On June 17, 2016, Ms. Barnard was involved in a motor vehicle accident with an underinsured motorist. When Ms. Barnard sought UIM benefits from Travelers, Travelers offered her $100,000 based on the UIM coverage limit on one of her vehicles.

Ms. Barnard sued, seeking $200,000 in stacked UIM benefits.

The U.S. District Court for the Eastern District of Pennsylvania granted summary judgment in favor of Ms. Barnard, and Travelers appealed to the Third Circuit.

The circuit court observed that Section 1738 did not define the term "purchase," and it certified the following question to the Pennsylvania Supreme Court:

If an insured under a policy of insurance subject to the Pennsylvania Motor Vehicle Financial Responsibility Law has waived stacking but later secures an increase in the limit of her UIM coverage on her existing policy, must her insurance carrier obtain a separate waiver of her right to stack the coverage or does a prior waiver of the right to stack the coverage remain in effect?

The Pennsylvania Supreme Court's Decision

The court ruled that when Mr. Barnard paid to obtain additional UIM coverage for her two vehicles in 2009, Travelers was required to offer her the opportunity to waive stacking of the new, aggregate amount of UIM coverage at that time.

In its decision, the court explained that, under Section 1738, an insurance company must offer an insured the opportunity to waive stacking of UIM coverage limits whenever the insured purchased UIM coverage "for more than one vehicle under a policy." (As the court noted, if an insurance company did not obtain a stacking waiver at that time, the amount of UIM coverage available to an insured was "the sum of the limits for each motor vehicle" as to which the injured person was an insured.)

The court then ruled that, under a plain meaning analysis of Subsection 1738(c), an insured purchased UIM coverage when the insured paid to acquire UIM coverage "for more than one vehicle under a policy." It rejected Travelers' contention that the term "purchase" should be limited to an insured's initial purchase of an insurance policy. Rather, the court continued, the subsection required the execution of a new stacking waiver "any time" an insured paid to obtain UIM coverage for multiple vehicles, regardless of whether this acquisition occurred when an individual initially applied for insurance, or when he or she subsequently paid to obtain additional UIM coverage.

The court dismissed Travelers' concern that this interpretation of the term "purchase" required an insurance company to obtain a new stacking waiver whenever an insured paid an increased premium, reasoning that an insured who paid an increased premium due to inflation or because the insured replaced an old vehicle on her policy with a newer model did not acquire any more UIM coverage than the insured already had. Rather, the payment maintained the same amount of UIM coverage that the insured had acquired previously, "making a new stacking waiver unnecessary."

The court concluded that an insurance company must offer an insured the opportunity to waive stacking any time the insured acquired UIM coverage for more than one vehicle, regardless of whether this acquisition occurred when the insured initially applied for an insurance policy or when the insured subsequently increased his or her UIM coverage limits for multiple vehicles.

The case is Barnard v. Travelers Home and Marine Ins. Co., No. 42 EAP 2018 (Penn. Sept. 26, 2019).