The United States Court of Appeals for Third Circuit recently upheld a Magistrate Judge’s ruling that held that a waiver of stacking uninsured/underinsured (“UM/UIM”) coverages did apply to a vehicle that was added to an insured’s policy after the insured had already signed a stacking waiver.
In Kuhns v. The Travelers Home and Marine Insurance Company, No. 17-3371 (3rd Cir. January 3, 2019) the appellants, Wayne and Shannon Kuhns had an insurance policy with the appellees, The Travelers Home and Marine Insurance Company that covered three of their vehicles. The Kuhnses signed a stacking waiver at the time of obtaining the policy. The Kuhnses then obtained a fourth vehicle a few months later. This vehicle was added to the already existing policy with Travelers. No new stacking waiver was provided to the Kuhnses by Travelers at the time of adding the new vehicle.
The Kuhnses then sought to allow stacking of their UM/UIM coverages since no new stacking waiver was provided. The issue before the Magistrate Judge was whether the stacking waiver applied to the new vehicle that was added to the policy after the Kuhnses already signed a stacking waiver for that policy. The Magistrate Judge held that the waiver did apply and the Appellate Division agreed. Therefore, the Kuhnses do not get the benefit of stacking their UM/UIM coverages.
Stacking insurance is the ability to combine coverages for multiple vehicles under the same policy to provide an insured with greater coverage than that for a single vehicle. For example, an insured may have three vehicles listed under a single policy and each vehicle has $100,000 in UM/UIM benefits. The insured would be entitled to $300,000 in UM/UIM benefits ($100,000 multiplied by three vehicles) if the insured does not waive stacking. However, the insured would only be entitled to coverage under a single vehicle, or $100,000 under this example, if the insured does waive stacking.
The Magistrate Judge based her ruling on Sackett v. Nationwide Mutual Insurance Company, 919 A.2d 194 (Pa. 2007 (“Sackett I”) and Sackett v. Nationwide Mutual Insurance Company, 940 A.2d 329 (Pa. 2007) (“Sackett II”). Sackett II held that a stacking waiver that was signed before the addition of a new vehicle is applicable to the new vehicle if there is a “continuous after-acquired-vehicle clause.” An after-acquired-vehicle clause allows for coverage of an existing policy to extend to a newly added vehicle if the clause is found to be “continuous.”
The Kuhnses’s policy will automatically extend coverage to a new vehicle if the following three conditions are met: 1) The vehicle was acquired during the policy period; 2) the policy holder asks Travelers to insure it within 30 days; 3) no other insurance policy provides coverage for that vehicle. The Magistrate Judge found these conditions made the after-acquired-vehicle clause “continuous,” thereby extending the stacking waiver to the new vehicle.
The Kuhnses did not contend that they signed a valid stacking waiver, but rather contended that the new vehicle was added to the policy via an amended declaration page and not the after-acquired-vehicle clause. Additionally, the Kuhnses argued that, even if the new vehicle was added via the after-acquired-vehicle clause, this clause was not “continuous” as it required three conditions to extend coverage.
The Appellate Division held that the Magistrate Judge was correct in rejecting these arguments as Sackett II had already clearly ruled that this type of after-acquired-vehicle clause is “continuous” despite the conditions. The Appellate Division also held that the Kuhnses’s declaration page argument failed, because vehicles are generally added to policies by the after-acquired-vehicle clause according to the Pennsylvania Insurance Commissioner as opposed to an amended declaration page.
This ruling is significant as it protects an insurer by limiting coverage only to what an insured had elected. An insurer and insured can rely on a valid after-acquired-vehicle clause to quickly add a new vehicle to an insurance policy without the concern that an insured may be entitled to more coverage than the insured elected. Both parties will get the coverage that each had bargained for.