Defense Digest, Vol. 30, No. 4, December 2024

UIM Stacking Even When Not a Named Insured

By
Leo A. Bohanski

Key Points:

  • Pennsylvania Superior Court addresses issue of first impression involving UIM stacking and coverage. 
  • The company president, insured under policy covering one vehicle, was entitled to inter-policy stacking of UIM benefits.    

The Pennsylvania Superior Court recently addressed an issue of first impression involving UIM stacking and coverage in Baclit v. Sloan, 323 A.3d 1 (Pa. Super. 2024).  The plaintiff, Timothy S. Baclit, died acting as a good samaritan to aid the defendant, Steven Sloan, who was involved in a single motor vehicle accident after crashing into a bridge retaining wall. Mr. Baclit was operating a motor vehicle owned by his mother and stopped at the accident scene to render aid to Mr. Sloan. In the process of providing assistance to Mr. Sloan, Mr. Baclit fell from the bridge retaining wall and later succumbed to his injuries.  

Mr. Sloan’s automobile liability coverage through Farmers Insurance tendered the limits to the administrator of the estate of Mr. Baclit. The vehicle Mr. Baclit operated was insured under a multivehicle policy through State Farm Mutual Insurance Company with stacked UIM limits of $300,000. State Farm paid the stacked UIM policy limits under that claim. At the time of his death, Mr. Baclit owned a motorcycle that had UIM coverage through Progressive, which also tendered its UIM policy limits. What remained at issue was a commercial automobile policy through United Financial Casualty Company (United).      

Mr. Baclit was the president and sole officer of a trucking business, TKC Trucking, which was covered by a commercial automobile insurance policy through United.  Under that commercial policy, TKC Trucking was a “named insured” and Mr. Baclit and another individual were designated as rated drivers. The subject policy covered a truck and load trail trailer and provided stacked UIM coverage. 

The administrator of the estate for Mr. Baclit filed a complaint against United, asserting claims of breach of contract, bad faith, wrongful death, and survival. Notably, there was no waiver of stacking signed by Mr. Baclit under that policy and the premiums reflected higher payments for stacking coverage. 

Upon inception of the policy, United charged a premium for stacking under the single car commercial policy. The trial court felt that, since the carrier chose to provide stacked insurance coverage on a one-vehicle commercial policy, where the injured party was both the sole officer of TKC Trucking and named as a rated driver in the policy, the attempt to deny stacked coverage served as a de facto waiver, in violation of the language of the Pennsylvania Motor Vehicle Financial Responsibility Law (MVFRL). Thus, the trial court found that the estate was entitled to collect UIM benefits and granted its motion for summary judgment. 

United appealed to the Superior Court, which noted that the only question before it was purely one of law requiring of a determination whether Mr. Baclit was entitled to UIM benefits under the United policy. The court examined the interplay between the provisions of the MVFRL and the plain language of the policy. It reviewed the various provisions of the MVFRL pertaining to UIM coverages, focusing on section 1738(a), which provided, when multiple vehicles are insured on one or more policies providing UIM coverage, any UIM coverages “stacked” by default and the amount of coverage shall be the sum of the limits for each motor vehicle as to which the injured person is an insured. See also Gallagher v. Geico Indemnity Co., 201 A.3d 131, 137 (Pa. 2019). Section 1738 (a) unambiguously provides for inter-policy as well as intra-policy stacking. 

Although UM/UIM coverage is stacked by default, a named insured may waive stacking of UM or UIM coverages, in which case, the limits of coverage available under the policy for an insured shall be the stated limits for the motor vehicle as to which the injured person is an insured. 75 Pa.C.S. § 1738(b). Each named insured purchasing UM/UIM coverage must be “provided the opportunity to waive stacked limits of coverage and instead purchase coverage as described under Subsection (b). The premiums for an insured who exercises such waiver shall be reduced to reflect the different cost of such coverage.” Id. § 1738(c). Similarly, with regard to the waiver of UIM coverage, stacking may also be waived through the statutorily prescribed form contained in § 1738(b)(2). Failure to comply with the appropriate language in the rejection form will void any purported waiver.  

