The U.S. Court of Appeals for the Third Circuit has issued an opinion examining two decisions by the Pennsylvania Supreme Court from 2007 exploring whether auto insurers must offer their insureds a new opportunity to waive stacked uninsured and underinsured motorists (“UIM”) coverage when they acquire a new vehicle.
The Case
Wayne and Shannon Kuhns sued their auto insurer, The Travelers Home and Marine Insurance Company, seeking stacked insurance benefits under their auto insurance policy following an accident involving one of four automobiles that the Kuhnses owned and that were covered by that policy.
Travelers contended that the Kuhnses were not entitled to stacked coverage because they had waived stacked UIM coverage on their policy when it covered three of their vehicles and the waiver applied when, a few months later, the couple purchased a fourth vehicle – a pickup truck – and added it to that policy.
A U.S. magistrate judge in the U.S. District Court for the Middle District of Pennsylvania ruled that the Kuhnses' initial waiver of stacked insurance coverage applied to the fourth vehicle. The magistrate judge granted summary judgment to Travelers based on its conclusion that the fourth vehicle was added pursuant to the insurance policy's continuous after-acquired-vehicle clause.
The couple appealed to the Third Circuit.
The Third Circuit's Decision
The Third Circuit affirmed.
In its decision, the circuit court explained that, in two decisions issued in 2007, Sackett v. Nationwide Mutual Ins. Co., 919 A.2d 194 (Pa. 2007) (“Sackett I”), and Sackett v. Nationwide Mutual Ins. Co., 940 A.2d 329 (Pa. 2007) (“Sackett II”), the Pennsylvania Supreme Court considered when Pennsylvania law required an insurance company to provide its insured with an additional opportunity to waive stacked insurance. The insured in that case initially waived stacked insurance but subsequently added a car to an existing multi-car policy. The Pennsylvania Supreme Court concluded that adding another vehicle to a policy with a continuous after-acquired-vehicle clause did not require the issuance of another waiver.
Given those two decisions, the Third Circuit reasoned:
(1) If the Kuhnses had signed a valid stacking waiver;
(2) If their insurance policy extended coverage for newly-added vehicles under an after-acquired-vehicle clause; and
(3) If that clause was continuous (rather than finite);
(4) Then the waiver applied to the newly-added vehicle as well.
In this case, the circuit court observed, the Kuhnses had signed a valid stacking waiver and the policy contained an after-acquired-vehicle clause.
The Third Circuit then rejected the Kuhnses' contention that the after-acquired-vehicle clause in their policy was not continuous because the policy stated that a “covered auto” included “any . . .
vehicle[,] on the date you become the owner,” so long as three conditions were met: (1) the vehicle was acquired “during the policy period;” (2) the policyholder “asks [Travelers] to insure it within 30 days;” and (3) “no other insurance policy provides coverage for that vehicle.”
The Third Circuit found that, under Sackett II, these conditions subsequent did not affect the conclusion that the after-acquired-vehicle clause was continuous.
The circuit court also was not persuaded by the Kuhnses' argument that the after-acquired-vehicle clause did not apply because their fourth vehicle was not added to the policy pursuant to that clause but, rather, by the issuance of a new declarations page from Travelers.
The Third Circuit reasoned that, under Pennsylvania insurance law, the mechanism by which vehicles generally were added to existing policies was via “newly acquired vehicle clauses,” rather than by the issuance of an amended declarations page. Therefore, neither the adding of the fourth vehicle to the declarations sheet, nor the issuance of that sheet, triggered Travelers' contractual duty to extend coverage to the Kuhnses' newly-acquired vehicle. Instead, the Third Circuit concluded, Travelers' duty was triggered by the policy's after-acquired-vehicle clause, and Travelers did not have to provide the Kuhnses with another opportunity to waive stacking.
Steven A. Meyerowitz
Steven A. Meyerowitz, a Harvard Law School graduate, is the founder and president of Meyerowitz Communications Inc., a law firm marketing communications consulting company. He may be contacted at [email protected].