Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_12-cv-00681/USCOURTS-azd-2_12-cv-00681-1/pdf.json

Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 28:1441 Petition for Removal- Breach of Contract

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WO 

IN THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF ARIZONA 

Todd Schwallie, 

Plaintiff, 

v. 

American Family Mutual Insurance 

Company, 

Defendant. 

No. CV-12-00681-PHX-NVW

ORDER 

 

 Before the Court is Defendant American Family Mutual Insurance Company’s 

Response to the Court’s Order to Show Cause (Doc. 71). In its prior Order (Doc. 69), the 

Court denied Defendant’s Motion for Summary Judgment. The Court held that the antistacking provision of the underinsured motorist endorsement in Mr. Schwallie’s 

Motorcycle Policy with Defendant American Family Mutual Insurance Company 

(American Family) did not comply with the requirements of A.R.S. § 20-259.01(H). As 

a result, the Court ordered American Family to show cause why summary judgment 

should not be granted to Mr. Schwallie on the issue of liability. 

 In its Response, American Family contends that an insurer’s failure to notify the 

insured of his right to select which underinsured motorist coverage should apply does not 

preclude enforcement of an anti-stacking provision, relying on Farmers Insurance 

Company of Arizona v. Voss, 188 Ariz. 297, 298, 935 P.2d 875, 876 (Ct. App. 1996). 

The Arizona Supreme Court has made clear that the burden is on insurers to take 

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affirmative steps to incorporate an anti-stacking provision if they are to be enforced. 

State Farm Mut. Auto. Ins. Co. v. Lindsey, 182 Ariz. 329, 331, 897 P.2d 631, 633 (1995). 

In Voss, the state court held that the anti-stacking provisions of underinsured motorist 

endorsements on four policies an insured had with one insurer could be enforced even 

when they did not advise the insured of his right to select which policy applies. The Voss 

court held that the insurer’s failure to include explicit language informing the insured of 

his right to select which policy should apply was harmless where each policy actually 

contained an anti-stacking provision and the insurer paid benefits under the policy with 

the highest limits. 

American Family’s reliance on Voss is misplaced, however, because the situation 

in this case is different from Voss in one critical respect: each of the four policies in that 

case contained an underinsured motorist endorsement, and the accompanying antistacking provision, before the insured was injured. In this case, by contrast, Mr. 

Schwallie’s Motorcycle Policy did not contain an underinsured motorist endorsement, 

and could not contain an anti-stacking provision, until it was reformed after his claim. 

The Motorcycle Policy’s anti-stacking provision therefore did not comply with the 

requirements of A.R.S. § 20-259.01(H) not only because it failed to advise Mr. Schwallie 

of his right to select which policy could apply, but also because it was not incorporated 

into the policy at all prior to the accident. Mr. Schwallie did not agree to the antistacking provision in the Motorcycle Policy, and it was not incorporated into the policy 

by express agreement of the parties as part of the written acceptance of an underinsured 

motorist endorsement that contains such a provision. As a result, Mr. Schwallie’s right to 

select either the Family Car Policy or the Motorcycle Policy to apply was not implicit in 

each policy, as it was in Voss. 

 Even more important, American Family cannot rely on Voss because Voss

interpreted a previous version of the anti-stacking statute that did not contain an explicit 

requirement that the insured be notified of his right to select a policy in writing. 188 

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Ariz. at 298, 935 P.2d at 876 (citing A.R.S. § 20-259.01(F) (1994) (amended 1998)). 

However, two years after Voss was decided the Arizona legislature amended the statute 

itself to make clear that written notice must be given to the insured if the policy itself did 

not contain “a statement that informs the insureds of the insured’s right to select one 

policy or coverage, as required by this subsection . . . .” A.R.S. § 20-259.01(H) (as 

amended by Ariz. Law 1998, Ch. 288, § 1). The statutory requirement that the policy 

contain written notice of the insured’s right to select a policy, or that the insurer provide 

written notice of that right within 30 days of the accident, was therefore not at issue in 

Voss. 

The Arizona legislature effectively overruled the Voss court’s holding that an antistacking provision could be enforced in some circumstances without written notice 

immediately after it was decided. American Family’s argument that an insurer’s failure 

to notify the insured of his right to select a policy is not fatal to the insurer’s ability to 

enforce an anti-stacking provision is thus contrary to Arizona’s specific statutory 

command. Failure to notify an insured of his right to select which policy should apply in 

an anti-stacking provision in writing, either in the policy itself or within 30 days of any 

claim, prevents an insurer from limiting coverage under Arizona law. American Family 

did neither in this case, and so is liable under both policies. 

IT IS THEREFORE ORDERED that Defendant American Family Mutual 

Insurance Company’s Response to the Court’s Order to Show Cause (Doc. 71) is treated 

as a Motion to Reconsider and is denied. 

IT IS FURTHER ORDERED that the Court’s Order to Show Cause (Doc. 69) is 

discharged. 

 IT IS FURTHER ORDERED that summary judgment is granted in favor of 

Plaintiff, under Rule 56(f)(1), on the issue of American Family’s liability under the 

underinsured motorist endorsement of Mr. Schwallie’s Family Car Policy. 

 

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 IT IS FURTHER ORDERED that the deadlines in the Order Setting a Final 

Pretrial Conference (Doc. 70), in preparation for trial on the issue of Mr. Schwallie’s 

damages, are reaffirmed. 

 Dated this 20th day of August, 2013. 

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