March 3, 2008

Stacking of
Commercial UM/UIM
Policies

Under the Pennsylvania Motor Vehicle Financial Responsibility Law (PMVFRL), 75 Pa. C.S. § 1701-1799.7, “stacking” permits a person, or persons, fitting the definition of “insured” under uninsured or underinsured coverages, to add coverages from either other vehicles and/or other insurance policies, to provide a greater aggregate of available benefits to an “insured” seeking coverage as a result of an accident involving an uninsured or underinsured tortfeasor.

The Pennsylvania Supreme Court held that the PMVFRL does not mandate the stacking of UM/UIM coverages under commercial automobile fleet policies.

In Everhart, et al. v. PMA, 938 A.2d 301, decided on September 10, 2007, the Pennsylvania Supreme Court, in an Opinion authored by Chief Justice Cappy, held that the PMVFRL does not mandate the stacking of UM/UIM coverages under commercial automobile fleet policies. In ruling that the PMVFRL does not mandate stacking of coverages under commercial automobile fleet policies, the Supreme Court affirmed the Superior Court’s denial of stacking.

The underlying facts in the Everhart case were that the Plaintiff had died after an automobile accident in 2001. Everhart had been the President and CEO of the Northwest Division of Russell Standard Corporation, and Everhart had been operating a vehicle leased by Russell Standard when the accident occurred.

The vehicle that Everhart had been operating was insured by Russell Standard under a commercial automobile fleet policy issued by PMA Insurance. That policy was described as a “Business Automobile Policy,” with the only “named insured” on the policy being Russell Standard, the corporation.

When the accident occurred on July 26, 2001, Russell Standard’s commercial automobile policy with PMA provided coverage for 323 vehicles, including 33 passenger vehicles, as well as the one operated by Everhart.

The PMA-issued commercial automobile fleet policy provided $1,000,000.00 in bodily injury liability coverage, but the UM/UIM coverages were not “matching,” as the UM/UIM coverages were reduced to $35,000, in per vehicle coverage limits.

As a general practice, PMA did not offer stacked coverages for UM/UIM benefits to commercial insureds.

As a general practice, PMA did not offer stacked coverages for UM/UIM benefits to commercial insureds. For that reason, no signed “waiver” of stacked UM/UIM coverage was ever requested by PMA, or made by Russell Standard.

Two separate policy endorsements specifically referenced Everhart as an “insured,” including an endorsement for “Broadened First Party Medical Benefits,” and an endorsement for “Drive Other Car Coverage-Broadened Coverage Per Diem Individuals.”

After collecting the tortfeasor’s bodily injury liability limits, Everhart’s Estate filed a declaratory judgment action against PMA, alleging that PMA was required under the PMVFRL to provide “stacked” UIM coverage on the 33 private passenger vehicles listed in Russell Standard’s commercial auto fleet policy; stacked 33 times, the total UIM coverage would have been $1,155,000.00, instead of the $35,000.00 in limits without stacking.

The determined that Russell Standard was the only “Class 1” insured, further holding that only a “Class 1” insured could stack UIM/UIM coverages.

Concluding discovery, with the parties stipulating to the relevant facts, both parties sought Summary Judgment, with the trial court granting PMA’s motion. Finding in favor of PMA, the trial court found it dispositive that the only “named insured” on the policy was Russell Standard. The trial court determined, therefore, that Russell Standard was the only “Class 1” insured, further holding that only a “Class 1” insured could stack UIM/UIM coverages.

A “Class 1” insured is usually one who is specifically named on the policy.

An appeal was then perfected with the Superior Court, which unanimously affirmed the trial court. The Superior Court, however, affirmed the trial court ruling in reliance upon its holding in Miller v. Royal Insurance, 510 A.2d 1257 (Pa. Super. 1986), aff’d per curiam, 535 A.2d 1049 (Pa. 1988), in which it had been held that “coverages under a fleet policy may not be stacked,” absent an agreement by the parties.

In doing so, the Superior Court relied upon Section 1738 of the PMVFRL, finding that commercial stacking would “make premium costs prohibitively expensive and would not be within the reasonable expectations of the insurer and the employer-policyholder.”

The Supreme Court granted the Estate’s appeal petition in order to determine whether Section 1738 of the PMVFRL required the stacking of UM/UIM coverages under a commercial fleet policy.

In its appeal, the Estate argued that the PMVFRL required that all automobile policies provide the stacking of UM/UIM motorist coverages, unless a valid waiver of stacking was executed by a “named insured.” The Estate further argued that the PMVFRL provides no exceptions for commercial fleet policies.

PMA argued that neither it nor the policyholder expected the policy to provide stacked UM/UIM coverage, and that no premiums were ever paid for it.

