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January 20th, 2023
Andrew Backmeier was riding his bicycle when he was struck and killed by an underinsured motorist’s vehicle. Andrew’s mother, Elizabeth Backmeir sought recovery through her insurance carrier, Erie Insurance (“Erie”), for underinsured motorists (“UIM”) coverage provided by her two insurance policies. The two policies each provided $100,000 in UIM benefits per person, $300,000 per occurrence, unstacked. Elizabeth executed stacking waivers on both policies. Both policies contained a “Limit of Protection” provision which capped total recovery under all household policies at the highest limit available under any single policy. Erie tendered a total of $100,000 of UIM coverage ($50,000 from each policy) pursuant to the “Limit of Protection” clause.
Elizabeth and Erie filed declaratory judgment actions – Elizabeth claimed she was entitled to $200,000 while Erie claimed that her recovery was limited to $100,000. The trial court entered declaratory judgment in the amount of $100,000.00 in favor of Elizabeth and against Erie. Elizabeth appealed the decision arguing that she is entitled to $200,000 because the “limit of protection” clause in her policies is unenforceable because it impermissibly provides only “gap” coverage rather than the “excess” coverage required by the Motor Vehicle Financial Responsibility Law (“MVFRL”), 75 Pa.C.S.A. § 1701-1799.7,] as discussed in Generette v. Donegal Mut. Ins. Co., 957 A.2d 1180 (Pa. 2008)]. Exchange v. Backmeier, 2022 PA Super 221 (March 7, 2022). Alternatively, she believed she was entitled to $200,000 in UIM coverage because the stacking waivers she executed did not preclude inter-policy stacking under the circumstances. Id.
The Court discussed Section 1733 of the MVFRL, which sets forth the priority of recovery when seeking UIM coverage as follows:
Where multiple policies apply, payment shall be made in the following order of priority:
(1) A policy covering a motor vehicle occupied by the injured person at the time of the accident.
(2) A policy covering a motor vehicle not involved in the accident with respect to which the
injured person is an insured.
75 Pa.C.S.A. § 1733(a)(1) and (a)(2).
The Court also discussed the concept of stacking, which is the ability to add the coverages available from different vehicles and/or different policies to provide a greater amount of coverage available under any one vehicle or policy. Intra-policy stacking is when more than one vehicle is insured under a single policy of insurance. Inter-policy stacking is the addition of coverages for vehicles insured under different policies of insurance. Finally, the Court explained the concept of waiver. A policyholder knowingly waives inter-policy stacking when (1) the policyholder executes a waiver form which conforms to Section 1738(d) of the MVFRL, and (2) the insurance policy insures only a single vehicle. Craley v. State Farm Fire and Cas. Co, 895 A.2d 530 (Pa. 2006) Moreover, when a policyholder executes a waiver form for an insurance policy where there is no possibility of intra-policy stacking, it logically flows that the policyholder knowingly waives inter-policy stacking in exchange for a reduced premium. Id. Finally, the Court concluded that execution of a Section 1738(d) waiver form pertaining to an insurance policy that covered two or more motor vehicles each providing UIM coverage waived only intra-policy stacking. Erie Ins. Exch. v. Petrie, 242 A.3d 915, 920 (Pa. Super. 2020). To waive inter-policy stacking, the Petrie Court held that the Section 1738(d) waiver form must be supplemented with a statement that explicitly states the policyholder waives inter-policy stacking. However, the facts and the holding in Petrie was limited to a case involving an insurance policy that covered two or more motor vehicles each having UIM coverage.
After examining both policies, the Superior Court affirmed the trial court concluding that while Elizabeth did not sign a waiver including inter-policy stacking, both policies only covered a single vehicle, and a waiver was executed for each policy; therefore, she could not claim that she did not knowingly waive inter-policy stacking.
Finally, after an exhaustive review of Pennsylvania law, the Court concluded that the coverage limits of all second priority UIM coverage policies cannot be aggregated or “stacked” one upon the other. The Court explained to hold otherwise would permit a policyholder to waive stacking to receive a reduced premium and then permit stacking or aggregation of second priority UIM coverage. Thus, under the circumstances, a limit of protection clause that caps second priority UIM coverage to the highest limit of liability of any single motor vehicle insured under any one second priority UIM coverage policy merely implements the concept of waiver of stacking and does not create gap coverage in contravention of the MVFRL.
