To: Philadelphia Injury Lawers P.C.
From: Brynn Chafin
May 17, 2023
2023 Essay Competition
ISSUE:
Should insurance companies allow customers to stack insurance policies? Why?
ANSWER:
Stacking should be allowed
1
2
who are legally bound3
to purchase insurance from only a few powerful insurers (the top 10 of which alone control almost 50% of the auto-insurance market.)4
1. See Ashwini Vasanthakumar, Recent Debates on Victims’ Duties to Resist Their Oppression, 15
PHILOSOPHY COMPASS 1,
2 (2020) (citations omitted).
2. Felix Richter, Cars still dominate the American commute, WORLD ECONOMIC FORUM (May 19,
2022), https://www.weforum.org/agenda/2022/05/commute-america-sustainability-cars/.
3. See Bob Haegele, The Minimum Car Insurance Required In Your State, FORBES: FORBES
ADVISOR (Jan. 19, 2023, 2:35 PM), https://www.forbes.com/advisor/car-insurance/minimumrequired-in-state/.
4. Daniel Robinson, 10 Largest Car Insurance Companies in the U.S., MARKET WATCH (May 5,
2023, 10:23 PM), https://www.marketwatch.com/guides/insurance-services/largest-carinsurance-companies/.
5
Oftentimes insured drivers may sign waiver forms to limit their own ability to stack their insurance policies in return for cheaper rates, or alternatively, as in Gallagher, the insured will opt into stacking policies and pay increased premiums for that increased coverage.6
The primary issue of fairness in the debate of stacked claims stems from the “insurance industries’ age-old rubric[:] . . . [that] an insured should receive the coverage for which he has paid.”
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. Stacked insurance conforms to that age-old rubric by:
1) Incentivizing the insurance to profit and compete by adjusting their rates, not by writing overly-complex contracts:
The first reason that stacked insurance should be allowed is because it addresses the power-imbalance in the insurance-negotiation. This is because stacking incentivizes insurance companies to use fair rates, rather than complex contracts, to compensate themselves for the risk of insuring a driver.
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The “one-shotter,” (the everyday individual consumers who purchase insurance, such as Mr. Gallagher) is vulnerable to believing or paying higher rates for stacked coverage that the insurance had no intentions of actually paying.9
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Through disincentivizing difficult-to-understand contracts by allowing stacked insurance or by using a presumption of stacked insurance when ambiguous, insurance providers will have to fulfil their obligation to compete to raise profits in another way: raising rates. This is more easily understandable by consumers wishing to shop between different possible insurers, which is much6. Gallagher, 650 Pa. at 605.
7. Id. at 612.
8. See Marc Galanter, Why the “Haves” Come out Ahead: Speculations on the Limits of Legal
Change, 9 L. & Soc’y Rev. 95, 101 (1974) (explaining institutional preferences in litigation)
9. See id.; see also Gallagher, 650 Pa. at 605 (explaining the opt-in).
10. See Invest, How Insurance Works, https://www.investprogram.org/students/insurance-in-reallife/insurance-works/ (last visited May 16, 2023).
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could have been avoided if stacked coverage was always clearly allowed when the higher rate is paid.2) Reducing the experience-bias that insurers benefit from:
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From base familiarity with the insurance process to economies of scale regarding ability and readiness to litigate, the insurer is at an advantage in every step. Without a guarantee of stacked provisions, even if the insured has the ability to shop through different insurance providers, the powerdynamic at the heart of the inequity is the same: the insurer lives and breathes and profits off insurance law, and the consumer does not.14
Stacking addresses this.3) Setting a fair expressive message in insurance law:
15
11. Lisa Marchand, What is readability and why should content editors care about it?, CENTER
FOR PLAIN LANGUAGE (Mar. 22, 2017) (Listing the average American readability level at the
equivalent to a 7th/8th grader).
13. See Robyn L. Sondak, Adam P. Friedman, Ten Commandments of Interpreting Commercial
Insurance Policies (but, Unlike Moses, There Are Sub-Commandments), 25 Fidelity L.J. 229, 250
(2019) (comparing commercial insurance and “mass-marketed general risk lines” like auto where
the consumers are not “sophisticated.”).
15. Cass R. Sunstein, On the Expressive Function of Law, 144 U. Pa. L. Rev. 2021, 2024 (1996)
In short, aside from the commercial effect (to incentivize competition based on rates, not contractual complexity) and the power imbalance-correcting effect of stacking, stacking should be allowed because the law should never make the statement that consumers deserve to be stuck in the unworkable situation in which coverage paid by the insurance doesn’t match the amount purchased by the driver.
If a driver believes they have insurance, and the insurer has represented that the contract contains stacked coverage, then denying the stacked coverage would be effectively punishing the driver for relying on their insurer. In a system where the government has shown a willingness to step into insurance contracts on behalf of insurers when they are deceived,16 the expressive message send by the government’s refusal to allow stacked insurance would a terribly unfair one. Simply put, a just government cannot endorse an unfulfilled or inequitable contract.
For all the above reasons, stacked insurance should be allowed.
16. See, e.g., Daniel Markovits, Philosophy of Contract Law, STANFORD ENCYCLOPEDIA OF
PHILOSOPHY (Nov. 23, 2021), https://plato.stanford.edu/entries/contract-law/ (detailing
philosophical impacts of misrepresentations, power dynamics, and expectations in contract law).
