In Pennsylvania, uninsured motorist (UM) and underinsured motorist (UIM) coverages must be offered with the issuance of all motor vehicle liability insurance policies. These coverages may be rejected in accordance with the strictures of §1731(c.1) of the Motor Vehicle Financial Responsibility Law. If not rejected, UM and UIM coverages must be stacked unless stacking is rejected pursuant to §1738 of the MVFRL. Stacking is the cumulation of coverages in order to create a greater pool of benefits for recovery. The manner and method of stacking under motor vehicle policies continues to perplex practitioners and the courts in Pennsylvania.
Prior to 1990, stacking was developed through case law. All policies provided stacked coverage. Stacking was limited, however, to a specific class of claimants. Essentially, Class One insureds (the named insured and resident relatives) were entitled to stack UM and UIM coverages; Class Two insureds (people deriving their claim by reason of occupancy of an insured vehicle) were not entitled to stack. The Act 6 amendments to the MVFRL, effective July 1, 1990, codified stacking for the first time. Under the MVFRL, policyholders were given the option to reject stacking of UM and UIM coverages. A specific form, to be signed by the first named insured, is required in order to reject stacking. Although not included in the amendments, the class distinction was retained by the courts in assessing eligibility to stack.
Generally, stacking is available under both personal and business auto policies. Under business auto policies issued to a corporate named insured, however, no stacking of coverages is available. Simply stated, a corporation is not an individual and has no resident relatives. See Northern Insurance Company v. Resinski , 827 A.2d 1240 (Pa. Super. 2003) and State Farm v. Taylor , 293 F. Supp. 530 (E.D. Pa. 2003). Therefore, there are no Class One insureds under a business auto policy issued to a corporation. Thus, no claimants are eligible to stack under such policies. In fact, in Everhart v. PMA Insurance Group , 938 A.2d 301 (Pa. 2007), the Supreme Court held that insurers need not offer stacking under commercial fleet policies issued to a corporate named insured. The same may not be true, however, with respect to business auto policies issued to individuals. Those policies, even though commercial in nature, still have Class One insureds. As such, stacking, if not rejected, is arguably available.
Currently, auto policies are issued as either stacked or nonstacked for UM and UIM coverages in Pennsylvania. Obviously, no claimants may stack UM and UIM coverages under a nonstacked policy. Class One insureds may stack coverage under a stacked policy.
Stacking may be either intrapolicy or interpolicy. Intrapolicy stacking involves multiple vehicles insured under a single policy; interpolicy stacking involves multiple vehicles insured under multiple policies. Eligibility for and limitations upon stacking are incorporated into auto policies.
The limit of liability section of the UM and UIM coverage part generally addresses intrapolicy stacking. The other insurance provisions of the UM and UIM endorsements involve interpolicy stacking. While intrapolicy stacking issues are relatively straightforward, interpolicy stacking claims are often more problematic. Intrapolicy issues generally involve (1) the propriety of the waiver or (2) the eligibility of the claimant as a Class One insured.
A waiver of intrapolicy stacking is a relinquishment of all coverage beyond the single limit of coverage for one vehicle. Interpolicy stacking issues are more difficult because the waiver of interpolicy stacking is not a relinquishment of coverage but rather a limitation on recovery. The standard other insurance clause does not prohibit recovery under the nonstacked policy, but rather limits recovery to the higher limit of all applicable policies. The waiver of interpolicy stacking, therefore, is not a total relinquishment of additional coverages, as in the nonstacked intrapolicy situation.
Thus, in the nonstacked interpolicy situation the claimant may still recover some benefits under each of the multiple policies applicable to the loss, provided, however, that the total recovery does not exceed the highest limit of the applicable policies. This methodology is rife with difficulty.
The decisions of the Pennsylvania courts have done little to clarify the confusion. In Craley v. State Farm , 895 A.2d 530 (Pa. 2006), the Supreme Court addressed stacking issues under the MVFRL in the context of a household exclusion case. In recognizing that interpolicy stacking could be waived, the court noted that the waiver form mandated by §1738 of the MVFRL, however, addressed only intrapolicy stacking.
The form required by the statute waived stacking only “under the policy.” The Supreme Court concluded that this waiver thus only applied to intrapolicy stacking of coverages, leaving interpolicy stacking unaffected. This conclusion created a problem. Under the one-vehicle policy, intrapolicy stacking would not be available, there being no additional coverages to stack. The court reasoned, therefore, that the waiver must then necessarily waive interpolicy stacking since the waiver, accompanied by a reduced premium, had to have some effect. Therefore, only in the one-vehicle policy situation did the statutory form waive interpolicy stacking. Interpolicy stacking was not waived if more than one vehicle was insured under the policy. The Craley decision, while directly addressing stacking issues, actually did little to clarify the stacking landscape.
In Generette v. Donegal , 957 A.2d 1180 (Pa. 2008), the Supreme Court again addressed stacking issues. This decision, too, sought to remedy the confusion surrounding interpolicy stacking. Prior to Generette , interpolicy stacking was considered to be any recovery among multiple policies. In Generette , however, the Supreme Court determined that stacking involved only recovery under multiple household policies.
The guest passenger situation, i.e., the claimant recovering under a nonhousehold policy prior to recovering benefits under a policy for which he or she is an insured, was merely the priority of recovery under §1733 of the MVFRL, not the stacking of coverages under §1738 of the statute. Thus, the waiver of stacking did not affect the recovery in the guest passenger situation. The court then went on to note that the limitation imposed upon recovery by the other insurance clause in that situation was an unlawful conversion of UIM benefits to “gap” rather than “excess” coverage, as it was originally intended. The enforceability of the other insurance limitation in the stacking situation, i.e., recovery under multiple household policies, however, remains unresolved in Pennsylvania.
As noted, the waiver of interpolicy stacking has been incorporated into policies by insurers pursuant to the other insurance provisions of the UM and UIM coverage parts of auto policies. This other insurance language purports to limit recovery under household policies. Recovery is restricted to the highest limit of any applicable household policy. The net result, however, may be the denial of recovery for which an insured paid a premium.
The effect of this other insurance limitation, especially in a situation where the multiple household policies are written by different insurers, may deny full recovery to an insured under his or her own policy. Further, an insurer’s obligation may be premised upon the order in which the claimant seeks recovery under the household policies. As noted by the late Chief Justice Ralph J. Cappy in his concurring opinion in Craley , the “cure” may rest with the General Assembly. Absent such legislative intervention, however, confusion will continue while these stacking issues are litigated in the courts. •
James C. Haggerty is one of the founding partners of Haggerty, Goldberg, Schleifer & Kupersmith, a firmdedicated to the handling of complex civil litigation,personal injury, coverage and bad faith matters on behalf of injured victims. Haggerty personally handles insurance coverage, bad faith, first-party, uninsured/underinsured, motor vehicle and class action litigation.