Anti-Stacking Clause and UIM Benefits
December 26, 2016
The named insureds brought an action against the auto insurer to recover the limit of underinsured motorist (UIM) benefits under separate policies for an injury to their minor son as a passenger in a car driven by the tortfeasor. This case is Gearhart v. Mutual of Unumclaw Insurance Company, 378 P.3d 454 (2016).
Trent Gearhart and Tina Palmer were driving in Tina's brother's Impala. Trent was in the passenger seat and Tina was driving. Tina was negligent and caused an accident which left Trent with a severe brain injury. The damages suffered by Trent are in excess of $600,000.
There were three insurance policies that covered the accident: a Farmers Insurance policy held by the owner of the Impala; an auto policy with Enumclaw purchased by Brandi (Trent's mother); and a separate auto policy with Enumclaw purchased by Ronald Trent (Trent's father). Trent was a beneficiary under both of the Enumclaw policies, with each providing for $300,000 in UIM coverage. As of July 2013, the Farmers policy and one of the Enumclaw policies made payments totaling $300,000.
The parents of Trent filed a complaint against Unumclaw alleging failure to pay $300,000 in UIM benefits under each policy. Enumclaw answered that the UIM anti-stacking provision clearly and unambiguously limited Trent's maximum entitlement to UIM benefits under the combined Enumclaw policies to $300,000. The district court ruled in favor of the parents and required the insurer to pay the limit of each policy. Enumclaw appealed.
The Supreme Court of Idaho noted that the anti-stacking provision would be the focus of inquiry in this case, that is, is the clause ambiguous or violative of public policy. The court examined the other insurance provision and the anti-stacking clause in the two Enumclaw policies and found that the language is confusing to the extent of being an ineffective barrier to the coverage afforded by both policies. The court said that insurers often contend that anti-stacking provisions are designed to keep insureds with multiple policies from being overcompensated for their injuries. However, that is not a concern in this case since, as the insurer acknowledged, Trent was seriously injured in the accident and it is not disputed that his damages exceeded the coverage available under all of the policies at issue.
The court also noted that Trent's parents each purchased an Enumclaw policy, each paying the required premium in order to obtain $300,000 in UIM benefits for the protection of their child. If the barrier sought to be imposed by Enumclaw is allowed to be imposed, the court ruled, Trent will end up getting undercompensated by more than half.
The court affirmed the district court's holding on the ground that the actual language employed in the Enumclaw policies is confusing to the extent that it is ineffective to establish a barrier to recovery of Trent's actual damages in the full amount of the limit provided in each of the two policies.
Editor's Note: The Supreme Court of Idaho holds that the anti-stacking clause did not bar recovery of stacked limits of UIM benefits after reviewing the policy language. The anti-stacking language was not the clear and precise language necessary to restrict coverage.