In support of the trial court and Superior Court rulings, PMA argued that neither it nor the policyholder expected the commercial auto fleet policy to provide an employee with stacked UM/UIM coverage, and that no premiums were ever paid for stacked coverage, with stacked coverage necessarily requiring the insurer to seek a policy premium commensurate with a much broader risk assumed.

Analyzing principles of statutory construction, the Supreme Court closely examined Section 1738 of the PMVFRL, which Section provides:

1. Limit for each vehicle. – When more than one vehicle is insured under one or more policies providing uninsured or underinsured motorist coverage, the stated limit for uninsured or underinsured coverage shall apply separately to each vehicle so insured. The limits of coverages available under this subchapter for an insured shall be the sum of the limits for each motor vehicle as to which the injured person is an insured.
2. Waiver. – Notwithstanding the provisions of subsection (a), a named insured may waive coverage providing stacking of uninsured or underinsured coverages in which case the limits of coverage available under the policy for the insured shall be the stated limits for the motor vehicle as to which the injured person is an insured.
3. More than one vehicle. – Each named insured purchasing uninsured or underinsured motorist coverage for more than one vehicle under a policy shall be provided the opportunity to waive the stacked limits of coverage and instead purchase coverage as described in subsection (b). The premiums for an insured who exercises such waiver shall be reduced to reflect the different cost of such coverage.
4. Forms. – (1) The named insured shall be informed that he may exercise the waiver of the stacked limits of uninsured motorist coverage by signing the following written rejection form:

Uninsured Coverage Limits

By signing this waiver, I am rejecting stacked limits of uninsured motorist coverage under the policy for myself and members of my household under which the limits of coverage available would be the sum of limits for each motor vehicle insured under the policy. Instead, the limits of coverage that I am purchasing shall be reduced to the limits stated in the policy. I knowingly and voluntarily reject the stacked limits of coverage. I understand that my premiums will be reduced if I reject this coverage.

Signature of Named Insured
Date

(2) The named insured shall be informed that he may exercise the waiver of the stacked limits of underinsured motorist coverage by signing the following written rejection form:

Underinsured Coverage Lmits

By signing this waiver, I am rejecting stacked limits of underinsured motorist coverage under the policy for myself and members of my household under which the limits of coverage available would be the sum of limits for each motor vehicle insured under the policy. Instead, the limits of coverage that I am purchasing shall be reduced to the limits stated in the policy. I knowingly and voluntarily reject the stacked limits of coverage. I understand that my premiums will be reduced if I reject this coverage.

Signature of First Named Insured
Date

The Supreme Court found that Section 1738 was silent as to the requirement of stacking UM/UIM coverage under a commercial auto fleet policy.

Applying statutory construction, the Supreme Court determined that the statutory provisions did not provide an “unambiguous indication that stacking is mandated under a commercial fleet policy.” Instead, the Supreme Court found that Section 1738 was silent as to the requirement of stacking UM/UIM coverage under a commercial auto fleet policy. It also determined that the waiver form, required under Section 1738, specifically referred to individual policyholders, with statutory reference to “I,” “myself,” and “members of my household.”

There being no explicit directive requiring the stacking of UM/UIM coverages in the context of commercial auto fleet policies, the Supreme Court further analyzed the statutory objectives under the PMVFRL, being two-fold: to control the cost of insurance, and to insure that a much higher percentage of drivers were able to afford insurance, thereby reducing the number of uninsured drivers statewide.

No less critical was the determination that the stacking of coverages under commercial fleet policies, in some cases required the stacking of coverages for hundreds or thousands of insured vehicles, and would lead to “prohibitive premium costs” negatively impacting on the PMVFRL’s primary purpose, being the reduction of insurance premium costs.

Other facts relevant to the Supreme Court’s determination were that compelling stacking in a commercial auto fleet policy would not be “within the reasonable expectations of the insured or the policyholder.”

Justices Castille, Saylor, Eakin, Baer and Fitzgerald joined in the Opinion, with Justice Baldwin filing a concurring Opinion, in which the majority’s Opinion was distinguished with an analysis of who is “defined” as an “insured” under Russell Standard’s commercial fleet policy, with Justice Baldwin finding that Russell Standard, as a corporation, did not meet the definition of “insured” under the PMVFRL, and that, therefore, Russell Standard could neither “purchase” nor “waive” the stacking of UM/UIM benefits.

Under the Supreme Court’s holding in Everhart, two principles are clear.

• First, stacking of UM/UIM coverages is not applicable in the context of commercial auto fleet policies.
• Second, iwaiver forms, under which the stacking of UM/UIM coverages are waived by the policyholder, are never necessary if a commercial auto fleet policy is being issued.

Questions concerning this decision, and like issues, can be directed to our motor vehicle liability department attorneys.

(Back to top)