Mr. Donovan's mother, Linda Donovan, with whom Mr. Donovan resided, maintained an automobile insurance policy with State Farm that extended UIM coverage to “resident relatives.” After his motorcycle accident, Mr. Donovan filed a claim for UIM benefits under his mother's policy, which provided for UIM benefits of up to $100,000 per individual.

State Farm denied this claim, stating that Ms. Donovan's policy did not allow for additional coverage of Mr. Donovan because she previously had signed a waiver declining stacked UIM benefits under her policy.

According to State Farm, the waiver eliminated both the right to stack limits of coverage as to the vehicles identified in the policy – intra-policy stacking – and the right to combine the policy's UIM benefits with any other State Farm policy – inter-policy stacking.

The Donovans contended that the waiver applied only to intra-policy stacking, and they filed an action seeking declaratory relief.

The parties moved for summary judgment.

The State Farm Policy

The waiver in Ms. Donovan's policy provided:

By signing this waiver, I am rejecting stacked limits of underinsured motorist coverage under the policy for myself and members of my household under which the limits of coverage available would be the sum of limits for each motor vehicle insured under the policy. Instead, the limits of coverage that I am purchasing shall be reduced to the limits stated in the policy. I knowingly and voluntarily reject stacked limits of coverage. I understand my premiums will be reduced if I reject this coverage.

The District Court's Decision

The district court granted summary judgment in favor of the Donovans, holding that the waiver signed by Ms. Donovan did not waive inter-policy stacking.

In its decision, the district court explained that the waiver signed by Ms. Donovan referred only to a “single policy form” and, therefore, did not “clearly address” inter-policy stacking.

State Farm could not rely on Ms. Donovan's waiver of intra-policy stacking because her policy covered multiple vehicles, the district court added. Moreover, it continued, the premium reduction Ms. Donovan acknowledged in waiving stacking correlated with a waiver of intra-policy stacking, and State Farm had not demonstrated any additional saving attributable to her purported waiver of inter-policy stacking.

The district court found that State Farm had “not provided any basis for the conclusion that Ms. Donovan's waiver applied to inter-policy as well as intra-policy stacking.”

It declared that even if there was a defect in the waiver provision in Pennsylvania's Motor Vehicle Financial Responsibility Law (MVFRL) that State Farm tracked in Ms. Donovan's policy, State Farm was “well aware of that defect and of its obligation to secure a knowing waiver of inter-policy stacking.” In the final analysis, the district court concluded, State Farm had to “bear responsibility” for the policy it issued.

The case is Donovan v. State Farm Mutual Automobile Ins. Co., No. 17-03940 (E.D. Pa. June 28, 2019). Attorneys involved include: For COREY DONOVAN, LINDA DONOVAN, Plaintiffs: JAMES C. HAGGERTY, LEAD ATTORNEY, HAGGERTY GOLDBERG SCHLEIFER & KUPERSMITH PC, PHILADELPHIA, PA. For STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Defendant, Counter Claimant: JOHN J. MCGRATH, LEAD ATTORNEY, PALMER & BARR PC, PHILADELPHIA, PA. For COREY DONOVAN, Counter Defendant: JAMES C. HAGGERTY, LEAD ATTORNEY, HAGGERTY GOLDBERG SCHLEIFER & KUPERSMITH PC, PHILADELPHIA, PA.