Sackett v. Nationwide Mutual Insurance
No. 8 WAP 2006, Pa. Supreme Court
December 27, 2007
Everhart v. The PMA Insurance Group
No. 13 WAP 2007, Pa. Supreme Court
December 27, 2007

Holdings:  In Sackett, the Pennsylvania Supreme Court holds that, in regard to insurance policies containing a standard after-acquired-vehicle provision that provides continuing coverage, new rejections of UM/UIM stacking are not required upon the addition of vehicles that increases the number of vehicles under the policy; however, new rejection forms are required for policies that contain “finite” after-acquired-vehicle provisions that provide only temporary coverage.

In Everhart, the Supreme Court holds that there is no right to stack “commercial fleet” coverage at all.

Background: The Sackett and Everhart cases have been subjects of prior eNotes and extensive commentary in the legal and insurance communities. In Sackett, the Supreme Court had held, in a controversial decision rendered in April 2007, that UM/UIM stacking rejection forms were no longer valid after a vehicle was added to a policy. Rather, the Court held, a new rejection form must be obtained from the insured every time a vehicle was added to the policy, if the addition was not just a substitution but rather increased the number of vehicles insured under the policy. That decision caused an uproar in the insurance industry, as it would have resulted in the payment of countless millions of dollars of benefits for stacked coverage in cases where stacking had been rejected, plus enormous administrative and underwriting costs associated with identifying and fixing existing policies and implementing appropriate procedures for the future. In the wake of that uproar, the Supreme Court took the extraordinary step of granting reconsideration of the decision.

Everhart concerned the UIM claim of the estate of a president of a corporation, which sought to stack UIM coverage under the company’s policy insuring some 323 vehicles, including 33 “passenger vehicles.” The Superior Court held that there could be no stacking of vehicles under a “fleet” policy, regardless of whether stacking was rejected.

Disposition: In Sackett, the Supreme Court “clarified” its prior decision by holding that new forms are required only when the policy contained a “finite” after-acquired-vehicle provision that required issuance of a new policy for the additional vehicles after a specified period of time. In the Sackett case itself, the Court held that, since there was no evidence of the type of provision contained in the policy, Nationwide was required to provide the stacked coverage.

In Everhart, the Supreme Court affirmed the Superior Court’s ruling, holding simply that there is no right to stack “commercial fleet” coverage.

Comment: The net result of those decisions is very favorable in that they move the law toward more reasonable limitations on stacking and provide a better indication of what is required in order to give effect to insured’s choices with respect to stacking. Unfortunately, neither of the decisions is crystal-clear in all respects; and they are likely to result in further litigation over their meaning.

In regard to Sackett, there is likely to be substantial litigation as to whether particular policies contain standard after-acquired-vehicle provisions for continuous coverage or else “finite” provisions for temporary coverage. In the Sackett opinion, the Court cited examples of continuous coverage provisions that are similar to those contained in standard policies, which do not require the issuance of a new policy but rather provide for additional after-acquired-auto coverage from the date of acquisition, conditioned only on the insured asking the insurer to provide coverage within a certain number of days thereafter. Again, new forms are not required in connection with such policies. The Court cited a State Farm case as an example of a policy that provided only temporary or “finite” coverage for after-acquired-vehicles and required that the additional vehicle(s) be insured under a separate policy thereafter. New forms are required for such policies. Since there remain countless policies that are potentially affected, it would be advisable for insurance companies to collect and maintain records relating to coverage, copies of declaration sheets, and copies of insurance forms, used since 1990, so as to be in position to prove the type of after-acquired-vehicle provision in effect at the time that any vehicles were added to a particular policy.

In regard to Everhart, there is likely to be substantial further litigation as to what constitutes a “commercial fleet” policy. The Court’s opinion does not define its key term ("commercial fleet") nor the other important terms used in some of the other opinions on which it relies. (E . g ., the Court cites Lastooka v. Aetna Insurance Co., 552 A.2d 254 (Pa. Super. 1989), which permitted stacking but only of "personal use" vehicles.) There is a great deal of variety and inconsistency in the case law, statutes and regulations that employ such terms as “commercial” and “fleet,” and “personal” and “private passenger” motor vehicle. Such words as “business use” and “personal use” are not defined at all. Therefore, the Supreme Court's failure to explain or define such terms is virtually certain to result in considerable further litigation as to what they mean. For insurers who do not wish to provide stacked commercial coverage, it would be wise to clarify such matters in the title, definitions and provisions of the policies themselves.

Any questions regarding those cases should be directed to Pete Speaker at 717-237-7644 or pspeaker@tthlaw.com.