Barnard v. Travelers Home & Marine Ins. Co.

216 A.3d 1045

Michelle BARNARD, Appellant

v.The TRAVELERS HOME AND MARINE INSURANCE COMPANY, Appellee

No. 42 EAP 2018

Supreme Court of Pennsylvania.

Argued: May 14, 2019

Decided: September 26, 2019

OPINION

JUSTICE WECHT

This case comes to us by way of a certified question of law from the United States Court of Appeals for the Third Circuit. That court inquires whether an increase to the limits of underinsured motorist ("UIM") coverage for multiple vehicles that are insured under an existing policy constitutes a "purchase" for purposes of Subsection 1738(c) of the Pennsylvania Motor Vehicle Financial Responsibility Law ("MVFRL").¹ Based upon the plain language of Subsection 1738(c), we conclude that it does. Therefore, an increase of UIM coverage under such circumstances triggers an insurance company's statutory obligation to offer an insured the opportunity to waive stacking of the new, aggregate amount of UIM coverage.

I. Background

In September 2007, Michelle Barnard purchased a personal automobile policy from Travelers Home and Marine Insurance Company ("Travelers") to insure her two vehicles. As part of this policy, Barnard purchased UIM coverage in the amount of $50,000 per vehicle. Barnard waived stacking of her UIM coverage limits.²

On May 24, 2009, Barnard increased the UIM coverage limit on each of her vehicles to $100,000. Barnard did not execute a new stacking waiver at that time.

On June 17, 2016, Barnard was involved in a motor vehicle accident with an underinsured motorist. When Barnard sought UIM benefits from Travelers, Travelers offered her $100,000 based upon the UIM coverage limit on one of her vehicles. Barnard filed a complaint for declaratory judgment, seeking $200,000 in stacked UIM benefits. Travelers removed the case to the United States District Court for the Eastern District of Pennsylvania, where the parties filed cross-motions for summary judgment.

On February 5, 2018, the District Court granted Barnard's cross-motion for summary judgment. Barnard v. Travelers Home & Marine Ins. Co. , 289 F. Supp. 3d 633 (E.D. Pa. 2018). The court opined that the case turned on the meaning of the term "purchase" in Subsection 1738(c).³

Noting that, under the rules of statutory construction, the plain language of a statute controls, the court observed that, in common usage, "to purchase" means "to buy" or "to acquire something by paying for it." Id. at 636. Rejecting Travelers' argument that Barnard's increase to her UIM coverage limits constituted an alteration to an existing policy rather than a purchase, the court reasoned that Barnard paid a higher premium to obtain an increased UIM coverage limit. Thus, under a plain meaning analysis of Subsection 1738(c), the court found that Barnard had purchased UIM coverage, requiring Travelers to obtain a new stacking waiver.

Although the District Court recognized that there were no Pennsylvania cases directly on point, it observed that "such case law as there is favors a literal reading of Section 1738 in this context." Id. The court pointed out that, in Sackett v. Nationwide Mut. Ins. Co. , 591 Pa. 416, 919 A.2d 194 (2007) (" Sackett I "),⁴ this Court found that an insurance company's obligation to secure a stacking waiver was not limited to the initial purchase of an insurance policy. The District Court also cited approvingly the Pennsylvania Superior Court's discussion of stacking waivers in Shipp v. Phoenix Ins. Co. , 51 A.3d 219 (Pa. Super. 2012). In Shipp , an individual purchased an insurance policy and waived stacking of UM and UIM coverage. Subsequently, he replaced two vehicles insured under the policy with new vehicles, and added collision coverage for one of the vehicles. Despite the insured's argument that his insurance company was required to obtain a new stacking waiver after these changes, the Shipp court noted "that the matter of importance in all of these cases, as well as in Section 1738, pertains only to the UM/UIM coverage, whether it has changed, and whether a new waiver of stacked coverage is required." Id. at 224. Because the amount of UM and UIM coverage remained the same after the changes to the insured's policy, the Shipp court concluded that he did not "purchase" new UM or UIM coverage. Thus, no new stacking waiver was required. The District Court here recognized that Shipp 's language was dicta inasmuch as the Superior Court was deciding whether the replacement of vehicles and the addition of collision coverage, rather than UM/UIM coverages, necessitated the execution of a new stacking waiver. However, the District Court opined that this dicta "sensibly describe[d] Pennsylvania case law," and, therefore, was "deserving of serious consideration." Barnard , 289 F. Supp. 3d at 639. Consistent with the Superior Court's dicta in Shipp , the District Court held that, because Barnard had acquired additional UIM coverage for both of her vehicles in 2009, she had purchased UIM coverage such that a new stacking waiver was required.

