The issues of "stacking" tend to arise frequently in the context of automobile coverage. In a recent case before the Seventh Circuit, anti-stacking clauses were upheld to prevent the doubling of an auto insurer's liability limits. For an insurer's counsel or risk manager, the case provides reasoning and lines of argument that can be extended to anti-stacking cases involving other types of coverages as well.
The question of an insured's right to "stack" limits of insurance is a frequently encountered issue which arises in the aftermath of an auto accident. "Stacking" is the aggregation of multiple insurance coverages or limits to cover a single loss. Attempts to "stack" coverage can be based on a theory that a party is entitled to coverage under more than one policy ("interpolicy stacking") or, as demonstrated in the Grinnell v Baker case, on a theory that a single policy provides more than a single limit of coverage applicable to the claim ("intrapolicy stacking").
Insurers seek to prevent stacking by including "anti-stacking" clauses, conditions, or terms in their policies. Whether such provisions are enforceable will turn on several factors, including whether the policy language unambiguously conveys the insurer's intent to prohibit stacking and whether the applicable state law (including judicial decisions and mandatory auto insurance law) permits such a prohibition.
Grinnell v Baker
In an opinion released on April 5, 2004, the U.S. Circuit Court of Appeals for the Seventh Circuit, applying Illinois law, ruled that the "anti-stacking" clauses of a personal auto policy precluded the insured and claimant from doubling the policy's single limit of liability in Grinnell Select Ins. Co. v Baker, 362 F3d 1005 (7th Cir 2004). The Grinnell case arose from an auto accident in which Martha Baker was injured. Ms. Baker sued the driver of the other car, Sheena George, who was an insured under an auto policy issued to her parents by Grinnell. The policy covered two of her parents' cars, including the one which was involved in the accident. The policy's declarations page stated that $100,000 was the "per person, per accident" maximum limit of liability coverage.
Grinnell tendered $100,000 to Ms. Baker as its applicable policy limit. However, Ms. Baker and the Georges contended that Grinnell's exposure was actually $200,000, on the basis that the $100,000 limit for each vehicle could be "stacked." Grinnell sued in federal court (based on diversity jurisdiction, 28 USC §1332) and sought a declaration that its payment of $100,000 had exhausted its coverage. The district court entered summary judgment for Ms. Baker and the Georges. The Seventh Circuit reversed, finding that the "anti-stacking" clauses of Grinnell's policy unambiguously limited Grinnell's liability coverage to $100,000.
The Grinnell policy contained two "anti-stacking" clauses. The first, which the court described as "implicit," provided:
The limit of liability shown in the Declarations for each person for Bodily Injury Liability is our maximum limit of liability for all damages, including damages for care, loss of services or death, arising out of "bodily injury" sustained by any one person in any one auto accident. Subject to this limit for each person, the limit of liability shown in the Declarations for each accident for Bodily Injury Liability is our maximum limit of liability for all damages for "bodily injury" resulting from one auto accident.
The court construed this clause as meaning that one injured person is matched against "the" limit of liability—$100,000—rather than against multiple limits. The second "anti-stacking" clause was characterized by the court as "express" and provided that Grinnell's $100,000 limit of liability:
… (I)s the most we will pay regardless of the number of:
- "Insureds";
- Claims made;
- Vehicles or premiums shown in the Declarations; or
- Vehicles involved in the auto accident.
The court referred to the second clause as a "disambiguator." Even if it was assumed that the declarations page was ambiguous, the function of the second clause was to make clear that stacking was not allowed, thereby eliminating any ambiguity.
While the court felt that the foregoing clauses clearly and unambiguously precluded the stacking of limits, it noted a difference of opinions in the appellate districts of Illinois when addressing similar policy language. The Fifth District, in two decisions, found similar language ambiguous, reasoning that, where the declarations page states "insurance is provided where a premium is shown," an insured might read that language to allow for stacking. Hall v General Cas. Co., 328 Ill App 3d 655, 766 NE2d 680 (5th Dist 2002); Yates v Farmers Auto Ins. Assoc., 311 Ill App 3d 797 (5th Dist 2000).
Two other districts of the appellate court held, however, that similar clauses were unambiguous and enforceable. Domin v Shelby Ins. Co., 326 Ill App 3d 688, 761 NE2d 746 (1st Dist 2001); Pekin Ins. Co. v Estate of Ritter, 322 Ill App 3d 1004, 750 NE2d 1285 (4th Dist 2001).
The district court had relied on the Fifth District's opinions to support entry of judgment for Ms. Baker and the Georges. The Seventh Circuit noted that, in a diversity case, the federal court's task is to anticipate what action the state's highest court will take if and when it is confronted with the same issue. After examining the conflicting appellate opinions and Illinois Supreme Court cases enforcing "anti-stacking" language in the context of uninsured and underinsured motorist coverage, the Seventh Circuit concluded that the supreme court would find the language unambiguous and enforceable.
The court found further support for its opinion in cases handed down by the courts of other states, enforcing similar "anti-stacking" clauses, including the following.
- Rodriguez v General Accident Insurance Co., 808 SW2d 379 (Mo 1991) (addressing underinsured motorist coverage)
- Saccucci v State Farm Mutual Automobile Ins. Co., 32 Ohio St 3d 273, 512 NE2d 1160 (1987) (addressing uninsured motorist coverage)
- Antanovich v Allstate Insurance Co., 507 Pa 68, 488 A2d 571 (1985) (addressing "work loss" benefits under an auto policy)
- Upshaw v Trinity Cos., 842 SW2d 631, 35 Tex Sup Ct J 1219 (Texas 1992) (addressing uninsured/underinsured motorist coverage)
- Folkman v Quamme, 264 Wis 2d 617, 665 NW2d 857 (2003) (addressing auto liability coverage)
The court found further support for the enforceability of the "anti-stacking" clauses by analyzing the relationship of premium to available coverage, making the following observation.
A policy covering two cars and multiple drivers is twice as likely to be called on as a policy covering one car and one driver; the separate premium compensates the insurer for this marginal risk. On the holding of Hall and Yates, however, a policy covering two cars (each at the same premium as one car) quadruples rather than doubles the insurer's exposure because it doubles the number of cars and doubles the limit for each. Reasonable insureds would not expect quadruple the coverage for double the premium.
Conclusion
The Grinnell opinion reinforces the proposition that, so long as it is clear and unambiguous, the courts of Illinois and many other states will enforce "anti-stacking" conditions. Although issues of "stacking" tend to arise frequently in the context of auto coverage, they can arise in the context of other policies as well. The valid bases for enforcement of these provisions—including unambiguous policy language, the relationship of the premium to the insurer's exposure, and the insured's "reasonable expectations"—are succinctly addressed by the Seventh Circuit in Grinnell. For an insurer's counsel or risk manager, the case provides reasoning and lines of argument which can be extended to anti-stacking cases involving other types of coverages.
A comprehensive overview of the enforceability of "anti-stacking" terms and conditions throughout the United States (in the context of uninsured motorist coverage) can be found in Combining or "Stacking" Uninsured Motorist Coverage Provided in Separate Policies Issued By The Same Insurer To The Same Insured, Janet Boeth Jones, 25 ALR4th 6 (1983) (updated June 2003).
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