Recently, in Gittlemacher v. Travelers Property Casualty Company, et al., No. 23-1774, 2024 WL 4274460 (3d Cir. Sept. 24, 2024), the Third Circuit affirmed the lower court decision, in which the court granted summary judgement in favor of the insurance carrier when it determined that the plain meaning of the policy language only entitled the plaintiff to unstacked, second priority, capped UIM benefits.
The claimant was injured as a pedestrian in a parking lot and made a claim for underinsured motorist benefits (“UIM) under three household policies issued to her, her daughter and granddaughter as named insureds, respectively. Each of the three insurance policies insured one vehicle and contained a signed waiver rejecting stacked UIM coverage. All of the policies also included “Other Insurance” clauses that established the priority of recovery consistent with Section 1733 of the Motor Vehicle Financial Responsibility Laws and advised that if no insurance was applicable under the first priority of recovery, the maximum recovery for the injured insured could not exceed the “highest appliable limit for any one vehicle under any one policy”. If two or more policies held equal priority, the first policy against which the claim was filed would be responsible for paying the entire claim, after which it could seek contribution from the other insurers.
The claimant urged that she was entitled to recovery the combined limits of $250,000 in UIM benefits across all three policies, suggesting that any other result would deprive her of the benefits paid. The insurers tendered a combined $100,000 across all policies, arguing that the “Other Insurance” clause precluded recovery beyond the single highest limit across any one policy in the household, which was $100,000 in this case. The Court granted summary judgment for the defendants, holding that the claimant was not entitled to more than $100,000 in UIM benefits because all policies had knowingly waived inter-policy stacking, meaning her recovery could “not exceed the highest applicable limit for any one vehicle under any one policy.”
The United States Court of Appeals for the Third Circuit affirmed, first expressing that according to “general principles of contract interpretation,” an insurance policy is fundamentally a contract between an insurer and an insured, provided there are no conflicts with statutory mandates. Next, the Court referenced the MVFRL, which mandates insurance companies offer UIM coverage, and allow UIM stacking, unless the insured explicitly signs a waiver for these benefits. In citing to Craley, the Third Circuit explained that the stacking waivers on the single-vehicle policies were enforceable as a knowing rejection of stacking. Because the claimant’s policies all insuring a single vehicle, the Third Circuit explained that the policies knowingly waived inter-policy stacking. Craley v. State Farm Fire & Cas. Co., 586 Pa. 484, 895 A.2d 530 (2006).
In ascertaining how the stacking waiver applied to inter-policy stacking where all policies served as the second priority of recovery, the Court cited Backmeier, where the Pennsylvania Superior Court held that when “inter-policy stacking was knowingly waived, second priority coverage may be limited to the highest applicable limit of one policy.” Erie Ins. Exch. v. Backmeier, 287 A.3d 931 (2022).
The Court noted the parallels between Backmeier and the current case, emphasizing that since the insured was not in a vehicle covered by the policies, she qualified only for second priority coverage. The Court pointed out that a contrary ruling would enable policyholders to forgo stacking and obtain lower premiums while still reaping the advantages of stacked second priority UIM coverage. Therefore, the Court determined that the “other insurance” clauses served merely as a mechanism to facilitate the waiver of stacking and affirmed the trial court, accordingly.
The Gittelmacher decision can be found here.
For additional questions, please contact Molly Hecht, Esq. and/or Glen Shikunov, Esq.
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