1 "Stacking" refers to the practice of allowing an insured to add or stack the limits of each

vehicle covered under a policy of insurance for multiple vehicles to pay for damages sustained in

an accident. For example, if the insured chose $10,000 coverage for bodily injury on two vehicles

covered under a policy, the maximum recovery would be $20,000 ($10,000 plus $10,000). United States Court of Appeals,

Fifth Circuit.

No. 92-7609.

ALLSTATE INSURANCE COMPANY, Plaintiff-Appellant Cross-Appellee,

v.

Luther ASHLEY, et al., Defendants,

Luther Ashley, et al., Defendants-Appellees Cross-Appellants.

Aug. 20, 1993.

Appeals from the United States District Court for the Southern District of Mississippi.

Before WISDOM, DAVIS, and SMITH, Circuit Judges.

WISDOM, Circuit Judge:

This case raises two principal issues: (1) Whether Mississippi insurance law requires

uninsured motorist coverage stacking when an uninsured motorist insurance policy contains an

express anti-stacking provision 1 and (2) whether charging a higher premium for mult iple car coverage

than for single car coverage constitutes charging two separate premiums.

The plaintiff/appellant, Allstate Insurance Company ("Allstate"), issued an automobile

insurance policy to Luther Ashley, one of the defendants/appellees, providing uninsured motorist

coverage fo r fo ur aut omobiles. Allstate charged Ashley a flat premium based on the fact that the

policy cove r ed mult iple vehicles. Allstate charges a lower premium for single car coverage. The

policy contained an express anti-stacking provision.

When four passengers in a vehicle insured under this policy were injured in an accident

invo lving an uninsured motorist, Allstate filed a declaratory judgment action in federal court seeking

to limit its liabilit

y to one full c overage, rather than four stacked coverages. The district court

concluded that Allstate, by charging a higher premium for multiple car coverage, had charged twoseparate premiums and was, therefore, liable under the policy for two stacked coverages.

On appeal, Allstate argues that it charged only one premium and is, therefore, liable for only

one full coverage. The defendants/appellees argue that they are entitled to stacking for each vehicle

insured under the policy, or four full coverages. Relying on a Mississippi Supreme Court ruling

entered after the district court decided the instant cas e, we hold that even if Allstate charged a

separate premium for each of the vehicles insured under the policy, it is liable only for the greater of

one full coverage or four stacked statutory minimum coverages. Because we decide the instant case

based on this issue, we do not reach the issue of whether Allstate's higher premium for mult iple car

coverage constitutes two separate premiums.

I.

While driving in one of the four vehicles insured un der Lut her Ashley's Allstate policy,

Jennifer Ashley, Nell Ashl ey, Ro nald Rainer, and Ernest Couch were injured by an uninsured

motorist. At that time, the policy provided coverage of up to $50,000 per accident if one person was

injured and up t o $100,000 per accident if two or more persons were injured. The parties do not

dispute that more than one person was injured or that their damages/injuries exceed $400,000.

Under t he original policy issued to Luther Ashley, Allstate charged a separate premium of

$49.70 for uninsured motorist coverage for each of t he cars insured under the policy. In 1989,

Allstate altered its rate structure. Under the new plan, Allstate charged a single uninsured motorist

premium. Allstate set this premium at two different rates: o ne rat e for single-car coverage and a

higher rate for coverage of more than one car. This higher rate was a flat fee of $91.90 that remained

the same regardless of the number of vehicles covered. Thus, a two car insured would be charged

the same premium as a three or four car insured.

After submitting its plan to the Mississippi Insurance Commissioner for approval, Allstate sent

notice of these changes to all of it s po licyho lders, including Luther Ashley. The notice explicitly

stated that no "stacking" would be allowed in the future under this new plan. In the past, under the

old plan, if an insured was injured, although the coverage limits were set at $100,000 per accident,

if the insured paid separate premiu ms for each of its cars, the coverage on each vehicle would bestacked. Thus, if the policy provided uninsured motorist coverage for four vehicles, the policyholder

could collect up to $400,000 by stacking the coverage on the four cars.

