PA’s Uninsured & Underinsured Motorist Stacking Rules Clarified

Editor’s note: The author represented Nationwide in the Sackett cases,
filed the amicus brief for the Pennsylvania Association for Justice in
Bumbarger and represents the plaintiff in Seiple.

In Pennsylvania, questions exist as to whether and when insurers need to
obtain new stacking waivers when new vehicles are added to existing policies
providing unstacked uninsured and underinsured motorist coverages. In
Sackett v. Nationwide Mutual Insurance, 919 A.2d 194 (Pa. 2007), known
as Sackett I, and Sackett v. Nationwide Mutual Insurance, 940 A.2d 329
(Pa. 2007), known as Sackett II, the state Supreme Court established the
rules to be applied in this situation. In Sackett v. Nationwide Mutual
Insurance, 4 A.3d 637 (Pa. Super. 2010), or Sackett III, and, most recently,
in Bumbarger v. Peerless Indemnity Insurance, 2014 PA Super. 115 (June
6, 2014), the Superior Court decided how these rules are to be applied.

Nonetheless, some insurers still question the need for new stacking waivers
when new vehicles are added to existing unstacked policies. The en banc
Superior Court decision in Bumbarger and the pending Seiple v. Progressive
Northern Insurance, No. 13-3213, matter in the U.S. Court of Appeals for
the Third Circuit address these issues.

In Pennsylvania, stacking of UM and UIM coverages is mandated, absent a
valid waiver. In Sackett I, the Supreme Court held that the addition of
a new vehicle to an existing policy providing unstacked coverage required
a new stacking waiver. In Sackett II, the Supreme Court, on reconsideration,
carved out a limited exception to Sackett I. In Sackett II, the Supreme
Court held that a new stacking waiver is not needed for a vehicle added
to an existing unstacked policy where the vehicle is added by reason of
a newly acquired vehicle clause that is continuous (not finite) in nature.
An understanding of the operation of the newly acquired vehicle clause
is necessary for the proper application of the Sackett rules.

Generally, new vehicles are added to existing policies in two ways: by
endorsement or pursuant to the newly acquired vehicle clause. The newly
acquired vehicle clause generally provides the insured with coverage upon
the acquisition of a new vehicle until the vehicle is endorsed onto the
policy. The clause only operates when and until the new vehicle is actually
listed on the policy. Once specific insurance is purchased on the vehicle,
it is no longer newly acquired and the automatic extension of insurance
terminates. Thus, the newly acquired vehicle clause provides coverage
to vehicles where the insurer has not yet been apprised of the acquisition.
Once listed on the policy, it is no longer a newly acquired vehicle, but
rather a covered vehicle, as in Bramlett v. State Farm Mutual Automobile
Insurance, 205 Kan. 128 (Kan 1970), and Barnard v. Fireman’s Fund
Insurance, 996 F. 2d 246 (10th Cir. 1993). The newly acquired vehicle
clause thus only operates to extend coverage where the insured fails to
immediately notify the insurer of the vehicle purchase. Customarily, the
newly acquired vehicle clause requires notification of the acquisition
to the insurer within a designated period of time for the clause to operate.
Where timely notice is given, coverage is bound to the date of acquisition.
Where timely notice is not given, coverage is only bound to the date of
notice to the insurer.

In many instances, the newly acquired vehicle clause is never triggered.
Often, the insurer is notified of the acquisition immediately and the
new vehicle is endorsed onto the policy, as new declarations pages are
issued. In that situation, the newly acquired vehicle clause is never
invoked. In Sackett III, the Superior Court addressed these particular
circumstances. In that case, the court noted that Victor Sackett’s
new vehicle was added by endorsement since the insured immediately notified
the insurer upon purchase. The newly acquired vehicle clause was therefore
never triggered to provide coverage. Thus, the court held that Sackett
I, alone, applied; Sackett II was not applicable. Nonetheless, some insurers
continued to insist that all new vehicles are added to their policies
by operation of a newly acquired vehicle clause. As such, they contended
that no new waiver was needed.

