By David Thompson, CPCU
The question is often asked, "Why should someone carry stacked UM coverage on a single car if there is nothing to stack on?" Even with a single car risk, there is a coverage difference between the stacked and non-stacked UM forms, which can affect whether the policyholder will be able to collect UM at all.
While this article is specific to single-vehicle risks, the coverage analysis for the coverage difference between stacked and non-stacked coverage applies on policies with multiple vehicles insured.
Florida Statute 627.727(9) addresses UM coverage and the stacking/non-stacking issue. In part, the statute says this:
(9) Insurers may offer policies of uninsured motorist coverage containing policy provisions, in language approved by the department, establishing that if the insured accepts this offer:
(a)The coverage provided as to two or more motor vehicles shall not be added together to determine the limit of insurance coverage available to an injured person for any one accident, except as provided in paragraph (c).
(b) If at the time of the accident the injured person is occupying a motor vehicle, the uninsured motorist coverage available to her or him is the coverage available as to that motor vehicle.
(c) If the injured person is occupying a motor vehicle which is not owned by her or him or by a family member residing with her or him, the injured person is entitled to the highest limits of uninsured motorist coverage afforded for any one vehicle as to which she or he is a named insured or insured family member. Such coverage shall be excess over the coverage on the vehicle the injured person is occupying.
(d) The uninsured motorist coverage provided by the policy does not apply to the named insured or family members residing in her or his household who are injured while occupying any vehicle owned by such insureds for which uninsured motorist coverage was not purchased.
(e) If, at the time of the accident the injured person is not occupying a motor vehicle, she or he is entitled to select any one limit of uninsured motorist coverage for any one vehicle afforded by a policy under which she or he is insured as a named insured or as an insured resident of the named insured's household.
Note that the statutes say the company may offer the non-stacked variety of coverage; there is no requirement that they do so. An insurance company could, if they wanted to, write only stacked UM coverage. In fact, some companies offer only the stacked variety of UM coverage under certain situations. Remember, too, if the policyholder does not sign an election/rejection form, the UM coverage is issued at a limit equal to the bodily injury limits on a stacked basis.
Before looking at the differences in stacked and non-stacked UM, let's look at the similarities.
- Both forms allow the insured to get UM coverage occupying an auto that they own and insure.
- Both forms allow the insured to collect while they are occupying an auto not owned by them, for example, the insured rents a car or borrows a friend’s car and is injured by an uninsured motorist.
- Both forms allow an insured to collect UM in a rental car.
- Both forms allow the insured to collect UM benefits if they are struck as a pedestrian by an uninsured motorist.
- Thus, both the stacked and the non-stacked UM forms provide coverage that is "portable,” meaning it follows the insured into other non-owned vehicles and as a pedestrian.
The Dollar Difference
The stacking provision, in its simplest form, states that the insured can take the UM available on each car that is owned and insured and "stack" it together to be used anywhere. For example, an insured with two cars insured at stacked UM limits of 100/300 would actually have limits of 200/600 while occupying any motor vehicle, or as a pedestrian if struck by an uninsured motor vehicle. On the other hand, non-stacking is much like "what you see is what you get," meaning the UM limit you see on the declarations page is what you get, no matter how many cars you own and insure.
- Example #1: Bill has UM limits of $100,000 per accident and owns two cars that are both insured on one policy. An at-fault driver hurts Bill while Bill is in a rental car out-of-state on business. With stacked UM Bill has $200,000 of UM available under his own policy. With non-stacked UM Bill has $100,000 of UM coverage available under his own policy.
- Example #2: Bill has UM limits of $100,000 per accident and owns two cars that are both insured on one policy. Bill is in his car, and is injured by a hit-and-run driver. With stacked UM, Bill has $200,000 of UM available under his own policy. With non-stacked UM, Bill has $100,000 of UM coverage available under his own policy.
- Example #3: Bill has UM limits of $100,000 per accident and owns two cars that are both insured on one policy. Bill’s son, Junior, is walking at night and is struck by a hit and run driver. With stacked UM, Junior has $200,000 of UM available. With non-stacked UM, Junior has $100,000 of UM coverage available.
