Ladies and Gentlemen:
In Sackett v. Nationwide Mutual Insurance Company, the Supreme Court of Pennsylvania, in a 4-2 decision reversing the trial court and Superior Court, holds that under Section 1738 of the FRL, the first named insured must be given the opportunity to reject stacked limits of coverage each time a vehicle is added to an existing policy which provides underinsured motorist coverage. In Sackett, the named insured originally purchased $100,000 in underinsured motorist coverage for each of two vehicles and rejected stacked limits of coverage. Two years later a third vehicle was added to the policy. $100,000 of underinsured motorist coverage was purchased for the third vehicle. The insured was not provided the opportunity of rejecting stacked limits of coverage when the third vehicle was added to the policy. Pursuant to the rejection of stacked limits signed at the inception of the policy, Nationwide continued to provide non-stacked underinsured motorist coverage after the third vehicle was added.
The majority in Sackett held that because there was a purchase of underinsured motorist coverage for the third vehicle, Nationwide was required under Section 1738 to give the named insured the opportunity to again reject stacked limits. Because there was no rejection at the time the coverage on the third vehicle was purchased, the Court finds that Nationwide is obligated to provide stacked UIM coverage on all three vehicles.
While the undersigned questions whether Sackett was correctly decided and believes the reasoning set forth in the dissenting opinion is more compelling, insurers should be advised that on a going forward basis to obtain new rejection of stacking forms every time a vehicle is added to a policy (as opposed to when a vehicle is purchased to replace another vehicle) and may want to consider reviewing all policies in effect at the present time which provide non-stacked coverage, to determine whether valid rejection forms have been obtained. If you would like to read a copy of the opinion of the Supreme Court, click here or you can call Denise Alosi at (215) 665-3321 and request a copy from her. If you have any questions about the case or any other automobile insurance law issues, please feel free to call me.
Very truly yours,
Michael Saltzburg
MS/dma
