Important New Auto Law Decision

Following is a summary by PADC Amicus Committee co-chair Terry Sachs on a recent important auto law case. The Court’s opinions are attached.

Barnard v. Travelers Home & Marine Ins. Co., __A.3d__ (Pa. September 26, 2019).  The Supreme Court held that an insured’s increase in the limits of her UM/UIM coverage constituted a new purchase of coverage for purposes of Section 1738, and therefore required execution of a new stacking waiver.  The insured purchased UM/UIM coverage with $50,000 per person limits in 2007. The policy coverage two vehicles, and she rejected stacking.  Two years later, in 2009, the insured increased her UM/UIM coverage limits to $100,000 per person. No separate stacking rejection was provided or executed.  Seven years later, in 2016, the insured was injured by an underinsured motorist, and argued that she was entitled to stacked UIM benefits because she had not rejected stacking when she increased her UIM limits in 2009. 

The district court noted that "the issue is a close one," with no Pennsylvania law on point, and concluded that the increase in limits constituted a "new purchase of coverage" for purposes of §1738, and that a new rejection of stacking was therefore required.  Barnard, 289 F. Supp. 3d 633 (E.D. Pa. 2018). The case was appealed to the Third Circuit, 18-1456, which certified the issue to the Pennsylvania Supreme Court.

The Supreme Court opined that the case turned on the definition of “purchase” in §1738, and looked to a dictionary definition of “purchase” (the act or instance of buying, which is to acquire or obtain something by paying for it). Nothing in §1738(c) limited “purchase” to the original purchase of an insurance policy. Also, a waiver must be “knowing and voluntary” and the insured cannot knowingly reject a new aggregate amount of coverage before it exists. This would not apply to premium increases as a result of inflation or replacing an existing vehicle with a newer one, because in those cases the amount of coverage remained the same.

Chief Justice Saylor dissented on the basis that the Majority’s was inconsistent with Sackett II,  which recognized the term “purchase” for §1738 purposes as having a specialized meaning in the insurance industry