In the case of Barnard v. The Travelers Home and Marine Ins. Co., No. 17-00290 (E.D. Pa. Feb. 5, 2018 McHugh, J.) (Mem. Op.), the Eastern District Court addressed the issue of whether a carrier was required to obtain an updated Section 1738 rejection of stacking of UIM benefits when the insured sought to purchase increased UIM benefits. Despite the insured having signed a Section 1738 rejection of stacked benefits when the policy was issued, the Court held that a new Section 1738 rejection was required.
In a Memorandum Opinion, Judge McHugh held that a new rejection of stacking form was required when the UIM benefits were increased since, under the judge’s review of the applicable statutes, a carrier is required to secure a rejection of stacking from the insured whenever increased UIM policy limits are purchased.
Plaintiff Michelle Barnard originally signed a Section 1738 rejection of stacked UM and UIM benefits when she purchased her two-vehicle policy, with a UIM policy limit of 50/100. She later increased her policy limit to 100/300 but was not offered a new Section 1738 stacking waiver. Barnard was subsequently injured in a car accident and filed a claim for UIM coverage, after which Travelers paid out $100,000. Barnard argued that stacked limits were available.
The Court noted that the case hinged on the definition of “purchase” in the context of stacked coverage. In analyzing the issue under Section 1738, the Judge used the plain meaning of the word. “In common usage, to purchase means to buy—to acquire something by paying for it,” McHugh said. “Travelers contends that the transaction should be characterized as an ‘alteration’ of limits, but that ignores the fact that plaintiff here paid for a level of UIM insurance that was different from what she had previously purchased, and for which she paid a different and higher premium. As an insurance ‘product,’ the May 2009 policy was distinct from the May 2007 version that preceded it.” He added, “The question then becomes whether case law applying the statute compels a different result. Although the issue is a close one, I am not persuaded that the language of the statute can be ignored when the transaction in question specifically involved a change in UIM coverage as compared to some other aspect of the policy. The parties acknowledge that there is no case directly on point, and argue by way of analogy. I am convinced that such case law as there is favors a literal reading of Section 1738 in this context.”
Travelers argued that such an interpretation would have negative consequences on the insurance marketplace, but McHugh disagreed, noting that the only evidence Travelers submitted was a brief from the state insurance commissioner submitted in another case in 2010.
“I am hard-pressed to conclude that conditions in the marketplace at that time shed meaningful light on conditions prevailing today, and Travelers does not attempt to explain how a decision in Bernard’s favor would portend widespread disruption,” McHugh said. “The buying and selling of automobiles is a major engine of commerce and such a frequent occurrence that policies are drafted in recognition of that fact.”
Questions regarding this Opinion can be directed to David Friedman.
