Franklin v. CSAA Gen. Ins. – 7/28/2023

September 29, 2023

Arizona Supreme Court (1) approves intra-policy coverage stacking, holding that A.R.S. § 20-259.01 mandates that a single policy insuring multiple vehicles provide different underinsured motorist (“UIM”) coverages for each vehicle; and (2) holds that § 20-259.01(B) does not limit UIM coverage from exceeding the liability limits.

Decedent, who died in a motor-vehicle collision, held a $50,000 UIM policy covering her two vehicles. Her surviving daughter collected the negligent driver’s liability policy limits and the $50,000 UIM policy limit from decedent’s insurance company. The daughter sued, arguing that inclusion of the decedent’s second vehicle in the policy meant the policy provided separate, additional coverage that she could “stack,” increasing the total UIM coverage from $50,000 to $100,000.

The federal district court certified two questions to the Arizona Supreme Court: (1) Does A.R.S. § 20-259.01 mandate that a single policy insuring multiple vehicles provides different UIM coverages for each vehicle, or a single UIM coverage that applies to multiple vehicles?; and (2) does A.R.S. § 20-259.01(B) bar an insured from receiving UIM coverage from the policy in an amount greater than the bodily injury liability limits of the policy?

The court held that an insured covered under a single, multi-vehicle policy holds multiple, separate UIM coverages for each vehicle that can be stacked, referred to as “intra-policy stacking.” The sole means by which an insurer can prevent intra-policy stacking is through strict compliance with § 20-259.01(H), the “anti-stacking” provision, which requires insurers to provide notice either in the policy itself or in writing within 30 days after it receives notice of the collision. Reading other subsections as limiting stacking would be contrary to statutory interpretation principles because it would render subsection (H) meaningless and subvert the Uninsured/Underinsured Motorist Act’s (“UMA”) purpose of affording insureds coverage. The court rejected the defendant insurer’s argument that a 1997 amendment to subsection (H) solidified that it applied only to inter-policy stacking, holding instead that the amendment explicitly recognized intra-policy stacking and established subsection (H) as the sole means by which insurers may limit intra-policy stacking.

The court further held that § 20-259.01(B) does not limit the insured from receiving UIM coverage that exceeds the liability limits. Subsection (B) requires insurers to initially offer UIM coverage of at least the liability coverage limits, but permits the insured to reject that offer and instead request coverage in any amount up to the liability coverage limits. The defendant insurer argued that the “up to” language prevents the insured from obtaining UIM coverage in excess of the liability limits. The court disagreed. Instead, subsection (B)’s “up to” language refers to per-vehicle rather than total UIM coverage. To hold that the liability limits impose a ceiling on total UIM coverage would render the provision’s stacking of UIM coverages superfluous because the stacked UIM coverage would often exceed the liability coverage limits. Viewed in this context, the “up to” language obligates an insurer to sell UIM coverage up to the liability coverage limits, but does not prohibit UIM coverage that exceeds those limits.

Justice Lopez authored the opinion for a unanimous court.

Posted by: Michael Price