The judges of the District Court for the Eastern District of Pennsylvania ruled in favor of an insurer defending the validity of its "Other Insurance" clause and enforcement of a stated UIM limit. The case is Meyers v. Travelers Ins. Co., 597 F. Supp. 3d 745 (E.D. Pa. 2022).
Ellen Meyers was severely injured in a car crash; the payment from the other driver's insurer was insufficient to cover the costs of her injuries. Meyers filed UIM claims under multiple policies and received $100,000 from Erie, her primary insurer, and an aggregate $1.5 million from her secondary insurers, Progressive and AIG. Each of these policies provided stacked UIM benefits, which is the default in Pennsylvania. As Meyers and her mother, Marie White, were living together at the time of the accident, Meyers also filed a UIM claim with Travelers, her mother's insurer. The stacked UIM limit in the Travelers policy was $300,000, but White had waived stacking.
The stacking waiver operated as a function of the policy's "Other Insurance" clause. When the stacking waiver was in play and coverage from Travelers was secondary, the "Other Insurance" clause set the UIM limit at the highest limit available from a claimant's secondary insurers. Among Meyers' secondary insurers–Progressive, AIG, and Travelers–the highest limit available was $500,000. Travelers offset their pro-rata payment against that limit and issued a payment for $85,000.
Meyers accepted the payment but filed a complaint challenging the validity of the "Other Insurance" clause. Though she had no issue with the stacking waiver or Travelers' calculation of their pro rata share, Meyers argued that capping her recovery at $500,000 violated Pennsylvania's excess coverage framework. She sought declaratory judgment that Travelers owed her the policy's stacked UIM limit of $300,000. Travelers, in turn, sought a declaration that Meyers was not entitled to a higher UIM payment and that the "Other Insurance" clause was valid and enforceable.
In Pennsylvania and other states that adhere to an excess coverage framework, a driver is "underinsured" when that driver's liability limits are less than that the amount of the victim's loss, so that the victim's own coverage is in excess of the other driver's coverage. The question before the Eastern District of Pennsylvania was whether it was permissible to use the highest liability limit available from any of an insured's secondary insurers as a cap for an insured's maximum recovery under non-stacked, secondary UIM coverage.
In an earlier case, Generette v. Donegal Mut. Ins. Co., 957 A.2d 1180 (Pa. 2008), the Supreme Court of Pennsylvania examined the relationship between primary and secondary UIM benefits under multiple policies. The financial responsibility law said the first insurer to receive a claim was obligated to pay the claim "as if wholly responsible," but that insurer could afterward seek pro-rata contributions from other insurers on the same level. (see 75 Pa. C.S. §1733(b)). Based on this language, the justices held that secondary UIM coverage must be excess over primary UIM coverage. However, the Generette court did not address the interaction of multiple policies at the same level of priority, much less what happened when some policies permitted stacking and some did not.
According to 75 Pa. C.S. §1738, the only statute in Pennsylvania's financial responsibility law addressing non-stacked UIM limits, when UIM coverage is waived, "the limits of coverage available under the policy for an insured shall be the stated limits for the motor vehicle as to which the injured person is an insured" (emphasis added). The Travelers policy stated that "[t]he maximum recovery under all policies in the [s]econd priority may equal but not exceed the highest applicable limit of liability for any one vehicle under any one policy…" (emphasis added). This language implemented the stacking waiver by precluding the aggregation of policy limits from different secondary policies, which the court said "[was] precisely how the waiver of stacking is supposed to work." Meyers' argument to the contrary would broaden excess coverage to the point where stacking waivers would be useless.
Therefore, the court ruled in favor of Travelers.
Editor's Note: The contours of stacking coverage vary by state. States like Pennsylvania automatically include stacking in auto policies, meaning policyholders must opt out of, or waive, stacking in order to pay a lower premium. Whenever stacking is waived, that waiver applies to the entire policy. In other states, policyholders must affirmatively opt into stacking and be willing to pay the higher premium that comes with it.
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