In Bumbarger, the insurer, Peerless, made this argument. The en banc Superior
Court then addressed these issues. In that case, Helen Bumbarger added
new vehicles to her unstacked policy. No new stacking waivers were obtained.
Peerless contended that no new waiver was needed because the new vehicles
were added pursuant to the newly acquired vehicle clause and the newly
acquired vehicle clause was continuous, not finite, in nature. In rejecting
these contentions, the court first outlined the methodology to be utilized,
namely: “(1) how was the ‘new’ vehicle added to the existing
automobile policy (i.e., via endorsement or newly acquired clause); and
(2) what is the specific language of the relevant clauses found in the
applicable insurance policy.”

In answering these questions, the en banc Superior Court held that since
“the additional cars were added on pursuant to the policy’s endorsement
provision immediately after being purchased and were placed on the policy’s
declarations pages, the after-acquired clause became irrelevant.”
As such, a new stacking waiver was needed.

The en banc Superior Court went on to note that the newly acquired auto
clause in the Peerless policy was, in fact, finite. The court pointed
out that the newly acquired vehicle clause differentiated between coverage
for newly acquired and replacement vehicles. Coverage for replacement
vehicles was provided without any notice to the insurer. Coverage for
new, additional vehicles requires notice for coverage to attach beyond
the grace period. Thus, while coverage for replacement vehicles is continuous,
coverage for newly acquired additional vehicles is finite. New stacking
waivers were needed but never obtained. Stacked coverage was thus available
to the plaintiffs in Bumbarger.

In Seiple, the insurer similarly contends that all new vehicles are added
to existing policies by way of the newly acquired vehicle clause. The
policy in question in that case identified three types of covered autos:
listed autos, newly acquired autos and replacement autos. Listed autos
were those specifically identified on the declarations pages. Newly acquired
autos are covered automatically (until being specifically listed on the
policy), but only if the insured notified the insurer within 30 days of
the acquisition. Replacement autos, on the other hand, have coverage automatically
extended for the entire term of the policy upon acquisition, regardless
of notice to the insurer.

In the complaint, Alfred Seiple contended that his new vehicles were added
to the existing policy by way of endorsement—the issuance of amended
declarations pages following immediate notification to the insurer of
the acquisition. Under Sackett III, a new waiver should be needed. Nonetheless,
the trial court dismissed the claims on a motion to dismiss, finding that
the vehicle was added pursuant to the newly acquired vehicle clause, which
the court found was continuous. On appeal, Seiple is seeking reversal
of the trial court decision, asserting that a new stacking waiver was
needed since new vehicles were not added pursuant to the newly acquired
vehicle clause. Seiple also maintains the position that the newly acquired
vehicle clause, even if applicable, was finite, not continuous in nature.
As such, he contends that a new waiver of stacking is needed.

The distinction between the notice requirement for the new and replacement
vehicles in the policy in Seiple is very similar to that in Bumbarger.
While the replacement vehicle is provided coverage for the remainder of
the policy term, the newly acquired vehicle is given coverage for the
finite period until notification is given and the vehicle is then listed
on the policy. When the new vehicle becomes a listed vehicle, the newly
acquired vehicle ceases to function. This is true of the newly acquired
clause in most auto policies. In Seiple, the Third Circuit will address
the same issues decided in Bumbarger. The Third Circuit accepted Seiple
for disposition on June 12 without oral argument.

In Pennsylvania, the application of the stacking rules of Sackett by insurers
is currently not uniform. The en banc Superior Court has clarified the
application of these rules. The Third Circuit has a similar opportunity
to clear up any confusion. Those insurers, like those in Bumbarger and
Seiple, that contend that all new vehicles are added to policies pursuant
to a continuous newly acquired vehicle clause, thereby obviating the need
for a new stacking waiver, will need to amend their underwriting policies.
In practice, most new vehicles are not added to existing policies by way
of a newly acquired vehicle clause. Instead, most new cars are added to
policies by the issuance of amended declarations pages, thereby immediately
making the new vehicle a listed vehicle without the application of any
newly acquired vehicle clause. Many newly acquired clauses, if triggered,
are finite in nature, in stark contrast to replacement vehicle clauses.
Claimants in Pennsylvania need to be aware of the stacking rules and their
application in order to maximize recovery in motor vehicle accident cases.

JAMES C. HAGGERTY is one of the founding partners of Haggerty, Goldberg,
Schleifer & Kupersmith, with offices in Philadelphia, Holland, Reading
and Allentown, Pa. He focuses his practice on plaintiffs personal injury,
bad faith, UM/UIM and insurance coverage matters, having previously represented
the insurance industry for more than 30 years.