When the defendants/appellees filed their cl aim wit h Allstate, they requested that their

coverage be stacked. At the time of the accident, they had four cars insured under the policy. By

stacking the full coverage limit for each insured vehicle, they cl a imed $400,000 in coverage. In

response, in November 1990, Allstate filed a declaratory judgment action in the United States District

C o urt fo r the Southern District of Mississippi against the Ashleys, Rainer, and Couch seeking a

determination that it had no obligation to stack uninsured motorist bodily injury coverage. Allstate

tendered $100,000, one full coverage amount, to the court with the request that it be divided among

the claimants by the court. Allstate maintained that the policy explicitly prohibited stacking.

The defendants/a ppellees answered, admitting Allstate's factual allegations but seeking to

stack four coverages. In addition, Rainer counterclaimed for damages caused by Allstate's "bad faith"

in failing to pay their claim fully and immediat ely. Allstate then moved for summary judgment on the

coverage issue. The district court entered an order on November 15, 1991 concluding that stacking

was required in spite of the anti-stacking provision in the policy. The court reasoned that because

Allstate charged a higher premium for multiple car coverage, it had in effect charged two separate

premiums. In accordance with the Mississippi law at that time, the court stacked two full coverages,

awarding the defendants/appellees $200,000.

Allstate requested leave to file an interlocutory appeal from this order. Instead of granting

this request, the district court asked the parties to brief it on the remaining issues t o enable it to

resolve the entire case. After doing so, the parties again moved for summary judgment. On July 31,

1992, the court entered its final order, 795 F.S u pp. 809. The court found that two premiums had

been charged; thus, two coverages were to be stacked ($200,000). Further the court held that as a

matter of law, Allstate had not acted in bad faith. On a motion to reconsider, the court clarified its

earlier order, granting the defendants/appellees $200,000, $100,000 to be awarded from the amount

placed with the court by Allstate and the rest to be provided by Allst at e directly. Later in an

Amended Judgment, the court stated that Allstate was to be credited with the amount paid into the2 Allstate Automobile Policy, Complaint Ex. A, at 3-7, Record on Appeal p. 0015-19.

registry, but not with the interest that money had accrued. The court directed the clerk to pay the

interest to the defendants/appellees. Further the court ordered Allstate to pay interest on the

remaining $100,000 from the date of its final order, July 31, 1992.

Allstate appeals the court's finding that the higher rate for multiple car coverage constitutes

mult iple premiums. The defendants/appellees appeal arguing that they are entitled to stacking for all

four covered vehicles, not stacking for just two premiums. Rainer also appeals the court's decision

that Allstate did not act in bad faith as a matter of law. Finally, the defendants/appellees request that

post judgment interest be granted from the date of the original order on November 15, 1991, not from

the final order on July 31, 1992.

II.

The district court held that the anti-stacking language in the policy clearly and unambiguously

precludes stacking. The policy states in part:

Combining Limits of Two or More Autos Prohibited

If you have two or more autos insured in your name and one of these autos is involved in an accident, only the coverage limit s shown on the declarations page for that auto will apply....

The limits available for any other auto covered by this policy will not be added to the

coverage for the involved or chosen auto....

Limit s of Liabilit y

The limit s shown on the declarations page are the maximum we will pay for any single auto

accident.... The insuring of more than one person or auto under this policy will not increase

our liabilit

y limit s beyond the amou n t shown for any one auto, even though a separate premium is charged for each auto. 2

In addition to this language in the ne w po licy, Allstate sent an explanation of the changes to the

Ashleys. The explanation clearly states that the old policy of stacking is no longer in effect

.

