Stacking of UM/UIM Coverages for Newly Acquired Vehicles

Under the Pennsylvania Motor Vehicle Financial Responsibility Law, 75 Pa. C.S.A. Section 1701 et seq., stacking of uninsured motorist (UM) and underinsured motorist (UIM) coverages may be waived. Absent a valid waiver, stacking is mandated, see 75 Pa. C.S.A. Section 1738. In Sackett v. Nationwide, 919 A.2d 194 (Pa. 2007) (Sackett I), the Supreme Court held that a new waiver of stacking of UM and UIM coverage is needed when a new, additional vehicle is added to an existing unstacked policy. On reconsideration, in Sackett v. Nationwide, 940 A.2d 329 (Pa. 2007) (Sackett II), the court recognized a narrow exception to this rule, namely where a new vehicle is added to an existing policy by operation of a continuous newly acquired vehicle clause. The interpretation and application of these holdings continues to create controversy in Pennsylvania.

Newly Acquired Clause

Auto policies generally identify three types of insured vehicles, namely: listed autos; newly acquired autos; and replacement autos. Listed autos are afforded coverage by reason of being specifically identified on the declarations pages of the policy. Newly acquired autos and replacement autos are automatically extended coverage under the policy even before the insurer is advised of the acquisition, thereby avoiding any gap in coverage. These newly acquired and replacement clauses generally extend coverage for a period of time provided the insurer is given notice of the acquisition within that period. By creating a limited exception to the mandate of Sackett I, the Supreme Court in Sackett II recognized that it would be unreasonable to require an insurer to secure a stacking waiver for a vehicle for which coverage was provided by operation of the newly acquired clause since, by the very nature of the clause, the insurer did not yet know the insured had purchased the vehicle. An insurer could not be required to secure a waiver of stacking for a vehicle it did not yet know the insured has purchased. Thus, in Sackett II, the court held that where a new vehicle is added to an existing policy by reason of a continuous newly acquired clause (extending coverage without any time limit or any notice requirement), no new stacking waiver is needed. Where a new vehicle is added, however, by reason of a finite newly acquired clause (extending coverage with a time limit and a notice requirement), a new stacking waiver is, in fact, needed. The manner in which the new vehicle is added to the policy, therefore, is crucial to the resolution of the stacking issue for the newly acquired vehicle.

Addition of Vehicles