Insurance Law Posts

Third Circuit Confirms Single-Vehicle Automobile Insurance Policies Can Provide Stacked UM/UIM Benefits

July 10, 2023

In yet another important decision clarifying the scope and application of the UM/UIM stacking provisions in the Pennsylvania Motor Vehicle Financial Responsibility Law (“MVFRL”), the United States Court of Appeals for the Third Circuit recently concluded that an insured is entitled to stacked UM/UIM benefits even where that insured’s policy only insures a single automobile. In doing so, the Court affirmed the dismissal of four Pennsylvania class action lawsuits that the insureds had filed against their respective insurers based on the contention that the stacking benefit for which they had paid premiums was “illusory.”

The four cases that were consolidated on appeal to the Third Circuit — Berardi v. USAA General Indemnity Company; Smith v. USAA Casualty Insurance Company; Jones v. GEICO Choice Insurance Company; and Purcell v. GEICO Casualty Company — all arose from the same basic set of facts. In each case, the plaintiffs alleged that they had purchased an automobile insurance policy from their respective insurance company; and that the policy included the statutorily-mandated UM and UIM coverage. The plaintiffs further alleged that the policy they purchased insured only one automobile, and that the plaintiffs were not insured under any other household automobile insurance policies at that time. Finally, the insureds alleged that they had not waived stacking of their UM/UIM benefits. As such, the policies were issued with stacked UM/UIM benefits as required by the MVFRL, and the plaintiffs were charged the premiums for this stacked benefit. 

On behalf of themselves and the putative classes of similarly-situated policyholders, the plaintiffs alleged that they should not have been charged premiums for stacked UM/UIM coverage. According to the plaintiffs, their respective policies did not provide an actual stacking benefit, as the policies insured only one vehicle and the plaintiffs were not insured under any other household policies of insurance. Thus, the plaintiffs alleged, there were neither additional vehicles (intra-policy stacking) nor other household policies (inter-policy stacking) to stack. The plaintiffs therefore claimed that they should have been charged premiums for unstacked UM/UIM coverage, and that the insurers should therefore be required to return the difference in premiums. The plaintiffs also asserted claims for unjust enrichment and for violations of the Pennsylvania Unfair Trade Practices and Consumer Protection Law (“UTPCPL”).

After the District Courts granted the insurers’ Motions to Dismiss in each of the four cases, the plaintiffs appealed to the Third Circuit and the cases were consolidated for the purposes of the appeal. In a unanimous decision, the Third Circuit affirmed the dismissal of the plaintiffs’ claims. In its opinion, the Third Circuit first considered whether the plaintiffs could benefit from stacked UM/UIM coverage even though their policies only insured a single automobile and the plaintiffs were not insured under any other household automobile insurance policies. Relying on the Pennsylvania Superior Court’s decision in In re Insurance Stacking Litigation, 754 A.2d 702 (Pa. Super. 2000), the Third Circuit confirmed that such a stacking benefit was available to insureds in those circumstances. In In re Stacking Litigation, the Superior Court concluded — based on an opinion from the Pennsylvania Insurance Commissioner—that insureds who were insured under single-vehicle insurance policies could nevertheless benefit from stacking “in at least two situations”: where the insured was injured in his or her own vehicle but was also covered under another insurance policy at that time; and where the individual was injured in a vehicle other than his or her own and was an insured under the non-owned vehicle’s insurance policy for UM/UIM benefits. 

In reaching the conclusion that the plaintiffs could receive stacked UM/UIM benefits, the Third Circuit rejected the plaintiffs’ contention that the Pennsylvania Supreme Court’s decision in Generette v. Donegal Mutual Insurance Company, 957 A.2d 1180 (Pa. 2008), eliminated the potential for stacking under a single-vehicle insurance policy. Rather, according to the Court, Generette “simply clarified that stacking applies ‘only to’ insureds’ as defined by Section 1702 [of the MVFRL].” As the Court noted, § 1702’s definition of “insured” does not include “guest passengers”—that is, a plaintiff who is a passenger in a non-owned vehicle but does not qualify as a named “insured” under the policy covering that automobile. The Court further explained that Generette “says nothing about the second scenario provided by the Insurance Commissioner, which involves a single vehicle policyholder who was injured in his employer’s vehicle and is an insured under his employer’s policy for that vehicle.” The Third Circuit further rejected the plaintiffs’ contention that the two scenarios identified by the Insurance Commissioner in In re Stacking Litigation were the only two potential scenarios where stacking benefits could exist. To the contrary, the Third Circuit expressly acknowledged a potential for stacking under a single-vehicle automobile policy where, for example, the insured acquires a new automobile or someone in the insured’s household acquires a policy that would cover the insured. The Third Circuit therefore rejected the plaintiffs’ argument that the stacked UM/UIM coverage on their policy was “illusory.” The Third Circuit also rejected the claim that the insurers should have told the plaintiffs that their policies might not include stacked benefits, noting that “insureds have the ‘obligation to question [the] insurer at the time the insurance contract is entered into as to the type of coverage desired and the ramifications arising therefrom,’ and to determine what coverage will best serve their needs.” On this point, the Third Circuit further explained that “insureds with a single vehicle and no other household policies can still benefit from stacking in certain situations, and Plaintiffs had the choice to waive stacking if they believed these scenarios would be inapplicable to them.”

Based on its analysis of the MVFRL and Pennsylvania law, the Third Circuit concluded that the plaintiffs’ policies included a stacked benefit. Thus, the Third Circuit held, the plaintiffs were properly charged the premiums for stacked UM/UIM benefits, and they were therefore not entitled to a “return of premiums.” The Third Circuit also affirmed the dismissal of the plaintiffs’ unjust enrichment and UTPCPL claims. With respect to the unjust enrichment claim, the Third Circuit held that its determination as to the potential stacking benefit meant that the plaintiffs and the insurers had a valid contract. Under Pennsylvania law, the Third Circuit explained, the plaintiffs therefore could not pursue an equitable claim for unjust enrichment. As to the claim under the UTPCPL, the Third Circuit held that the plaintiffs did not establish in their pleadings that the insurers had engaged in any conduct that was prohibited under the UTPCPL. As the Court explained, “[t]here is nothing deceptive in providing such coverage to Plaintiffs because there are situations in which a single-vehicle owner with no other household policies at the time of purchase can benefit from stacked coverage.” Finally, the Third Circuit declined the plaintiffs’ request to certify the cases for consideration by the Pennsylvania Supreme Court.

The decision in these class actions provides further clarification for insurers with respect to the scope and application of the MVFRL’s stacking provisions. In addition, the Third Circuit’s decision affirms that unless an insured expressly waives stacking of UM/UIM coverage in the manner required by the MVFRL, Pennsylvania automobile insurers may continue to charge premiums for stacked UM/UIM coverage even on single-vehicle policies and where the insured is not covered under any other household automobile insurance policies.