Consequently, coverage is limit ed to the amount stated in the policy. The defendants/appellees

contend that because Allstate charged mult iple premiums in conjunction with this contract language,

the language was rendered ambiguous. Their argument is illogical and unfounded. The language is

clear and the district court correctly recognized this fact.3 See Wickline v. U.S. Fidelity & Guar. Co., 530 So.2d 708, 714 (Miss.1988). See also

Government Employees Ins. Co. v. Brow n, 446 So.2d 1002 (Miss.1984). In Brown, the

Mississippi Supreme Court held that where multiple premiums are charged for uninsured motorist

coverage on several cars covered by the policy, stacking is required. Id. at 1006. The Court

reasoned that since stacking would be required if the insured had purchased separate policies on

the vehicles, the same should hold true when the insured purchases a single policy with multiple

premiums for multiple coverages. Although the Court did not clearly articulate the reasons for

this decision, at least one court from another state has. The Oklahoma Supreme Court explained

its identical holding as follows:

Uninsured motorist coverage is not dependent on the insured occupying a vehicle

named in the policy.... [The insured] is entitled to recover under his policy ...

because uninsured motorist coverage protects an insured, even though he is not

occupying a vehicle named in the policy. If we limit [the insured's] uninsured

motorist coverage to [a single coverage], he will not have gained anything by

paying the [extra] premium[s], because the uninsured motorist premium which he

paid for his first car would cover the [single coverage]. In effect, [the insurer] will

have gained a windfall by collecting the [extra] premium[s]. Richardson v.

Allstate Ins. Co., 619 P.2d 594, 597 (Okla.1980) (quoting Federated American

Ins. Co. v. Raynes, 88 Wash.2d 439, 563 P.2d 815, 820 (1977)).

4 697 F.Supp. 1417 (N.D.Miss.1988).

5 Id. at 1420. Mississippi public policy provides that stacking of uninsured motorist coverage may not be

prohibited where the insurance company has charged mult iple premiums. 3 The di strict court was

aware of this rule of law. Applying it to the instant case, it concluded that Allstate was obligated to

stack two covera g es because two premiums had been charged. The district court reasoned that

because Allstate charged a higher premium for coverage of more than one car, it had in effect charged

two separate premiums: one for the first car covered and another for any additional cars covered.

The court relied on Pride v. General Agents Ins. Co. of America, Inc., 4 in which the court held that

a lump sum premium does not defeat stacking where this sum really constitutes a single charge for

multiple premiums. 5 The parties do not dispute the basic rule applied by the district court; rather,

they each contend that the court erred in determining how many premiums were charged.

Allstate argues that Mississippi's public policy requiring stacking where mult iple premiums

are charged does not apply to its single, although higher, premium. The defendants/appellees argue

that by statistically accounting for all automobiles covered in the state, Allstate in effect charged a6 The defendants/appellees allege that Allstate accounts for all the cars it insures in Mississippi,

then calculates the multiple car coverage premium based on these numbers. According to the

defendants/appellees, this practice has the effect of spreading the cost of "separate" premiums for

each covered vehicle among the insureds in the state. Hence, they argue that Allstate charges a

separate premium for each vehicle covered in spite of the fact that it charges a flat rate for

multiple car coverage to each individual policyholder.

7 608 So.2d 1258 reh'g denied (Miss.1992).

8 At the time of the accident and to date, the legislative minimum coverage for uninsured

motorist bodily injury in Mississippi is $10,000 per person per accident, with a limit of $20,000

per accident. Miss.Code Ann. § 63-15-11 (1972 & Supp.1992). separate premium for each of the four cars covered under Luther Ashley's policy. 6 In the light of the

Mississippi Supreme Court's recent decision in In re Koestler for Ben. of Koestler, 7 we decline to

decide the instant case based on this issue.

