On February 5, 2018, the federal District Court for the Eastern District of Pennsylvania ruled that an increase in Under Insured Motorist (UIM) benefits is a new purchase of insurance coverage. As such, automobile insurance carriers are required to obtain a new waiver of the stacked benefits under the auto insurance policy.
Stacked benefits, in UIM coverage, means that a person who purchases automobile insurance on more than one vehicle under the same policy can elect to purchase up to double the UIM insurance coverage. The Pennsylvania Motor Vehicle Financial Responsibility Law (“MVFRL”) requires an insurance carrier to offer stacked benefits to every policy holder who purchases insurance. If the policy holder decides not to take advantage of the stacked benefits, the insurer must obtain a written waiver of those benefits.
For instance, if you insure two cars for $20,000.00 each, you are eligible for stacking benefits that would allow you claim up to $40,000.00 on each vehicle. The MVFRL requires that the insurer offer this option to each and every insured.
If the insured declines, then the insurer must obtain an express written waiver of the option to purchase “stacked” benefits.
According to the Pennsylvania Eastern District Court in Barnard v Travelers, No. 17-00290, whenever an insured chooses to increase the amount of coverage under her UIM policy, the insurance carrier must obtain a new written waiver of stacked benefits as required by the MVFRL.
Michelle Barnard, the Plaintiff in this case, held a UIM policy with The Travelers Home and Marine Insurance Company, the Defendant, since 2007. When she initially secured the policy, she had UIM coverage limits of $50,000.00 for each of her two vehicles.
At the time of purchasing the initial insurance coverage, she signed a written waiver of stacked benefits under that policy, i.e., Ms. Barnard waived her right to stack UIM benefits under her policy. With that, the maximum amount of UIM benefits that she could claim, and ultimately receive, under her policy was $50,000.00.
However, in May 2009, Ms. Barnard increased her third-party liability coverage limits under the policy from $50,000.00 to $100,000.00 on each insured vehicle. So, this meant she would have been entitled to claim up to $200,000.00 on each car, as per her allowable stacked benefits. Notably, Ms. Barnard did not sign any written waiver of her stacked benefits upon this increase in coverage.
Thereafter, when Ms. Barnard was injured in a car accident on June 17, 2016, she submitted a UIM claim under her policy with Travelers Insurance. Travelers tendered $100,000.00 in UIM benefits to Ms. Barnard, assuming that she had waived her option to stack her UIM benefits in 2007. Ms. Barnard, however, rejected this tender and, claiming that she was entitled to more than was tendered, she sued the Travelers.
Increase in UIM limit is a ‘Purchase’
Travelers argued before the Eastern District Court that, among other things, it had no duty to obtain a new waiver of stacked benefits under the policy, even after Ms. Barnard had increased her liability insurance coverage limits in 2009. In other words, Travelers claimed that the initial 2007 waiver was still in operation and effective, despite the increased coverage purchased by Ms. Barnard in 2009.
The federal district court, however, rejected Travelers’ argument. Judge Gerald McHugh held that the language of the MVFRL requires a renewed waiver of stacked benefits when liability coverage limits are increased and/or purchased.
According to Judge McHugh, because an increase in coverage under an existing policy requires that an insured pay a higher premium, an increase in coverage limits also qualifies as a “purchase” as defined by the MVFRL. As a result, the court ruled that Travelers should have obtained a new waiver of UIM stacked benefits, in 2009, when Ms. Barnard increased her liability insurance limits. Pursuant to the district court’s ruling, Travelers was responsible, and required, to pay Ms. Barnard up to $200,000.00 in UIM benefits under her policy.
For questions relating to the MVFRL and Pennsylvania auto insurance coverages, please contact Matthew R. Zwick, partner of Zwick Law, at (814) 371-6400 or firstname.lastname@example.org, to schedule a legal consultation. At Zwick Law, we’re always here for you.
 Note: Travelers filed an appeal of the district court’s decision to the United States Third Circuit Court of Appeals, which remains pending at the time of publication of this article.
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