April 07, 2006
What is stacking of uninsured motorist benefits?
Stacking is additional amounts of coverage which is allowed under Alabama law in the context of uninsured motorist coverage. For example if you have one policy covering three vehicles and you have $100,000 in uninsured motorist coverage, you can stack all three coverages for $300,000 toward your injuries. Other types of coverage in the policy generally are not allowed to be stacked due to contractual provisions in the policy. For example, medical payments may not be stacked if this is contractually excluded under the policy.
Insurance carriers cannot disallow stacking of uninsured motorist coverage as that would contravene the meaning of Alabama Code § 32-7-23(c). The statute allows for stacking up to three coverages per policy. This code provision reads, “the recovery by an injured person under the uninsured motorist provisions of any one contract of automobile insurance shall be limited to the primary coverage plus such additional coverage as may be provided for additional vehicles, but not to exceed two additional coverages within such contract.”
According to State Farm Mutual Insurance Company v. Fox, 541 So. 2d 1070 (Ala. 1989) this allows for up to three coverages to be stacked per policy.
Formerly, a first class insured had no limit on the number of coverages that could be stacked and a second class insured was not entitled to stack coverages at all. See Holloway v. Nationwide Mutual Insurance Company, 376 So. 2d 690 (Ala. 1979). Now with the passage of the above statute in 1984, both first class insureds and second class insureds were allowed to stack up to three coverages per insurance policy or contract. There is no limit, however on the number of policies that may be stacked. For example, if there are three policies involved with three uninsured motorist coverages on each policy, nine coverages could be stacked.
There are still some distinctions between first class insureds and second class insureds as set forth in Allstate Insurance Company v. Alfa Mutual Insurance Company, 565 So. 2d 179 (Ala. 1990). In that case the court disallowed a second class insured to stack uninsured motorist coverage when a named insured had a separate policy on another vehicle. If the other vehicle had merely been an additional vehicle under the policy for which uninsured motorist benefits were sought then the second class insured could have stacked the second uninsured motorist coverage. The separate policy was disallowed while it would not have been disallowed for a first class insured.
Alabama Code § 32-7-23 does not provide for setoffs, but it also does not preclude setoffs. Generally, the matter is determined by the insurance policy language. See Guess v. Allstate Insurance Company, 717 So. 2d 389 (Ala. Civ. App. 1998). In this case the plaintiff sued the tortfeasor and the underinsured motorist carrier in one action. Just prior to trial the plaintiff settled with the tortfeasor for policy limits and proceeded with his case to the jury as to the uninsured motorist carrier. The jury returned a verdict in favor of the plaintiff at $57,500.00. Allstate then argued then argued that it was entitled to a set off of $25,000.00. The trial court granted the setoff and the plaintiff appealed. On appeal, the Court of Civil Appeals found that there was no error in the trial court granting the setoff because the trial court merely did the math instead of letting the jury do the math.
On occasion, an injured individual will desire to settle with the tortfeasor for less than the policy limits of the tortfeasor but at the same desire to proceed with an uninsured motorist claim. Uninsured motorist carriers typically take the position that if settlement is less than the full amount of the policy limits of the tortfeasor, then the insured should be barred from pursuing an underinsured motorist claim. In the case State Farm Mutual Automobile Insurance Company v. Scott, 707 So. 2d 238 (Ala. Civ. App. 1997) the court held that an insurer is not barred from pursuing an underinsured motorist claim in these circumstances in which a claim is properly settled with a tortfeasor for less than liability limits. Nonetheless, the insured would still have an obligation to follow the procedures set forth in Lambert v. State Farm Mutual Auto. Ins. Company, 576 So. 2d 160 (Ala. 1991).
In another case, Knowles v. State Farm Mutual Auto. Ins. Company, 781 So. 2d 211 (Ala. 2000) the plaintiff entered into a pro tanto settlement with the tortfeasor which had one million dollars of available coverage and then proceeded to attempt to make an underinsured motorist claim against State Farm, the carrier. The court ruled that the plaintiff could not do this because he had accepted the tortfeasor’s settlement.
In a later opinion, Omni Insurance Company v. Foreman, 802 So. 2d 195 (Ala. 2001) Omni made an argument that the Scott case had been overruled by Knowles but this was rejected by the Supreme Court which described the reasoning in Scott as sound and further permitted the plaintiff Foreman to proceed with his underinsured motorist coverage claim. Robertson and Cusimano in Alabama Tort Law (3d ed.) § 4.3 (2003 cumulative supplement) have provided a plausible explanation of these conflicting opinions by explaining, “had the plaintiff in Knowles offered substantial evidence that his damages exceeded one million dollars and had the court concluded that State Farm, the underinsured motorist carrier, had no obligation under those facts, the court would then have to reconcile Knowles and Scott.”