In Koestler, the Mississippi Supreme Court held that where an uninsured motorist insurance

policy contains clear anti-stacking language, insurers are require d t o st ack only the legislative

minimum coverages rather than stacking the full policy coverages. In K oestler, the insured purchased

uninsured motorist coverage for five vehicles. The policy expressly prohibited stacking. The policy

provided for $250,000 of coverage for each vehicle per accident. Stacking the full coverage limit for

each covere d vehicle would provide $1,250,000 per accident. Instead of requiring the insurance

company to pay this amount, the co urt held that although public policy required stacking where

mult iple premiums were charged, all th at this entailed was stacking of the l egislative minimum

coverages. Because of the anti-stacking provision in the policy, stacking of the full amount was not

required. Thus, the court held the insurance company liable for the greater of either one full coverage

amount ($250,000) or five stacked minimum coverages ($50,000: 10,000 × five coverages).

Allstate arg ues t hat this holding limits its liability to either $100,000 (one full coverage

amount) or $80,000 (4 × $20,000 per accident minimum). 8 We agree. The Ashleys attempt to

distinguish Koestler from the present dispute on th e grounds that K oestler dealt with a dispute

between t wo insurers not between an insured and an insurer. This distinction is immaterial. The

dispute between the two insurance companies in Koestler centered on the policyholder's rights under

the uninsured motorist insurance policy. Koestler purchased uninsured motorist coverage from one9 The Ashleys argue that Koestler is not reliable law. They rely on two facts: the vote was

split 5-4 on the case and one of the majority votes was cast by the now retired Chief Judge. This

state of affairs does not detract from the simple reality that the case is currently good law.

Further, the Court denied a rehearing in the case, which strengthens its position on the matter. insurance company and personal excess liabilit y insurance from the second. The two insurers settled

out of court with Koestler for $1,100,000, agreeing to pursue the proper division of this agreed upon

liabilit y in court. The divisio n of this liability turned on the very issue presented in the present

case—i.e. whether the uninsured motorist insurer was liable for the stacked amount of Koestler's five

full coverages ($1,250,000) or whether its liabilit y was limit

ed to a single unstacked coverage

($250,000). The Mississippi Supreme Court held that at most, the uninsured motorist insurer was

l iable fo r the greater of five stacked legislative minimum coverages or one full coverage. The

minimums totalled only $50,000; thus, the court held the insurer liable for o ne full coverage of

$250,000. Based on this determination, the court divided the liability between t he two insurance

companies accordingly—$250,000 for the uninsured motorist insurer and $850,000 for the personal

excess liability insurer.

The Koestler holding is clear. The parties are free to contract to limit stacking in excess of

the statutory minimums even when the insurer charges separate premiums. In the instant case, the

statutory minimum for each coverage was $20,00 0 o n t he date of the accident. Assuming for

purposes of argument that Allstate charged a separate premium for each of the Ashleys' four cars as

alleged by the defendants/appellees, the maximum dictated by stacking would be $80,000. Allstate

concedes that it owes at least one full coverage ($100,000), as that is the greater of the two options

provided by Koestler. 9

As a final matter, Rainer argues that the district court erred in holding as a matter of law that

Allstate did not act in bad faith by failing to pay the full $400,000 claim. They argue that Allstate

knew or should have known that its anti-stacking language in the new policy was "plainly" contrary

to public policy. We disagree. Allstate responded immediately to the Ashleys' claims. Although it

did not pay the requested $400,000, it did place what it believed it owed, and in fact does owe, with

the court when it promptly filed this suit for declaratory judgment. Contrary to Rainer's contentions,all of the i ssues raised in this case are not well settled. This was made clear by the district court's

decision to award only $200,000 and is reinforced by this Court's decision to reduce that judgment

to $100,000. The district court correctly held that Allstate had not acted in bad faith as a matter of

law.

Because we hold that Allstate is liable for only $100,000, the Ashleys appeal of the district

court's interest award is moot.

III.

In conclusion, we hold that Allstate is liable for $100,000 under the policy it issued to Luther

Ashley. Consequently, We REVERSE the district court's decision and RENDER judgment in favor

of Allstate.