhibits per Rule 12(c) of the Federal Rules of Civil Procedure, the Court noted a sign down of UM/UIM benefits remains in effect unless it is affirmatively changed by the insured. Although the Court’s reliance on Pennsylvania law was limited because the Supreme Court of Pennsylvania had not addressed the specific issue, the Court in Alcedo determined a § 1734 “sign down” survives the addition of vehicles to the policy. In other words, the Court held State Farm fulfilled its obligations under the MVFRL by (1) offering UM/UIM coverage up to the amount of the bodily injury liability limits; and (2) obtaining confirmation in writing from the insured. Further, the Court determined Mr. and Mrs. Alcedo’s reliance on the waiver of stacking under § 1738 was inapplicable to the issue at bar.</p>
<p style="text-align: justify;">In sum, this ruling serves as a reminder for insurers to provide clear notice at the time a policy is issued, and how, in the context of UM/UIM coverage disputes, affirmative steps are needed to alter coverage limits.</p>
<p style="text-align: justify;">Thanks to Lauren Berenbaum for her contribution to this post. Please email <a href="mailto:VPinto@wcmlaw.com">Vito A. Pinto</a> with any questions.</p>