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The insured plaintiff purchased insurance for three automobiles.  As was its practice, Farmers issued a separate policy for each automobile.  Further, the plaintiff opted to pay additional premiums on the policies for stacked insurance.  However, the polices also contained a household exclusion that provided, in pertinent part, “We do not provide Underinsured Motorists Coverage for ‘bodily injury’ sustained: By you while ‘occupying’ or when struck by, any motor vehicle which is not insured for coverage under this policy.”

At the time of the purchase of the policies, and also later at the time of the plaintiff’s automobile accident, Farmers had a practice of non-enforcement of the household exclusion when the insured paid for stacking and was subsequently injured while occupying a household vehicle.  Therefore, after the plaintiff was involved in an accident, the plaintiff was initially notified that the stacked values of the three individual vehicle polices were available for her claim.  More than six months later, the plaintiff was notified that the household exclusion excluded stacking for coverage for household vehicles.

The plaintiff filed suit against the insurer based on an alleged denial of her claim for stacking in bad faith.

Addressing cross-motions for summary judgment, the court stated that non-enforcement of the household exclusion would provide the plaintiff with an extra benefit for which she did not pay because the premium charged by Farmers was higher than a premium for unstacked coverage but presumably less than a premium for stacking without the household exclusion.

Further, the court found that although the plaintiff testified in her deposition that her agent told her that by selecting the stacking option she would be able “to stack [the] coverage on the number of vehicles [plaintiff] had on the policy,”  the statement by the agent was not inaccurate and did not indicate an intention to mislead.  The court also found that the plaintiff’s argument that she did not receive any benefit for the higher premium lacked merit, because the “fact that [the plaintiff] did not have stacked coverage for household vehicles does not negate the fact that she did, in fact receive stacking.”

Finally, the court rejected the plaintiff’s argument that Farmers was estopped from providing the stacked coverage to the plaintiff based on its prior practice of not enforcing the household exclusion because the plaintiff did not show that she knew of Farmers’ enforcement practices until after the litigation commenced, and therefore she could not have reasonably relied on Farmers’ previous conduct.

The court granted summary judgment in favor of Farmers and denied the plaintiff’s cross-motion for summary judgment.

Date of Decision:  February 8, 2007

Dougherty v. Farmers New Century Ins. Co., United States District Court for the Middle District of Pennsylvania, No. 3:CV 06-98, 2007 U.S. Dist. LEXIS 9023 (M.D. Pa. Feb. 8, 2007) (Nealon, J.)