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Pennsylvania Law Weekly Insurance companies must have their customers reject stacked underinsured motorist coverage each time they add a vehicle to their policy, the state Supreme Court has ruled. On a 4-2 vote, the justices reversed a unanimous Superior Court panel’s decision in Sackett v. Nationwide Mutual Insurance Co., PICS Case No. 07-0594 (Pa. April 17, 2007) Baldwin, J.; Castille, J. dissenting (20 pages). The six-justice court rejected Nationwide Mutual Insurance Co.’s argument that the statue only required insurers to provide stacked benefits at the initial purchase of coverage. “Today’s holding requires what the plain language of the statute states: when an existing insured purchases uninsured or underinsured motorist coverage for more than one vehicle under a policy, the named insured must be provided with the opportunity to waive stacking of that coverage,” Justice Cynthia Baldwin wrote in the majority opinion. Chief Justice Ralph J. Cappy and Justices Thomas G. Saylor and Max Baer joined Baldwin in the majority. Justice Ronald D. Castille filed a dissent, which Justice J. Michael Eakin joined. Former Justice Sandra Schultz Newman did not participate in the decision. The Sacketts had argued that the stacking of UM/UIM coverage, by its nature, involved multiple vehicles in one or more policies, according to the opinion. Hence, the Sacketts argued, “the ‘sum’ of available coverage changes with the ‘purchasing’ of new coverage, and therefore an insured is due the ‘opportunity’ to waive that sum,” the opinion said. The Sacketts’ lead attorney, Ronald J. Bergman of Nedwick & Bergman in Greensburg, said that he had been unsure what to expect after oral arguments and that he was pleased with the ruling. Scott Cooper of Schmidt Kramer in Harrisburg and Bergman’s co-counsel said that frequently insurance companies cite cost containment in cases like this one, but the court didn’t take that argument. “The court understood that insurance companies can’t be allowed willy nilly to have people sign waivers – when they often don’t understand what they are signing – and then enforce that throughout the policy,” Cooper said. Nationwide had contended that under Section 1738 of the Motor Vehicle Financial Responsibility Law it had no duty to provide a new waiver after the initial purchase and that the Sacketts had never paid for additional coverage. The insurer further argued that “adoption of [the Sacketts'] argument would run afoul of the public policy goal of cost containment,” according to the opinion. But the majority disagreed. “Nationwide fails to provide any statutory authority or cite to any case in any court, which provides that a purchase of coverage is limited to the inception of the policy, or that its policy argument should prevail over the plain language of the statute,” Baldwin wrote. The majority acknowledged there would be “some” cost attendant to its holding – referring to the cost to insurance companies of handling increased waivers – but said it could not look past the interpretation of the statute. “The plain language of Section 1738 will not yield to a policy goal, even one as laudable as the cost containment objective of the MVFRL Section,” Baldwin wrote. The court also found that the Sacketts’ available stacked limit increased when they purchased UM/UIM coverage for a vehicle they were adding to their existing two-vehicle policy. Because the Sacketts were never given the opportunity to waive that sum, the court ruled that the UIM coverage available under their policy was the sum of the three vehicles – $300,000. The panel disagreed with the Superior Court panel’s reliance on one of its own decisions, Smith v. The Hartford Insurance Co., 849 A.2d 277 (Pa. Super. 2004) and a 3rd U.S. Circuit Court of Appeals decision, Rupert v. Liberty Mutual Insurance Co., 291 F.3d 243 (3d Cir. 2002), which it used to reach its decision. In Smith, the Superior Court held that a decision to waive all UIM coverage is presumptively effective through the duration of a policy unless an affirmative change is made, according to the majority opinion. But the Supreme Court panel said Smith had no bearing on the instant case because it raised a different question regarding the stacking of UM/UIM coverage. Rupert dealt with whether a valid waiver of stacked coverage stayed effective after the first named insured changed. The 3rd Circuit found that it did, saying each insured under a policy was deemed to have sufficient notice of the stacking waiver by virtue of the first named insured’s signature. Rupert, too, handled a different question, the court said, and the court found Rupert was inapposite because it resolved a statutory ambiguity not at issue in Sackett. The court remanded Sackett back to the trial court, Westmoreland County Common Pleas. In his dissent, Castille said the majority’s conclusion was “unsupported by other sections of the MVFRL, the policies underpinning the MVFRL, and prior decisions of this court.” Castille emphasized Section 1791 of the MVRFL, which states that insurance applicants must get notice of stacking benefits “at the time of application for original coverage, and no other notice or rejection shall be required.” “The [m]ajority dismisses the clear language of this Section as irrelevant because the Section does not explicitly discuss the effect of adding a vehicle on an existing waiver of stacking,” Castille wrote. “Such a facile dismissal of clear legislative intent is, in my opinion, unwarranted.” That section, Castille said, was “obviously” intended to ease the burden on insurers by not obligating them to issue new notices when insureds make some change to their coverage. “The same policy appellants purchased in 1998 remained in effect, and the original waiver of stacking was part of that policy,” Castille wrote. Castille then objected that the majority’s holding would impose a burden on insurers “that could and likely will, result in costs of compliance being passed on to insureds,” and said the majority decision gave the Sacketts coverage for which they hadn’t paid premiums. Nationwide’s attorney, Peter B. Skeel of Summers McDonnell Hudock Guthrie & Skeel in Pittsburgh, said he was very disappointed and respectfully disagreed with the court’s ruling. James Ronca, a plaintiffs attorney, said he was part of the committee that drafted the legislation that became MVFRL and he agreed with the court’s ruling. “My feeling is, over the course of the last 17 years [since MVFRL's adoption] the court has frequently looked at the ‘spiraling cost of insurance’ as the public policy of the law, but hasn’t looked frequently enough at giving people choices in their coverage as another important part of the public policy,” Ronca said. “In this case, I think the court did look at the other part of the policy, which is to give people a chance to look at and waive coverages,” he said. Ronca said the court’s interpretation in the case was accurate as to his recollection of the committee’s intent when it drafted MVFRL. James C. Haggerty, president of the Pennsylvania Defense Institute, said the decision was an important one and amounted to an “administrative nightmare for insurers.” Haggerty, of Swartz Campbell, assisted Nationwide in the case. “Now essentially anytime a business adds a vehicle to a policy . . . if a waiver of stacking is not obtained, that policy – which may have 75 to 100 vehicles on it – will be converted to stacked coverage,” Haggerty said. In Sackett, the policyholder, Victor M. Sackett, bought a car insurance policy from Nationwide in 1998 to insure his two vehicles with UIM limits of $100,000 per person. He also was given a waiver form, as required by MVFRL, and rejected stacked limits of uninsured and underinsured motorist coverage on the two vehicles. Sackett added a third vehicle to the same policy in July 2000. Nationwide did not provide new stacking waiver forms at the time. The insurer issued unstacked underinsured motorist vehicle coverage on the third vehicle, according to the opinion. The next month, Sackett was severely injured when he was traveling as a passenger in someone else’s car. He settled his claim with the driver for $100,000 and the person who collided with the car for $15,000, according to the opinion. Sackett then sought underinsured motorist benefits under his Nationwide policy. But he and the insurer disputed how much coverage was available. Sackett and his wife filed a declaratory action in 2002, claiming that because Nationwide hadn’t offered a waiver form when Sackett added the third vehicle in 2000, the third car’s coverage should be stacked with the other two vehicles. n

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