The Pennsylvania Supreme Court Addresses Waive of Stacked Coverage When Vehicle Removed from Multiple Motor Vehicle Insurance Policy
Robert and Kelly Franks purchased motor vehicle insurance from State Farm in 2013 for their Nissan Xterra and Ford Taurus. The Franks purchased underinsured motorist coverage (“UIM”) of $100,000 per person and $300,000 per accident limits; however, they executed a form rejecting stacked UIM coverage in compliance with Section 1738(d)(2) of the MVFRL, which provides:
[t]he named insured shall be informed that he may exercise the waiver of the stacked limits of underinsured motorist coverage by signing the following written rejection form: UNDERINSURED COVERAGE LIMITS By signing this waiver, I am rejecting stacked limits of underinsured motorist coverage under the policy for myself and members of my household under which the limits of coverage available would be the sum of limits for each motor vehicle insured under the policy. Instead, the limits of coverage that I am purchasing shall be reduced to the limits stated in the policy. I knowingly and voluntarily reject the stacked limits of coverage. I understand that my premiums will be reduced if I reject this coverage.
Later, the Franks added a Nissan Altima to the policy, effective January 22, 2014. A new form rejecting stacked UIM coverage was executed. Thereafter, the Franks removed the Ford Taurus from the policy, and replaced their Nissan Xterra with a Nissan Frontier; however, no additional form rejecting stacked UIM coverage was offered or sought to be completed.
Robert Franks sustained injuries in an accident that was not his fault while operating the Nissan Frontier. The at-fault driver did not have sufficient insurance coverage to cover the injuries and damages sustained by the Franks. Accordingly, the Franks filed a claim for UIM benefits against State Farm. The Franks claimed a $200,000 limit because of the absence of a valid waiver of stacked UIM coverage. State Farm claimed the policy afforded a $100,000 limit because the removal of a vehicle from a multi-vehicle policy, without more, did not alter the status of the prior waiver nor trigger a need to execute a new waiver under § 1738(c), which provides:
(c) More than one vehicle.–Each named insured purchasing uninsured or underinsured motorist coverage for more than one vehicle under a policy shall be provided the opportunity to waive the stacked limits of coverage and instead purchase coverage as described in subsection (b). The premiums for an insured who exercises such waiver shall be reduced to reflect the different cost of such coverage.
The trial court and Superior Court agreed with State Farm, and the Franks pursued their appeal to the Supreme Court, who affirmed the lower courts. In addressing this issue of first impression, the Superior and Supreme Courts found Barnard v. Travelers Home & Marine Insurance Co., 216 A.3d 1045 (Pa. 2019) to be instructive. Therein, the Supreme Court held that § 1738 was not ambiguous and that according to the rules of statutory construction, the term “purchase” should be afforded its standard dictionary meaning as “[t]he act or an instance of buying.”
The Franks took the position of the dissenting judges in Shipp v. Phoenix Ins. Co., 51 A.3d 219 (Pa.Super. 2012), and argued that under section 1738(c) of the MVFRL, the term “purchasing” UIM coverage includes circumstances when an insured removes a vehicle from an existing multi-vehicle policy because it changes the potential UIM coverage from that offered under the original policy and because the amount of premiums for that coverage also changes.
However, the Supreme Court concluded that the removal of a vehicle from coverage under the policy, while not disturbing the remaining coverage, did not constitute a “purchase” under section 1738(c) triggering any renewed requirement to offer or acquire an express waiver of previously waived stacked UIM coverage. The Court reiterated that section 1738 is not inherently ambiguous nor does it reflect an ambiguity in context with other aspects of the MVFRL. Accordingly, it applied the plain meaning of “purchasing” to determine when an insurer must offer an opportunity to waive stacking on approved forms. Further, the court restated that the “purchase” pertains to UIM/UM coverage rather than the underlying policy itself. Franks v. State Farm Mut. Auto. Ins. Co., No. 42 MAP 2022 (Pa. April 19, 2023).