U.S. Court of Appeals Decides Underinsured Motorist Coverage Regarding Stacking

Toni Dugan was insured by Nationwide Insurance Co. She was involved in an automobile accident with Chelsea Rainey who was insured by American Family Insurance Co. Rainey’s policy had a $100,000 limit, which American Family paid to Dugan and her husband, James.

The Dugans’ damages exceeded $200,000, and they made a claim under their own underinsurance motorist coverage through Nationwide. The Dugans’ claim against Nationwide sought $400,000 less American Family’s $100,000 payment. Based on the underinsured motorist coverage (UIM), the Dugans claimed coverage for 4 automobiles. The premium was charged on each of the four cars for UIM coverage of $100,000 per person and $300,000 per occurrence.

Nationwide denied coverage, contending its policy prohibited stacking of UIM coverage and filed a complaint for declaratory judgment. The parties filed cross-motions for summary judgment and the U.S. District Court judge of the Southern District of Illinois granted Nationwide’s motion finding that stacking was prohibited.

The Dugans appealed to the U.S. Court of Appeals for the 7th Circuit wherein the court affirmed the district court judge’s finding that dismissed the Dugans’ claim for further recovery against Nationwide.

The Dugans contended that the limit of liability provision in their Nationwide policy was ambiguous and stacking was allowed under two Illinois Supreme Court decisions: Bruder v. County Mutual Insurance Co., 157 Ill.2d 179, 620 N.E.2d 355 (1993), and Hobbs v. Hartford Insurance Company of the Midwest, 214 Ill.2d 11, 823 N.E.2d 561 (2005).

The Dugans argued that “a long line of Illinois authority dictates that, where the anti-stacking provision refers to the limit of liability listed on the declarations page as the maximum the insurer would pay, and the declarations page lists separate underinsured motorist limits for each of the covered vehicles, the anti-stacking provision is ambiguous, and stacking is permitted. We agree.”

“The seminal case in the interpretation of anti-stacking clauses, is Bruder v. Country Mutual Insurance Co., 157 Ill.2d 179, 620 N.E.2d 355 (1993). In what has now become known as the ‘Bruder dicta,’ the Illinois Supreme Court stated that ‘[i]t would not be difficult to find an ambiguity’ where an anti-stacking provision ties the limit of liability to the limit shown on the declarations page, and the declarations page lists multiple vehicles along with the separate coverage limit applicable to each vehicle and the separate premium charged for each vehicle.”

In holding that stacking was allowed under certain ambiguous limit of liability clauses, the court next considered Nationwide’s claim that stacking was prohibited by the other-insurance clause in its policy. It was concluded by the appeals panel that the other-insurance clause clearly prohibited stacking, so the Dugans could not stack their four policies for $400,000 in coverage (less American Family’s $100,000 payment).

In addition, the court stated that the Illinois Insurance Code expressly authorizes anti-stacking provisions in motor vehicle insurance policies. 215 ILCS 5/143a-2(5). The Illinois Insurance Code states: ‘Nothing herein shall prohibit an insurer from setting forth policy terms and conditions which provide that if the insured has coverage available under the section under more than one policy or provision of coverage, any recovery or benefits may be equal to, but not exceed, the higher of the applicable limits of their respective coverage, and the limits of liability under this section shall not be increased because of multiple motor vehicles covered under the same policy of insurance.”

In conclusion, the court stated that because the “other insurance” provision was unambiguous in limiting the Dugans’ recovery to $100,000, the court held that Nationwide, after applying its setoff, does not owe the Dugans underinsurance motorist coverage under its policy. Thus, the court affirmed the trial judge’s decision.

Nationwide Agribusiness Insurance Co. v. Dugan, 810 F.3d 446 (7th Cir. 2005).

Kreisman Law Offices has been handling car accident cases, truck accident cases, motorcycle crash cases, catastrophic injury cases and bicycle accident cases for individuals and families who have been injured or killed by the negligence of another for more than 40 years, in and around Chicago, Cook County and its surrounding areas including, Evergreen Park, Chicago (Washington Heights, Roseland, Pullman, Lake Calumet, East Side, South Shore, Bronzeville, Old Town, Gold Coast, Humboldt Park, Garfield Park, Lawndale, Little Village, Austin, Polish Village), Franklin Park, Schiller Park, Northlake and Maywood, Ill.

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