Insurance--Stacking UIM Coverage on Liability Coverage in Separate Policies


The defendant was injured while riding as a passenger on her husband's motorcycle in a one vehicle accident. Her husband had a liability policy on the motorcycle in his name only with a $100,000 policy limit issued by American Family Mutual Insurance Company [American Family]. The defendant had a separate liability insurance policy on her car issued only in her name and also issued by American Family. This policy had a $100,000 underinsured motorist [UIM] limit. Defendant settled with her husband for the $100,000 liability policy limit expressly reserving her right to pursue UIM coverage against her own policy. American Family denied the UIM claim stating this coverage had an "anti-stacking" provision prohibiting her from recovering liability payments and UIM payments against the same policy or insurance company. American Family brought this declaratory relief action in federal district court and plaintiff counterclaimed for breach of contract and bad faith. The federal district court certified the question of whether Arizona law allowed a recovery against the UIM coverage under these circumstances. The Arizona Supreme Court held it did.

Arizona's Uninsured/UIM Act [UMA] (ARS sec. 20-259.01) requires all insurers writing motor vehicle liability coverage to offer UIM in the same amount as the liability coverage. UIM coverage is to extent to all persons insured under the liability coverage and is designed to cover these individuals when their damages exceed all applicable liability limits subject to valid limitations placed on a recovery by the insurer. However, the insurer may not make exceptions to UIM coverage that are not allowed against uninsured motorist [UM] coverage.

Subsection H of the UMA provides "If multiple policies or coverages purchased by one insured on different vehicles apply to an accident or claim, the insurer may limit the coverage so that only one policy or coverage, selected by the insured, shall be applicable to any one accident." Considering the legislative intent to allow for broad remedial application of UIM coverage to assure those injured on our highways are fairly compensated, the supreme court interpreted this provision to only apply where the insured has obtained coverages for several vehicles and then attempts to claim multiple UIM coverages for the same accident. Here the defendant was not attempting to stack UIM coverages but instead was making a claim against only one UIM policy in addition to her liability claim.

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