Citing Gallagher, 201 A.3d at 137, the Superior Court stated that “[w]e must apply general principles of contract interpretation, as, at base, an insurance policy is nothing more than a contract between an insurer and the insured.” It also referred to Gallagher, 201 A.3d at 137 (citation omitted), in noting that, “[i]mportantly, however, provisions of insurance contracts are invalid and unenforceable if they conflict with statutory mandates because contracts cannot alter existing laws.” Based on Erie Ins. Exch. v. Eachus, 306 A.3d 930, 933 (Pa. Super. 2023), it indicated that “[t]he provisions of the MVFRL are mandatory, and where the insurance policy provisions fail … to comply with the provisions of the MVFRL, the policy provisions will be found unenforceable.”

Utilizing these principles, the Superior Court interpreted the policy to determine whether Mr. Baclit, as a sole officer of the company, should be regarded as an insured under the subject policy and, therefore, entitled to stacked UIM benefits. The court first recognized that “[t]he owner and/or officers of a corporation are ‘Class I’ insureds under a policy issued in the name of a corporation.” Miller v. Royal Ins. Co., 510 A.2d 1257, 1258 (Pa. Super. 1986). The Superior Court in Miller had found that Mr. Miller was a de facto named insured under the business automobile policy and that the spouse of a corporate officer was also a “Class I insured.” Taking the analysis in Miller, the court here felt that because Mr. Baclit was the sole officer and president of TKC Trucking and was the sole corporate officer and person responsible for paying premiums for the subject policy, he would be the one who would have had the power to decline waiver of UIM and stacking of coverage for TKC Trucking. 

United contended the subject policy should have been considered a first priority UIM policy. Thus, the concept of “stacking” would not have come into play unless the insured had more than one vehicle insured under one or more policies providing UM or UIM coverage. United presented a hypothetical that Mr. Baclit would be seeking primary UIM coverage under the policy as a single policy of insurance that insures a single vehicle. Following the hypothetical through to its logical conclusion, Mr. Baclit would thereafter seek stacked UIM coverage from his mother’s policy and his own motorcycle policy. As the driver or operator of the vehicle insured under the policy involved in an accident, wherein Mr. Baclit was not at fault, he would recover first priority UIM coverage from the policy under §§ 1731 and 1733 and not stacked coverage under § 1738. Yet, there would be no mechanism for any individual to stack benefits paid for by TKC Trucking under the policy. As per the Supreme Court in Gallagher, this constituted de facto waiver of stacking benefits in violation of the MVFRL. Gallagher, 201 A.3d at 132. 

In the absence of finding Mr. Baclit was an insured under the policy pursuant to Miller, the language of the policy (defining an “insured” in a corporate policy for purposes of stacking UIM benefits) operated as a de facto waiver of stacking coverage because, as in Gallagher, there was no ability for anyone to recover stacked UIM benefits, despite the fact that the carrier did not obtain the requisite waiver in violation of § 1738 of the MVFRL. 

To the contrary, as in Gallagher, Mr. Baclit paid increased premiums to obtain stacked UIM benefits under the commercial policy and, as the sole officer of the company and one who made the payments, reasonably expected to receive such stacked UIM benefits. Unless Mr. Baclit was a named insured under the policy, United’s constricted view of who could constitute as “an insured” for purposes of collecting stacked UIM benefits under a single-vehicle, business automobile policy violated the MVFRL. As such, the Superior Court found no error or abuse of discretion in the trial court’s decision and affirmed the trial court’s order granting the estate’s motion for summary judgment seeking stacked UIM benefits under United’s commercial automobile policy.  

*Leo is a shareholder and member of our Casualty Department. He works in our Scranton, Pennsylvania, office and can be reached at LABohanski@mdwcg.com. 

 

Defense Digest, Vol. 30, No. 4, December 2024, is prepared by Marshall Dennehey to provide information on recent legal developments of interest to our readers. This publication is not intended to provide legal advice for a specific situation or to create an attorney-client relationship. ATTORNEY ADVERTISING pursuant to New York RPC 7.1. © 2024 Marshall Dennehey. All Rights Reserved. This article may not be reprinted without the express written permission of our firm. For reprints, contact tamontemuro@mdwcg.com.