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PA Supreme Court Holds that No New Waiver of Stacking is Required When the Insureds Remove a Vehicle from a Policy

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Does the removal of a vehicle from an automobile insurance policy constitute the purchase of insurance? That was the question facing the Pennsylvania Supreme Court in its latest UM/UIM stacking case. In its unanimous decision in Franks v. State Farm Mutual Automobile Insurance Company, which was issued on April 19, 2023, the Court held that the removal of a vehicle from a multi-vehicle policy was not a “purchase” of insurance unless there was also a change to the coverage or costs relative to the remaining vehicles on the policy. In the absence of a “purchase” of UM/UIM coverage, according to the Court, an insurer is not obligated to obtain a new waiver of UM/UIM stacking. The Court therefore held that the Franks’ removal of a vehicle from their policy—without additional changes to the UM/UIM coverage for the remaining vehicles—did not require State Farm to obtain a new waiver.

In 2013, the Franks purchased a personal automobile insurance policy from State Farm. The policy insured two vehicles: a 2002 Nissan Xterra and a 1999 Ford Taurus. At the time they purchased the policy, the Franks executed a waiver of stacked UM/UIM coverage in accordance with 75 Pa. C.S. § 1738. As a result, the policy was issued with unstacked UM/UIM coverage of $100,000 per person and $300,000 per vehicle. Several months later, the Franks added a new vehicle—a 2012 Nissan Altima—to their policy. At the time of this change to the policy, they executed a new waiver of stacking. Approximately six months later, the Franks requested that the 1999 Ford Taurus be removed from the policy. The removal of this vehicle did not affect the coverages or premiums relative to the two remaining vehicles. State Farm did not obtain a new waiver of stacking when the 1999 Ford Taurus was removed from the policy. 

In 2016, Mr. Franks was injured in an automobile accident, and he subsequently made a claim to State Farm for UIM benefits. The Franks and State Farm disagreed as to the available UIM policy limits. The Franks claimed that they were entitled to $200,000 of UIM coverage—that is, stacked UIM benefits based on the two vehicles remaining on the policy—because State Farm did not obtain a waiver of stacking following the removal of the 1999 Ford Taurus from the policy. The absence of a valid waiver of stacking, according to the Franks, required State Farm to provide stacked coverage because that is the default position under the MVFRL. State Farm contended that the policy limit was the single-vehicle limit of $100,000. According to State Farm, the removal of the vehicle did not trigger the need for a new waiver of stacking under § 1738(c).

Both the trial court and the en banc Superior Court held that the requirement to obtain a new waiver of stacking was not triggered by the removal of the 1999 Ford Taurus, and thus the applicable UIM policy limit was $100,000. On appeal to the Supreme Court, the parties agreed that the obligation to obtain a new waiver of stacking turned on an interpretation of § 1738(c) of the MVFRL. This statutory provision states that:

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 and instead purchase coverage as described in subsection (b). The premiums for an insured who exercises such waiver shall be reduced to reflect the different cost of such coverage. 

According to the Franks, the term “purchasing” as used in § 1738(c) was the same as “change,” such that any change in the policy’s UM/UIM coverage required a new waiver of stacking. The Franks contended that removing a vehicle from their policy changed the potential UIM coverage from that offered in the original policy, as well as changing the premiums; as such, a new waiver was required. State Farm argued that such a broad interpretation of the term “purchasing” was inconsistent with both the language of the MVFRL and the Court’s prior decision in Barnard v. Travelers Home & Marine Insurance Company, 216 A.3d 1045 (Pa. 2019). In Barnard, which involved an increase in the insureds’ UM/UIM coverage, the Court held that the language of § 1738(c) was unambiguous. As such, the Court stated in Barnard, the term “purchas[e]” should therefore be given its standard dictionary meaning—that is, “‘[t]he act or an instance of buying.’” Pursuant to Barnard, State Farm contended, a new waiver of stacking was only required if the Franks obtained something they did not already have in exchange for payment.

The Court acknowledged that the issue before it was one of first impression. However, it relied on Barnard’s determination that the language of § 1738(c) was not ambiguous when it concluded that the Franks’ removal of the vehicle from their policy did not require a new waiver of stacking. In so doing, the unanimous Court held that “[t]he fact that [the Franks’] potential financial considerations in initially waiving stacked coverage may now differ does not convert the removal into a ‘purchase’ under the plain meaning of that term adopted in Barnard.” The Court concluded that:

[T]he logic of Barnard in construing “purchase” in accord with its plain meaning does not justify [the Franks’] expansive interpretation equating the term with any “change.” The removal of a vehicle from coverage under a multi-vehicle policy under conditions that do not alter the pre-existing coverage or costs relative to the remaining vehicles is not a purchase requiring a renewed express waiver per section 1738(c). 

The Court therefore affirmed the Superior Court’s holding that the applicable UIM policy limits were the $100,000, unstacked limits.

It is not uncommon for an insured to change the number of vehicles on his or her insurance policy, and the question of when such a change triggers the need for a new waiver of UM/UIM stacking has vexed the courts, attorneys, and insurers for some time now. The Franks decision was far from the first word on this issue, and it is almost certainly not going to be the last. However, the Franks decision provides substantial clarity and guidance because it held that not every change to a policy requires a new waiver of stacking. It also reaffirmed the principle that the term “purchasing” as used in § 1738(c) should be given its plain, common meaning. Insurers should therefore take note that when an insured removes a vehicle from his or her policy without changing the coverage or costs of the UM/UIM benefits relative to the remaining vehicles on the policy, the insured is not required to sign a new waiver of stacking.

Disclaimer: This post does not offer specific legal advice, nor does it create an attorney-client relationship. You should not reach any legal conclusions based on the information contained in this post without first seeking the advice of counsel.