Timothy F. Rayne, Esquire

On December 27, 2007, the Pennsylvania Supreme Court modified its decision in Sackett v. Nationwide Mut. Ins. Co., 919 A.2d 194 (Pa. 2007) ("Sackett I"). In Sackett I, the Supreme Court held that where stacking of uninsured/underinsured motorists (UM/UIM) had been waived by the execution of appropriate waiver forms, if a new vehicle was added to the policy, the insurance company had to have a new waiver form signed or else the insured would be converted to stacked coverage.

After Nationwide's Petition for Reargument was granted, the Supreme Court modified its decision and held that adding a new vehicle to a pre-existing multi-vehicle policy is not a new purchase of coverage for the purposes of UM/UIM coverage and, as such, does not require the signing of new stacking waivers upon penalty of converting the policy to stacked coverage. Nevertheless, under certain circumstances the Sackett I holding still controls.

The Rationale Behind the Sackett I Decision
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 new stacking waivers to sign. After being involved in an accident and settling with the responsible driver, Mr. Sackett made a claim for stacked UIM coverage for his three vehicles.

The holding in Sackett I was based upon Section 1738(c) of the Motor Vehicle Financial Responsibility Law which 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."

In the Sackett I decision, the Supreme Court concluded that the addition of a vehicle to an existing multi-vehicle policy constitutes a new purchase of insurance coverage. Accordingly, Section 1738(c) required a new stacking waiver to be signed or else the policy would be converted to stacked coverage.

The Aftermath of Sackett I
Following the decision in Sackett I, Nationwide filed an application for reargument. While the application was pending, the Court invited the Pennsylvania Insurance Commissioner to file a statement on the issue. The Commissioner filed a statement which disagreed with Sackett I's central conclusion that the addition of a new vehicle to an existing multi-vehicle policy constitutes a new purchase of coverage requiring a new stacking waiver to be signed.

The Commissioner explained that the "add-on" of a new car has never been considered a new purchase of coverage, but instead an extension of pre-existing coverage. The Commissioner explained that motor vehicle policies contain "newly acquired vehicle" clauses which automatically cover newly-acquired cars on existing policies, provided that the policyholders give timely notice to the insurance company and then pay additional premiums.

The Commissioner also expressed concern that, for 17 years, insurance companies had relied upon an assumption that they did not need to present new stacking waivers for "add-on" vehicles. If thousands of stacking waivers were invalidated by the Sackett I decision, inadequate premiums were collected for those policies and rate increases might be required.

The Sackett II Decision
On reargument, the Supreme Court placed substantial weight on the Insurance Commissioner's explanation of what he believed to be a "purchase" of new coverage versus what he interpreted as a mere "add-on" of a vehicle. The Court reasoned that, under the Statutory Construction Act, technical words and phrases, and words that have acquired a peculiar meaning, are to be construed accordingly. The Court found that the Insurance Commissioner's submission made it clear that the "purchase" of UM/UIM coverage is a term in the insurance industry that does not include the "add-on" of a vehicle to an existing multi-vehicle policy.

Ultimately, the Court "clarified" that Sackett I does not preclude the enforcement of an initial waiver of stacked UM/UIM coverage after the purchase of an "add-on" vehicle.

Nevertheless, the Court indicated that the terms of the "after-acquired vehicle" provision of the particular policy in question would determine whether the waiver would be effective through the end of the policy term or for just a certain grace period. The Court reasoned that some "after-acquired vehicle" clauses extend coverage through the end of the policy term, while others extend coverage for only a short grace period and then require an application for a new policy.

Sackett II holds that the policy language must be examined to determine how long the initial stacking waiver remains valid. If the policy states that the new vehicle is covered for the term of the policy, then the stacking waiver is also valid for that period. However, if the policy extends coverage for a grace period, but then requires a new application for coverage, a new stacking waiver needs to be signed at the same time.

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