Rejection of the Stacking Option for Underinsured Motorist Coverage

November 1st, 2012, 10:15 AM

Pennsylvania's auto insurance law requires that car insurance companies offer you underinsured motorist benefits. These auto insurance benefits provide a source of payment for injuries and losses that you may suffer in a car accident when the other driver has an insufficient dollar amount of liability insurance to compensate you in full. For instance, if you suffer injuries and losses in an auto accident totaling $25,000 and the person at fault has only $15,000 in liability insurance coverage, you will have $10,000 in uncompensated losses. If you had purchased underinsured motorist protection, then your car insurance company would pay you $10,000 in this example.


If you purchase underinsured motorist insurance coverage, and if you have more than one vehicle on your car insurance policy, then you have the option of "stacking" the dollar amounts of these coverages. In fact, the stacking option automatically applies unless you expressly reject that option by signing a special auto insurance form. Under the stacking option, the dollar amount of the coverage for each insured vehicle will be added together (stacked) . For instance, if you have three insured autos and if each of these cars is insured for $15,000 of underinsured motorist benefits, you would have a total of $45,000 in underinsured motorist coverage under the stacking option. If you reject the stacking option by signing the designated car insurance form, then you only have $15,000 in underinsured motorist coverage regardless of the number of autos that you have insured. Pennsylvania auto insurance law states that the event that triggers the requirement for the car insurance company to obtain a signed stacking rejection form is when the insured is "purchasing uninsured or underinsured motorist coverage for more than one vehicle". If you purchase underinsured motorist coverage under a policy that covers more than one car and if the insurance company does not have you signed the special form rejecting stacked coverage, then you automatically are entitled to stacked coverage regardless of whether you are charged a premium for the stacking option.


Once you reject the stacking option by signing the special car insurance form, do you have to sign a new rejection form each time you add a car to your policy? Or does the initial rejection form apply to all autos subsequently added to the car insurance policy? The Pennsylvania courts have answered this question with a "maybe."


In Shipp v. Phoenix Ins. Co., Mr. Shipp's car insurance policy was initially issued in 2002 and he signed a rejection of stacking form at that time. The declaration sheets issued to Shipp at each policy renewal showed coverage for underinsured motorist benefits in the amount of $100,000 non-stacked. At the inception of the policy, three vehicles were insured: a 1992 Ford , a 1995 Ford and a 1987 BMW. The later changes to Shipp's policy included the termination of coverage for the 1987 BMW on February 13, 2004. On February 19, 2004, coverage for the 1995 Ford was terminated and replaced by coverage for a 2004 Toyota. On September 10, 2005, Shipp terminated coverage on the 1992 Ford and added coverage for a 2005 Toyota. When these changes were made, the car insurance company did not offer Shipp the option to elect or reject stacked underinsured motorist coverage, nor did the car insurance company present new waiver rejection to have Shipp reject the stacking option. On February 3, 2006, Shipp's son (Michael) was severely injured in a motor vehicle accident. He was a passenger of a motor vehicle driven by a friend, who admitted liability for the accident. Michael died on February 11, 2006 as result of the injuries sustained in the car accident. On the date of the car accident, Shipp's auto insurance policy covered two vehicles, the 2005 and the 2004 Toyota. Following Michael's death, Shipp made a claim to his insurance company (Phoenix) for the limits of underinsured motorist benefits in the amount of $200,000. (This amount is the $100,000 underinsured motorist benefit stacked for the two covered vehicles.) Shipp took the position that the various changes to his car insurance policy required the auto insurance company to obtain new rejections of the stacking option. Since the auto insurance company did not have Shipp sign new rejection forms, he argued that the stacking option automatically applied. Phoenix responded by tendering only $100,000 for the undisputed underinsured motorist benefit limit, denying that Shipp was entitled to stacked coverage.


In the lawsuit that followed, the trial court ruled in favor of Shipp. The trial court found that the auto insurance coverage changed when the 1992 Ford was replaced by the 2005 Toyota. The Ford had only comprehensive coverage while the Toyota had both comprehensive and collision coverages. The court reasoned that since the auto insurance coverage increased, it amounted to a new purchase of insurance under the law and, thus, it required Phoenix to again obtain a written waiver of stacked underinsured motorist coverage. Since Phoenix did not have Shipp sign a new rejection form, the law requires Phoenix to pay in the amount of stacked coverage–here $200,000. The PA Superior Court disagreed with this reasoning. The court ruled that the fact that the Shipps' added collision coverage when they bought the Toyota in 2005 did not constitute a purchase of a new policy for the purpose of triggering the need to obtain another written rejection of the stacking option. Rather, the court stated that the fact that the coverages other than the underinsured motorist coverages had been changed was not relevant. The Superior Court noted that the critical consideration arising with adding vehicles to an existing auto insurance policy was the manner in which the change became effective. There are two common methods of adding insurance coverage for newly acquired vehicles. The first type provides automatic coverage upon acquisition of the additional new vehicle, but lapses after a specified, finite amount of time, requiring the insured to apply for new coverage thereafter. The second type provides continuing coverage, usually requiring the insured only to give notice that a new vehicle has been acquired. The courts have held that the second type of newly acquired vehicle clause does not trigger an obligation for the car insurance company to obtain a second rejection of stacked coverage; however, where the newly acquired vehicle clause is of the lapsing, finite variety, the auto insurance company must again acquire a waiver of stacked coverage. The Shipps' auto insurance policy stated that it would automatically cover a replacement car if it was acquired during the policy period and if Shipp asked Phoenix to cover that vehicle within 30 days. The court ruled that this policy provision constituted continuing insurance coverage subject only to a notice requirement and thus it did not require the insurer to again obtain a waiver of stacking. Thus, the initial waiver signed by the Shipps was still valid and barred the stacking of coverage.


Pennsylvania car insurance law is very complicated and it is often difficult to navigate safely. If you have a question regarding auto insurance claims or your entitlement to car insurance benefits you should call or contact the Elderkin Law Firm. Call (814) 456-4000 to speak with Robert C. LeSuer or Craig A. Markham at the Elderkin Law Firm in Erie, PA and to arrange for a free consultation concerning your questions about accident claims. Your initial meeting with one of the attorneys in our Erie, PA office is absolutely free and is without any obligation to hire us. We will provide you with a free initial evaluation of your case and will answer your questions about the law. If you choose the Elderkin Law firm to represent you, you will pay no fee unless we are successful in obtaining compensation for your injuries and losses. In such a case, our fee will be calculated as a percentage of the amount of the settlement or award.

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