Uninsured Motorist Coverage on Single Car Risks

By David Thompson, CPCU

Introduction

The question is often asked, "Why should an insured carry stacked uninsured motorist (UM) coverage on a single car risk 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 insured will be able to collect UM at all. This article addresses the issue. While the analysis here deals with only one auto being insured, the same analysis applies when multiple autos are insured.

The Statutes

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. (Emphasis added.)

(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 the 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 a named insured does not sign an election/rejection form, then the UM coverage is issued at a limit equal to the bodily injury limits on a stacked basis.

Coverage Similarities

Before looking at the differences in stacked and non-stacked UM, let's look at the similarities.

• "An insured" for UM includes the person named, resident spouse, and related persons who are resident in the household, such as children. (Persons occupying "your covered auto" are also "an insured" for UM coverage.)

• Both forms allow an insured to collect UM coverage while occupying an auto that they own and insure.

• Both forms allow an insured to collect while they are occupying an auto not owned by them. For example, a resident spouse who rents a car or borrows a friend's car and is injured by an uninsured motorist can collect his/her UM.

• Both forms respond out of state.

• Both forms respond if an insured is on a business errand or in a vehicle owned by their employer.

• Both forms respond for an insured who is occupying a non-owned motorcycle

• Both forms allow an insured to collect UM benefits if they are struck as a pedestrian by an uninsured motor vehicle.

• Thus, both the stacked and the non-stacked UM forms provide coverage which is "portable," meaning it follows an insured into non-owned vehicles and as a pedestrian.

The Dollar Difference

The stacking provision, in its simplest and most basic form, states that an insured can take the UM available on each car which is owned and insured and "stack" it together to be used anywhere. On the other hand, non-stacking is much like "what you see is what you get," meaning the UM limit shown on the declarations page is what is paid, no matter how many cars are insured.

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 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

Besides a pure dollar difference there is a significant coverage difference between the two forms which could affect whether an insured can collect under the UM provision of the policy. At times the stacked form will respond for a claim whereas, the non-stacked form will not. 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 covered for UM under the policy. (FS 627.727(9)(d) has similar wording.) Looking at a typical non-stacked UM form the exclusion reads like this:

A. We do not provide Uninsured Motorists Coverage for "bodily injury" sustained:

1. By an "insured" while "occupying" any motor vehicle owned by that "insured" which is not insured for this coverage under this policy. This includes a trailer of any type used with that vehicle.

This exclusion is not found in the stacked UM form. Therefore there are times, based on the statute and the policy, when the stacked UM will respond in a claim, but the non-stacked form will not. This is true regardless of how many cars are insured….one, two, three, or more.

Examples of When Stacked UM Responds but Non-stacked Does Not

The following examples illustrate the coverage difference between stacked and non-stacked UM coverage:

• 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 under non-stacked UM and owns another vehicle "up north." He/she is insured in that vehicle and is injured by an uninsured motorist. The Florida non-stacked coverage will not respond. Stacked responds.

• (Actual claim.) The insured owns a motorcycle, insures it separately under a motorcycle policy and has rejected UM under the motorcycle policy. In addition, the insured owns a car insured on a PAP with non-stacked UM. While on the motorcycle the insured is injured by an uninsured motorist. The non-stacked UM form covering the car would not respond. Stacked UM under the PAP responds.

• (Actual claim.) 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.

• (Actual claim.) 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 wedding both are tragically killed in an accident while occupying her car. The carrier denied UM benefits citing the "owned but not insured" exclusion. Litigation followed to the trial and appeals courts. Stacked would have responded without the need for litigation.

• (Actual claim.) 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.

• (Actual situation.) 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.

• (Actual situation.) 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.

Again, the reason that the stacked UM coverage applies in these situations is because of the absence of the exclusion for a vehicle owned but not insured. In all examples above the vehicle in question was owned by the insured but not covered for UM under the policy; therefore the non-stacked UM form would not respond.

Single Car Risks

The original question was, "Why stack UM on a single car risk?" Hopefully this article has shown how, even with one car on a policy, the stacked UM form provides broader coverage than the non-stacked form. Each of the examples above shows how coverage is broader under the stacked form. 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, "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 alleged 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% 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. (Emphasis added) 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.

Summary

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.

Be cautious of clients who own only one car. Don't jump to the conclusion of, "Since you only have one car there is no difference in the UM forms." It may be true that there is no difference in the amount of money that can be collected under the two forms, but there is a difference in whether the non-stacked form will respond at all under certain circumstances.

Note: This discussion deals with the Insurance Services Office uninsured motorist coverage forms which track the statutory wording. Other forms may differ, although it's difficult to vary greatly from the statutes when drafting forms.

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Copyright FAIA, 2/15/10, David Thompson