These examples point out how an insured, with multiple cars insured, is able to receive higher dollar amounts with stacked coverage than would be possible with non-stacked coverage.
The Coverage Difference
There is, however, a significant coverage difference between the two forms that could affect whether the insured can collect under the UM provision of the policy.
The non-stacked form has an exclusion stating that the insured can't collect UM while occupying a vehicle owned by the insured, but not insured for UM under the policy. Below are examples of how the exclusion would apply. These examples apply whether there is just one vehicle insured, or more than one. Almost all of these are actual claims that have taken place.
- The insured obtains a second vehicle and does not call to report the vehicle within the allowable 14-day period. (Companies vary on the 14-day issue.) Two months later, the insured is hurt in that new vehicle, injured by an uninsured motorist. Coverage under the non-stacked form will not respond. Stacked UM would respond.
- The insured is a "snowbird" who insures one vehicle in Florida at 100/300 non-stacked UM limits; they own another vehicle "up north." UM was rejected on the northern vehicle. The customer is injured in that vehicle by an uninsured motorist. The Florida non-stacked coverage will not respond. Stacked responds at limits of 100/300…not 200/600.
- The insured owns a motorcycle, insures it separately under a motorcycle policy and has rejected UM under the motorcycle policy. In addition, the insured has a PAP with four cars insured at limits of 250/500 non-stacked UM. The insured is killed on the motorcycle. The non-stacked UM does not respond; stacked would have paid $1 million.
- The insured owns one auto, insured under a PAP with non-stacked UM. He obtains an additional vehicle (pickup truck) that does not qualify for the PAP due to extensive business use. A separate business auto policy (BAP) is written on the pickup truck and UM is rejected on that policy. A few months later the insured is injured in that pickup truck and claims UM under the PAP. Non-stacked UM does not respond; stacked responds.
- The insured insures one auto on a PAP with non-stacked UM. He marries and his new wife has a PAP on her car where UM was rejected. The day after the marriage on their honeymoon and both are killed in an accident in the wife’s auto. Under the husband’s PAP there is no coverage due to non-stacked UM being on the policy. Stacked would have responded.
- The insured lives close to the Florida border, owns a vehicle in an adjoining state, has a PAP on that car through an agent in the other state, and has rejected UM. He owns a Florida car, insured on a PAP with non-stacked UM. While in the out-of-state car, he is injured and claims UM under his Florida PAP. Non-stacked does not respond; stacked responds.
- The insured, a single mother, owns and insures an auto in south Florida. Her daughter attends college in Gainesville and jointly owns an auto with her mother. The daughter buys and controls the auto policy on that car and has rejected UM on the policy. If Mom visits the daughter and occupies that auto, Mom’s south Florida policy does not provide UM for her if it’s non-stacked UM; stacked responds.
- The insured insures one auto on his PAP and goes to an auto dealer to trade in the car. Due to the low amount offered on trade, the insured decides to keep the old car and sell it on his own. He takes ownership of the new auto and transfers the license tag to the new auto. He takes the old auto to his house and runs an ad in the local newspaper to sell it and at the same time deletes the auto from his PAP. If the insured occupies the old auto and is injured, non-stacked UM does not respond; stacked responds.
- The insured has a PAP covering one auto at non-stacked UM limits of 100/300 in Miami Dade County. She owns a business and has a BAP covering the “company car” with UM limits of $100,000. The husband is in the “company car” and is severely injured by an at-fault party. The BAP carrier tenders the $100,000 UM limits. The insured turns to an attorney to recover the $100,000 UM under the PAP. The PAP adjuster asks to see the title of the “company car.” It turns out that the “company car” is jointly titled to the lady and the business. Non-stacked UM excludes this vehicle; stacked would have paid $100,000. The cost to change the 100/300 non-stacked UM to stacked would have been $39 per six months.
