Anti-Stacking Language Upheld

Zalma on Insurance in top 50

Patrick McGinness, driving a vehicle owned by his adult daughter, negligently struck and injured Marie DeMeo. DeMeo obtained a $350,000 state-court judgment against McGinness. His daughter’s insurer, American Family Insurance Company, paid its $100,000 policy limit under an owner’s liability policy that covered McGinness as a permitted driver. State Farm Mutual Insurance Company insured McGinness under four liability policies issued for the cars he owned. Each policy provided coverage to McGinness when operating a non-owned vehicle such as his daughter’s. Invoking the policies’ “anti-stacking” provisions, State Farm paid the per-person limit of one policy, $50,000. DeMeo sued to recover an additional $150,000, the combined limits of the other three policies.

In a prior appeal the Eighth Circuit concluded that the anti-stacking provisions unambiguously applied to limit State Farm’s contractual liability. The case was sent back to the district court to determine whether the anti-stacking provisions are invalid, at least in part, because they conflict with the minimum insurance requirements of Missouri’s Motor Vehicle Financial Responsibility Law (“MVFRL”).

On remand, the parties submitted additional briefs; DeMeo argued that the MVFRL mandates payment of the $25,000 statutory minimum coverage for each policy and requested a judgment of $75,000. The district court instead held that the anti-stacking provisions do not conflict with MVFRL requirements and granted summary judgment in State Farm’s favor. DeMeo appeals. Reviewing the district court’s interpretation of the insurance statutes de novo in Marie Demeo v. State Farm Mutual Automobile Insurance Company, No. 11-2695 (8th Cir. 07/26/2012) the Eighth Circuit resolved the dispute.

Missouri Public Policy on Stacking

A public policy limitation on anti-stacking policy provisions has long been part of Missouri insurance law. After the enactment of mandatory minimum levels of uninsured motorist coverage, the Supreme Court of Missouri held: “when a statute requires that uninsured motorist coverage be included in any and every policy covering any motor vehicle,” and the insured has paid for that coverage on two or more vehicles, public policy “prohibits the insurer from limiting an insured to only one of the uninsured motorist coverages provided.” Cameron Mut. Ins. Co. v. Madden, 533 S.W.2d 538, 544-45 (Mo. banc 1976). This decision was an exception to the normal rule of freedom to contract that should not go further than is strictly necessary to serve the statutory policy that an insured not be denied the benefit of some of the coverage which was required and which had to be paid for.

Enacted in 1986, the MVFRL for the first time mandated that motor vehicle owners and operators maintain minimum levels of financial responsibility for damages arising out of their ownership or use of a motor vehicle. Although the statute allows impractical self-insurance alternatives this financial requirement is most commonly satisfied by purchasing a motor vehicle liability policy that meets the requirements of the Missouri statute. The MVFRL ensures that people who are injured on the highways may collect damage awards, within limits, against negligent motor vehicle operators. Policy exclusions or coverage limitations are invalid to the extent they conflict with the MVFRL’s minimum insurance requirements.

In the prior appeal the Eighth Circuit determined that if this issue is governed by contract principles, State Farm’s anti-stacking provisions preclude the additional coverages in question.  The MVFRL did not require that McGinness purchase liability insurance covering his operation of a non-owned vehicle whose owner, like his daughter, maintained the required levels of financial responsibility.

Analysis

If an insured has paid for coverage while operating a non-owned car as part of an owner’s policy, and if that coverage applies to a particular accident, public policy as reflected in the MVFRL requires that at least the mandatory minimum limit be paid even if the victim’s damages are partially covered by policies issued to other insureds. State Farm more than satisfied that obligation to McGinness by paying, not merely the MVFRL minimum $25,000, but the full $50,000 limit of one policy. Since the statute did not obligate McGinness to purchase this coverage for the accident in question did not obligate State Farm to provide this coverage in its owner’s policies, we believe the Supreme Court of Missouri would conclude that the public policy exception to the normal rule of freedom to contract does not preclude enforcing the anti-stacking provisions in this case.

If the insured and insurer may contractually preclude multi-vehicle stacking within a single policy, we see no basis in Missouri public policy to conclude that the MVFRL demands stacking when there are multiple policies.

© 2012 – Barry Zalma

Barry Zalma, Esq., CFE, has practiced law in California for more than 40 years as an insurance coverage and claims handling lawyer. He also serves as an insurance consultant and expert witness specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud. Mr. Zalma serves as a consultant and expert, almost equally, for insurers and policyholders.

He founded Zalma Insurance Consultants in 2001 and serves as its senior consultant.

Mr. Zalma recently published the e-books, “Zalma on Insurance Fraud – 2012″; “Zalma on Diminution in Value Damages – 2012,”“Zalma on Insurance,” “Heads I Win, Tails You Lose — 2011,” “Zalma on Rescission in California,” “Arson for Profit”  and others that are available at www.zalma.com/zalmabooks.htm.

Mr. Zalma can also be seen on World Risk and Insurance News’ web based television program “Who Got Caught” with copies available at his website at http://www.zalma.com.