Timothy F. Rayne, Esquire

In April 2007, two significant automobile law cases were decided: State Farm v. Rosenthal, 2007 U.S. App. LEXIS 9126, a Third Circuit Case on the Statute of Limitations and Sackett v. Nationwide, 2007 Pa. LEXIS 835, a Pennsylvania Supreme Court case on stacking waivers. Both of these decisions have major implications in the automobile law arena.

State Farm v. Rosenthal - Statute of Limitations
Although it is a Third Circuit case, the well-reasoned decision in Rosenthal predicts how the Pennsylvania Supreme Court would deal with the Statute of Limitations in an Underinsured Motorist (UIM) case. The Court held that the Statute of Limitations would start running on the date on which the insured settles with or obtains an award from the adverse driver for less than the full amount of damages.

Factually, Mr. Rosenthal was injured on June 8, 1998 and reached an agreement to settle the case with the driver who hit him on June 9, 2003. Also on June 9, 2003, his attorney requested that State Farm grant consent to settle and informed State Farm that his client intended to pursue an UIM claim. On July 22, 2004, Rosenthal's attorney demanded UIM arbitration. State Farm filed a Declaratory Judgment action, seeking to dismiss the UIM case as time-barred by the four year Statute of Limitations.

The Third Circuit determined that there were three possible dates when the four year Statute of Limitations could start running:

1. the date of the accident;
2. the date on which the insured settled with the other driver for less than the full damages; or
3. the date on which the insurance company rejected the UIM claim.

Ultimately, the Court held that the statute would begin to run on the date of settlement with, or award from, the underinsured driver. Such an approach harmonized UIM with Uninsured Motorist (UM) cases, for which the statute runs when the insured definitively learns that the adverse driver is uninsured. In addition, the Court found this approach practical because it allows the insured to assess damages and learn the policy limits before having to file the UIM claim. It also eliminates the need to prematurely file a UIM claim while the third party case is still pending. As a practical matter, personal injury practitioners must remember that this is a Third Circuit decision, so it is wise to file for UIM arbitration within four years of the date of the accident. Moreover, it is critical to read the UIM policy language to determine whether there is any contractual provision addressing the statute of limitations. The insurance policy may provide for a Statute of Limitations shorter than four years.

As a practical matter, personal injury practitioners must remember that this is a Third Circuit decision, so it is wise to file for UIM arbitration within four years of the date of the accident. Moreover, it is critical to read the UIM policy language to determine whether there is any contractual provision addressing the statute of limitations. The insurance policy may provide for a Statute of Limitations shorter than four years

Sackett v. Nationwide - UIM Stacking Waiver
Sackett addressed the issue of whether the Motor Vehicle Responsibility Law requires insurance companies to provide new stacking waivers for UM/UIM coverage when a new vehicle is added to an existing policy. The Pennsylvania Supreme Court reversed the Superior Court and held that the MVFRL absolutely requires new waivers for the addition of new vehicles.

Factually, Mr. Sackett insured two cars with Nationwide and signed UM/UIM stacking waivers. When Mr. Sackett purchased a new car, he added it to the Nationwide policy, but was not presented with a new stacking waiver. After being involved in an accident and settling with the responsible driver, Sackett made a claim for stacked UIM coverage for his three vehicles. Nationwide denied the claim, asserting that it had no duty to have new stacking waivers signed when the new vehicle was added to the policy.

The Trial Court and Superior Court agreed with Nationwide and denied stacking. The Supreme Court, however, reversed. It held that the plain language of the MVFRL unambiguously required a new stacking waiver. Specifically, the language of 75 Pa.C.S.A. §1738 states that "Each named insured purchasing uninsured and underinsured motorist coverage . . . shall be provided the opportunity to waive the stacked limits of coverage." The Court concluded that such language required the signing of a new UM/UIM stacking waiver for a new vehicle.

The practical implications of this ruling are that personal injury litigators need to fully investigate their cases to determine whether UM/UIM stacking has been legally waived. Even if a policyholder waived stacking at the initial purchase of coverage, if a new vehicle was added without a new waiver being signed, stacking is available.

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