- The agency provided a PAP for a customer at non-stacked UM limits of 250/500 on one auto. Unknown to the agency, the customer purchased an antique auto and separately insured it elsewhere; that policy provided UM at 10/20 limits. The insured was in the antique auto, injured by an uninsured motor vehicle. The antique auto policy paid $10,000. The PAP denied the claim. The cost to change non-stacked UM to stacked would have been $65 per six months.
In the above situations, stacked UM responds because there is no exclusion in the stacked form saying the insured can't collect UM in a vehicle owned but not insured. Said another way, the client could own three vehicles and insure only one of them for UM and still collect while occupying any of the vehicles under the stacked form. (Also note that there is no exclusion in either UM form dealing with a vehicle with fewer than four wheels.)
These examples show that there are two differences in the two UM forms. One relates directly to how much money the client can collect. The other difference is whether the form responds or not. The stacked UM form will respond at times when the non-stacked UM form does not. Even on a one-car risk, there is a difference in UM coverage. That is why stacked UM on a one-car policy costs more than non-stacked UM on the same one-car policy.
Single Car Risks
The original question was, “Why should someone carry stacked UM on a single car policy?” To say that stacked UM benefits only those with more than one car is not correct.
Many people may never face a situation in which stacked UM on a single car policy would respond and non-stacked would not. However, it’s critical to understand the coverage differences in the two forms. Telling a client to “Buy non-stacked on a single car policy because it’s cheaper and stacked only benefits you if you insure more than one vehicle” doesn’t tell the full story. Stacked benefits always give the insured the benefit of the most, and broadest, uninsured motorist coverage.
The 2006 Florida Third District Court of Appeals class action case of Collins vs. GEICO addressed the “single car UM” issue. Ms. Collins (and others) filed suit against GEICO with an allegation that, for a number of years, she paid a premium for stacked UM, yet owned only one vehicle. According to the case, this caused her to pay an additional 20 percent for coverage she did not benefit from. The trial court found against Ms. Collins and she appealed. The appeals court upheld the trial court and stated in part:
Collins contended at oral argument that she is entitled to a return of her stacked uninsured motorist premium for the years she owned only one automobile. She argues that an insured benefits from stacking only when the insured can aggregate or stack the coverage from one vehicle upon another. Therefore, she received no benefit for the additional premiums she paid. We disagree. It is true that stacked uninsured coverage enables the insured to stack the coverage for one owned automobile onto the coverage of another owned automobile. That is not the only benefit of stacked coverage. Even with one automobile, should the insured have an uninsured motorist claim, stacked coverage provides certain benefits above those received with non-stacked. Section 627.727(9)(a)-(e) delineates the limitations in uninsured motorist coverage, in addition to the limitation of not being able to stack the coverage from one vehicle onto another, when non-stacked insurance is obtained for a twenty percent decrease in premium. When the insured purchases stacked coverage, the limitations of section 627.727 (9)(a)-(e) do not apply thereby giving the insured certain benefits for the twenty percent additional premium even when only one vehicle is owned. Therefore, a benefit was received by Collins for the premiums she paid for stacked coverage.
This article shows that there are two differences in the stacked and non-stacked UM forms. One relates directly to how much money the client can collect; the other difference is whether the form responds or not. The stacked UM form will respond at times when the non-stacked UM form does not. Even on a one-car risk, there is a difference in UM coverage. The fact that stacked UM is broader on single car risks is the reason that stacked UM on single car policies costs more than non-stacked UM coverage.
It may be true that there is no difference in the amount of money that can be collected under the two forms in some circumstances, but there is a difference in whether the non-stacked form will respond at all.
As an “invariable practice,” agency staff should always quote uninsured motorist coverage at limits equal to the bodily injury liability limits on a stacked basis, regardless of the number of vehicles insured. UM should also be quoted and recommended on an umbrella policy.
Note that this discussion deals with the current editions of the ISO Uninsured Motorist Coverage forms. Please check with your carrier to see if they are using ISO forms, and verify the edition dates in use.
Copyright FAIA, 2/27/16, David Thompson