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“Premium-Reducing” RV Policy Stacking Waiver Upheld

Article by Daniel Inadomi, Esq. 

The Western District of Pennsylvania recently found that an insured failed to state a claim for breach of contract when the insurer denied coverage pursuant to a valid waiver of stacking on a single-vehicle RV policy.  The Court also found that dismissal of the insured’s bad faith claim was appropriate because the insurer reasonably relied on the Pennsylvania Supreme Court’s decision in Craley v. State Farm to deny coverage.  See Miale v. Nationwide Ins. Co. of America, 2021 WL 6127068 (W.D. Pa. Dec. 27, 2021).

In Miale, the Plaintiff’s husband was killed in a motorcycle accident and sought underinsured motorist (“UIM”) benefits available under three policies issued by the insurer: an auto policy, a motorcycle policy, and an RV policy.  The insurer offered UIM benefits under the auto and motorcycle policies.  However, the insurer denied coverage under the RV policy on the basis that the insured had signed a rejection of stacking form (“RV Policy Stacking Waiver”) and was therefore not entitled to inter-policy stacking, which would allow recovery of underinsured benefits available on the RV policy to be stacked on the underinsured motorist benefits available under the auto and motorcycle policies.  Plaintiff requested that the insurer reconsider its denial, and argued that the RV Policy Stacking Waiver rejected only intra-policy stacking under the RV Policy and did not prohibit inter-policy stacking among the policies.  After the insurer allegedly refused to reconsider its denial, Plaintiff sued the insurer for breach of contract and bad faith.  The insurer moved to dismiss both claims.

In assessing the breach of contract claim, the Court first noted that Section 1738 of Pennsylvania’s Motor Vehicle Financial Responsibility Law (“MVFRL”) allows for the waiver of both intra- and inter-policy stacking and also sets forth required form language for a valid waiver, or rejection, of stacking.  The Court then turned to the Pennsylvania Supreme Court’s decision in Craley, which held that a waiver in the form prescribed by Section 1738 of the MVFRL only waives intra-policy stacking and is insufficient on its own to establish a valid waiver of inter-policy stacking.  Per Craley, a waiver of inter-policy stacking will only be valid if there is a “knowing waiver” of inter-policy stacking.  The Pennsylvania Supreme Court in Craley further held that when an insured only has one vehicle on the policy, signing a stacking waiver that complies with Section 1738 provides sufficient notice and knowingly waives inter-policy stacking.

Turning to the case at hand, the Court dismissed the breach of contract claim after finding that the insured had waived inter-policy stacking when he executed the RV Policy Stacking Waiver for his single-vehicle RV Policy.  Like the insured in Craley, the insured here could not have thought he was receiving a reduced premium for waiting intra-policy stacking because the RV policy only covered one vehicle.  The Court held that the “only possible interpretation is that the premium-reducing RV Policy Stacking Waiver applied to inter-policy stacking.”  The Court rejected the insured’s argument that Donovan v. State Farm required the Court to analyze the facts and circumstances of the case before deciding that the stacking waiver form was a valid waiver of inter-policy stacking.  The Court distinguished Donovan on the basis that the relevant policy, in that case, insured multiple vehicles, rather than just one as was the case here and in Craley.

Lastly, the Court dismissed the bad faith claim after finding that the insurer acted reasonably by relying on Craley to deny coverage under the RV policy due to the RV Policy Stacking Waiver.