Policies providing individual limits of UIM coverage for vehicles that are owned and held within the same household do not allow insureds to stack coverage.
The appellant sought new insurance policies for two cars that he and his wife owned. He filed an application for insurance with the appellee whereby he signed and submitted a "Rejection of 'Stacked Limits' for Underinsured Motorist Coverage" form, which provided that each vehicle under the policy would have its own limit of underinsured motorist coverage. After entering into the new policy, the appellant was involved in an automobile accident in which he sustained serious injuries. The appellant filed suit against the other driver involved in the accident, and with the consent of the appellee, the appellant settled with the other driver. The appellant then filed a UIM claim with appellee insurer seeking $200,000 in benefits, although the car he was driving at the time of the accident had only $100,000 in benefits, and stacking of the limits between his two cars was not allowed pursuant to the rejection that he previously signed. After the insurer denied his claim, the appellant brought suit against the insurer for breach of contract and bad faith, requesting a declaratory judgment that he was entitled to UIM benefits under each of his single-car insurance policies. After the insurer paid the Appellant $100,000, he withdrew his bad faith and breach of contract claims and only pursued the declaratory judgment that he was entitled to the UIM benefits under his other vehicle's policy. The Court of Appeals for the Third Circuit upheld the district court's grant of summary judgment in favor of the insurer, upholding the "household exclusion" in the policy. The "household exclusion" applies to policies that are intentionally separated, issued by the same insurance company, and cover cars within the same household. The court upheld the lower court's decision by ruling that such policies are a permissible means of decreasing premium costs and that, under these particular policies, the appellant could not receive UIM benefits for which he did not pay. Thus, the motion for summary judgment that was granted in favor of the insurer was affirmed.
Case Law Alert - 1st Qtr 2010