On appeal, the Third Circuit observed that Section 1738 did not define the term "purchase." Without any prior cases on point, that court concluded that it could not resolve the question before it with confidence. Thus, the Third Circuit filed a petition to certify the question to this Court. On December 27, 2018, we granted the petition in order to consider the following question:

If an insured under a policy of insurance subject to the Pennsylvania Motor Vehicle Financial Responsibility Law has waived stacking but later secures an increase in the limit of her UIM coverage on her existing policy, must her insurance carrier obtain a separate waiver of her right to stack the coverage or does a prior waiver of the right to stack the coverage remain in effect?

Barnard v. Travelers Home & Marine Ins. Co. , ––– Pa. ––––, 199 A.3d 864 (2018) (per curiam ).

In her brief to this Court, Barnard agrees with the District Court that the term "purchase" in Subsection 1738(c) is unambiguous and should be afforded its ordinary meaning: to acquire something by paying for it. By paying increased insurance premiums to obtain higher UIM coverage limits on both of her vehicles, Barnard maintains, she effectuated a purchase, thus requiring Travelers to offer her the opportunity to waive stacking of the new, aggregate amount of UIM coverage.

Barnard also points out that the stacking rejection form provided in Subsection 1738(d)(2) states that, by signing it, an insured "knowingly and voluntarily reject[s] the stacked limits of coverage." 75 Pa.C.S. § 1738(d)(2). By signing a stacking waiver when she first purchased the Travelers policy in 2007, Barnard asserts, she rejected stacking of her then-existing UIM coverage limits, but could not knowingly and voluntarily reject stacking of the increased UIM coverage limits that she would not obtain until 2009.

Moreover, Barnard contends, public policy favors the District Court's interpretation of Subsection 1738(c) because this interpretation encourages consumers to make informed decisions when purchasing insurance. Because Travelers failed to obtain a new stacking waiver when she increased her UIM coverage limits, Barnard maintains that she should be permitted to stack her UIM benefits.

In response, Travelers asserts that the term "purchase," as used in Subsection 1738(c), refers only to the insured's initial purchase of an insurance policy, not to subsequent changes to coverage limits. Travelers argues that this interpretation is consistent with Section 1791 of the MVFRL, which requires insurance companies to provide an insured with a notice of benefits and coverage limits only when the insured initially applies for insurance. Further, although Travelers concedes that there is no case law directly on point, it notes that Pennsylvania state and federal courts consistently have held that an insured's original coverage selections and rejections remain effective throughout the lifetime of the insurance policy, regardless of subsequent changes to that policy. Travelers asserts that stacking rejection forms should likewise remain effective, regardless of subsequent changes to UIM coverage limits.

Travelers and its amici curiae also posit that adopting the District Court's interpretation of the term "purchase" as the payment of an increased premium would lead to absurd results.⁵ For example, Travelers contends that, under this interpretation, a purchase would occur anytime an insured pays to renew her insurance policy after her premium increased due to inflation, or anytime an insured replaces an older vehicle on her policy with a newer model. According to Travelers and its amici , the General Assembly did not intend to require insurance companies to secure new stacking waivers in such instances. Further, Travelers' amici observe that relying solely on the term "purchase" in Subsection 1738(c) fails to give meaning to the entire statutory section. Amici emphasize that Section 1738 discusses stacking only in relation to the number of vehicles as to which a policyholder is insured.⁶ Accordingly, amici assert, stacking waivers are unnecessary when an insured alters UIM coverage limits, because such an alteration does not relate to the number of insured vehicles.

Finally, Travelers and its amici assert that the District Court's interpretation of Subsection 1738(c) contravenes public policy. According to Travelers, requiring insurance companies to obtain waivers any time an insured increases her UIM coverage limits would be detrimental to the insurance industry. In particular, Travelers argues that, because insurance companies historically have not obtained new stacking waivers after such increases, many insureds will be permitted to receive stacked UIM benefits even though they have been paying reduced premiums in exchange for their rejections of stacked coverage.⁷ According to Travelers, insurance companies likely will pass on the costs of these unexpected payouts, as well as the greater administrative...