What Constitutes a Purchase Under the Pennsylvania MVFRL?
Key Points:
- In Franks v. State Farm Mutual Insurance Company, the Superior Court addressed the issue of whether a new signed waiver is required when a vehicle is removed from an insurance policy.
- The court answered whether removal of a vehicle from an existing policy of motor vehicle insurance constitutes a “purchase” of coverage per 75 Pa.C.S. § 1738(c) that requires a named insured be given an opportunity to waive stacked limits of coverage.
Since the sweeping Motor Vehicle Financial Responsibility Law (MVFRL) was enacted in 1984, Pennsylvania courts have, on numerous occasions, been asked to decide when a change to a motor vehicle policy triggers a requirement that the insured execute a new election or waiver form. The en banc Superior Court has recently addressed whether the removal of a vehicle from a policy requires that a named insured be given the opportunity to waive stacked limits of coverage.
The stacking of uninsured (UM) and underinsured (UIM) motorist protection is governed by 75 Pa.C.S. § 1738. The default provision, Section 1738 (a), states that available coverage shall be the sum of all coverages available for each vehicle within a policy or multiple policies. However, under Section 1738(b), the stacking of UIM or UM coverage may be rejected. Section 1738(c) provides, in pertinent part:
(c) More than one vehicle.--Each named insured purchasing uninsured or underinsured motorist coverage for more than one vehicle under a policy shall be provided the opportunity to waive the stacked limits of coverage … .
75 Pa.C.S. § 1738(c).
The recent en banc decision in Franks v. State Farm Mutual Insurance Company, 263 A.3d 1169 (Pa. Super. 2021) addresses the issue of whether a new signed waiver is required when a vehicle is removed from an insurance policy. Stated differently, does the removal of a vehicle from an existing policy of motor vehicle insurance constitute a “purchase” of coverage per Section 1738(c)?
In January 2013, Robert Franks applied for and obtained motor vehicle insurance coverage for two vehicles with State Farm. In connection with his application, Franks executed a waiver of stacked underinsured motorist coverage. State Farm issued the Franks a policy of motor vehicle insurance containing unstacked underinsured motorist benefits on his 2002 Nissan Xterra and 1999 Ford Taurus. In January 2014, the Franks added a third vehicle, a 2012 Nissan Altima, to the policy. At that time, the Franks executed a second waiver of stacked limits. In July 2014, the Ford Taurus was removed from the policy.
When the Ford Taurus was removed from the policy, Franks was not asked to, nor did he sign, a new waiver form rejecting stacked underinsured motorist benefits. From July 2014 through August 11, 2016, therefore, Franks’ policy insured two vehicles, and the declaration page reflected non-stacked underinsured motorist coverages.
On August 11, 2016, Robert Franks sustained injuries in a motor vehicle accident caused by the negligence of another driver. In an attempt to resolve Franks’ underinsured motorist claim, State Farm offered to pay him the unstacked, single underinsured limit of $100,000 rather than the $200,000 stacked limit.
Franks, dissatisfied with the offer, filed a declaratory judgment action, seeking to have the court declare that the 2014 stacking waiver was invalid. Franks argued that the execution of a new waiver was required when he dropped the Taurus from the policy in July 2014.
The essential question addressed was whether the removal of a vehicle from an automobile insurance policy constituted a “purchase” under the coverage provisions of Section 1738(c) of the MVFRL. If so, Section 1738(c) required that Franks execute a new stacking waiver.
In a 6-3 decision, the Pennsylvania Superior Court, sitting en banc, looked to Black’s Law Dictionary for its answer. Specifically, the dictionary defines the term “purchase” as “an act or instance of buying.” The majority reasoned that, under this definition, Franks did not effectuate a “purchase” of coverage within the plain meaning of Section 1738(c) when he removed the Taurus from the policy.
This decision represents an important distinction from those cases requiring new waivers or election forms where the insured adds a new vehicle to an existing policy or makes a new application for coverage. Removal of a vehicle from a policy is not a “purchase” of coverage that requires an opportunity to waive stacked limits of coverage.
*John is a shareholder and works in our King of Prussia, Pennsylvania, office. He can be reached at 610.354.8489 or JRRiddell@mdwcg.com.
Defense Digest, Vol. 28, No. 1, April 2022 is prepared by Marshall Dennehey Warner Coleman & Goggin 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. © 2022 Marshall Dennehey Warner Coleman & Goggin. All Rights Reserved. This article may not be reprinted without the express written permission of our firm. For reprints, contact tamontemuro@mdwcg.com.