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Pennsylvania Supreme Court Expands UIM Stacking Waiver Requirements (PA)

October 4, 2019

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<p style="text-align: justify;">The Pennsylvania Supreme Court recently held that increasing underinsured motorist (UIM) coverage constitutes a “purchase” which voids prior stacking waivers and requires insurance companies to offer insureds a new opportunity to waive stacking.</p>
<p style="text-align: justify;">In <em>Barnard v. Travelers Home &amp; Marine Ins. Co</em>., the insured, Michelle Barnard, brought suit against Travelers Home and Insurance Company, claiming that the stacking waiver she signed with her initial policy purchase was no longer in effect because she subsequently increased her UIM coverage. In September 2007, Barnard purchased a personal automobile policy from Travelers, including UIM coverage of $50,000 for each of her vehicles, for which she waived stacking. In May 2009, she increased the UIM coverage to $100,000 for each vehicle and Travelers did not give her a waiver option. In June 2016, Barnard was involved in an accident and Travelers offered her $100,000, relying on her stacking waiver from 2007. Barnard sued Travelers for $200,000 claiming that her decision to increase her UIM coverage on both of her vehicles in 2009 constituted a “purchase”, and because Travelers did not give her the option to waive stacking, her policy defaulted to stacked UIM coverage.</p>
<p style="text-align: justify;">Under Pennsylvania’s Motor Vehicle Financial Responsibility Law (“MVFRL”), an insured must be offered the option to waive stacked UIM coverage whenever a “purchase” occurs. Although the courts had previously held that simply replacing vehicles covered under a policy without changing policy limits did not constitute a purchase, there was no case law on point addressing whether increasing policy limits constituted a purchase. This case turned on the plain and literal meaning of “purchase”, which the Court found requires: (1) the acquisition of something; and (2) payment. This literal interpretation overcame Travelers’ numerous attempts to persuade the Court that a “purchase” refers to the initial policy purchase. Travelers argued that requiring an insurance company to offer a new stacking waiver every time policy limits are increased would be akin to requiring it to offer a new stacking waiver every time premiums increase due to inflation or because a new vehicle is added to the policy.</p>
<p style="text-align: justify;">Ultimately, the Court found that an insured can only “knowingly and voluntarily [reject] the stacked limits of coverage” for the <em>present</em> limits of the policy, and an insured cannot knowingly and voluntarily reject future stacked limits because he or she is unaware of what those limits will be. Thus, Barnard could not have knowingly and voluntarily rejected the stacked limits of $100,000 when she only had limits of $50,000 in 2007. Furthermore, requiring an insurance company to offer a stacking waiver with increased UIM policy limits is not akin to requiring it to offer a stacking waiver with increased premiums because although the second part of a “purchase” is satisfied (“payment”), the first is not (“the acquisition of something”). When premiums increase, the insured is not getting anything beyond what was stated in the initial policy. When policy limits are increased, the insured is getting more coverage <em>and</em> making a payment for it.  The Court also rejected Travelers’ public policy argument, finding that public policy simply cannot contravene the plain meaning of the statute. Thus, the Court concluded, when an insured increases his or her UIM coverage on more than one vehicle, the insured must be offered a new stacking waiver or else the insured's UIM coverage automatically stacks.</p>
<p style="text-align: justify;">Accordingly, insurers should keep in this case in mind when UIM coverage is being increased under a policy.</p>
<p style="text-align: justify;">Thank you to Priscilla Torres for her contribution to this post.  Please email <a href="mailto:chayes@wcmlaw.com">Colleen E. Hayes</a> with any questions.</p>
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