Court Nixes Stacking Claim, Limited Bad-faith Claim Stays

By Don R. Sampen, published, Chicago Daily Law Bulletin, December 10, 2024

The U.S. District Court for the Northern District of Illinois recently rejected an insured’s “stacking” claim under an automobile policy, but allowed a bad-faith claim for an insurer’s delayed payment of benefits to stand.

The case is Saslow v. Bankers Standard Insurance Co., No. 22 C 4063, 2024 U.S. Dist. Lexis 174469 (Sept. 26). The insured, Ronald Saslow, and his passenger, Theresa Spencer, were represented by the Law Offices of Leonard S. Becker of Chicago. Tressler LLP of Chicago represented the insurer, Bankers Standard.

In 2020, Saslow and Spencer suffered serious bodily injury when a truck driven by an employee of Berry Brothers Firewood Co. crashed into their rental car in Arizona. Saslow had auto and umbrella policies with Bankers Standard.

The auto policy included coverage limits of $100,000 for medical expenses and $500,000 for uninsured/underinsured motorists coverage. The umbrella policy had a UM/UIM coverage limit of $1 million per occurrence. The auto policy provided a 60-day timeline for paying claimants.

Saslow and Spencer settled with the trucking company and driver based on the company’s $1 million auto policy, with most of the recovery going to Saslow. They then sought recovery under the Bankers Standard policies.

Although it took four months, Bankers Standard paid $100,000 in medical expenses to Saslow under the auto policy, and took the position it owed nothing under the UM/UIM auto coverage because of his recovery in excess of the UM/UIM limit from the trucking company. Bankers Standard also paid him the $1 million UM/UIM limit under the umbrella policy.

As for Spencer, the passenger, Bankers Standard acknowledged that the medical expense limit applied under the policy on a per person basis. It thus initially paid her about $55,000 for medical expenses under the auto policy. Later it added $34,000, for a total of a little more than $89,000 in medical expenses.

Bankers Standard took the position that nothing was owed Spencer her under the auto policy UM/UIM coverage because that coverage applied on a per occurrence basis and was reduced by payments already made. Spencer was not an insured under the umbrella policy.

Saslow and Spencer brought the suit arguing primarily that the Bankers Standard auto policy provided coverage for five different cars and that the coverages provided should be stacked, meaning combined, to allow for greater overall coverage. In addition they claimed that Bankers Standard acted in bad faith under the Illinois Insurance Code, 215 ILCS 5/155, by unnecessarily delaying payment beyond the 60-day deadline provided for in the policy.

Analysis

Upon cross-motions for summary judgment, Judge Steven C. Seeger denied the plaintiffs’ motion and mostly granted Bankers Standard’s motion. He focused on the anti-stacking language contained in the auto policy.

He noted, for example, that the medical expenses and UM/UIM coverages each indicated that the insurer would pay “up to your coverage limit” for that particular coverage, which, Seeger wrote, went a long way to prohibit stacking.

He also pointed to the policy’s “other insurance” clause, which limited recovery to “the higher of the applicable limit for any one vehicle under this insurance.” That language effectively placed a cap on any recovery at the coverage limit for a single car.

Seeger also rejected the plaintiffs’ argument that the fact the declaration pages of the auto policy spanned two pages, that they list the UM/UIM limit of $500,000 on each page, and that each car listed came with $100,000 in coverage for medical expenses, required stacking of the $500,000 UM/UIM limits. Seeger explained that the formatting of the declarations pages does not negate the other language in the policy, and the policy must be read as a whole.

Seeger relied on Kuhn v. Owners Insurance Co., 2024 IL 129895 (2024), and other cases for the proposition that an insurance policy does not become ambiguous as to the liability limits simply because the limits are listed more than once on the declarations pages.

He also agreed with Bankers Standard that its $500,000 cap on UM/UIM coverage “applied across all payments to Saslow, Spencer, and whoever else,” so that Spencer’s recovery under the UM/UIM coverage was reduced by payments made to Saslow.

Regarding the umbrella policy, Seeger applied a similar anti-stacking analysis, finding that it provided $1 million in UIM coverage regardless of the number of insured cars.

Finally, Seeger held against Bankers Standard on one aspect of the Section 155 bad-faith claim. While most of the payments the insurer made were paid within four months — not two as required by the policy — Seeger found it had reasonable explanations for the delay. But for both the supplemental $34,000 payment to Spencer, and the failure to pay Spencer the full $100,000 medical expense payment provided for under the auto policy, Bankers Standard provided no explanation.

As a result, Seeger granted Bankers Standard summary judgment on the plaintiffs’ stacking claims, but denied it as to the section 155 claim regarding the payments to Spencer. He also denied the plaintiffs’ summary judgment motion in its entirety.

Key Points

• Anti-stacking language in an automobile policy may be effective in preventing the stacking of policy limits, even if those limits are listed multiple times in the declaration pages of the policy.
  
• An insurer’s failure to meet the payment deadline for benefits under a policy may give rise to a Section 155 bad-faith claim if the insurer offers no reasonable explanation for the failure to comply.