Penn. appeals judges allow cap on UIM insurance under 'limit of protection' clause
The ruling is a win for insurance companies after the state appellate judges rejected a challenge to an auto insurer's “limit of protection” clause.
In a matter of first impression, a three-judge Superior Court panel has ruled that a particular limit on the amount of underinsured motorist (UIM) coverage an insured may recover from multiple auto policies does not violate Pennsylvania’s Motor Vehicle Financial Responsibility Law (MVFRL).
And the decision is a win for insurance companies, after the judges rejected a challenge to an auto insurer’s “limit of protection” clause. The clause capped the plaintiff’s total available UIM coverage at the highest limit of a single one of her policies, rather than capping her coverage at the combined limit of the two policies she held.
The case addresses a previously unresolved question of “whether a limit of protection clause capping second priority UIM coverage to the highest limit of liability of any single second priority UIM coverage policy violates the MVFRL’s excess coverage requirement,” according to the opinion, authored by Judge Judith Olson.
And the appellate court’s ruling affirmed the trial court’s determination that the provision was enforceable. Attorneys for the plaintiff and defendant in the case, captioned Erie Insurance Exchange v. Backmeier, did not respond to calls for comment.
Excess coverage requirement
For defendant Erie Insurance Exchange, represented by Scott Tredwell and Glen Shikunov of McCormick & Priore, the decision meant the insurer owed plaintiff Elizabeth Beckmeier only $100,000 in UIM coverage — half the funds the plaintiff claimed she should have recovered.
Beckmeier, represented by Craig Murphey of Purchase, George & Murphey, argued the “limit of protection” clause in her two Erie policies violated the MVFRL’s requirement that UIM coverage provides “excess” coverage, in which the insured recovers the value of their UIM coverage limit in addition to the value of the tortfeasor’s liability coverage.
Instead, Beckmeier claimed, the clause impermissibly provided her with only “gap” coverage, in which the insured’s UIM insurance covers the difference between the tortfeasor’s liability coverage and the insured’s UIM coverage limit.
The Superior Court judges, however, disagreed with the plaintiff’s interpretation.
The court determined that, contrary to the plaintiff’s arguments, stacking waivers Beckmeier had signed for each of her auto policies precluded her from combining the coverage limits of the two separate policies.
When the plaintiff knowingly and effectively waives stacking, the court ruled, the sort of “limit of protection” clause included in Erie’s policies does not violate the MVFRL’s excess coverage requirement.
In the plaintiff’s case, Olson wrote, the provision “merely implements the concept of waiver of stacking and does not create gap coverage in contravention of the MVFRL.”
The decision upholds the trial court’s judgment awarding $100,000 in UIM recovery to Beckmeier for an accident in which an underinsured motorist’s vehicle struck and killed her son.
Beckmeier contended she was entitled to $200,000 in benefits because her two policies provided up to $100,000 each. Instead, she recovered $50,000 from each policy, pursuant to the “limit of protection” clause.
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