3.3.2 Inter-Policy Stacking

• Jurisdiction: Arizona

"Other insurance" clauses are typically used by the insurance industry to eliminate the stacking of coverages in multiple-policy situations. The standard anti-stacking clause provides:

E. OTHER INSURANCE.

With respect to bodily injury to an insured while occupying a highway vehicle not owned by the named insured, this insurance shall apply only as excess over any other similar insurance available to such insured and applicable to such vehicle as primary insurance, and this insurance shall then apply only in the amount by which the limit of liability for this coverage exceeds the applicable limit of such other insurance.

Except as provided in the foregoing paragraph, if the insured has other similar insurance available to him and applicable to the accident, the damages shall be deemed not to exceed the higher of the applicable limits of liability of this insurance and such other insurance, and the company shall not be liable for a greater proportion of any loss to which this coverage applies than the limit of liability hereunder bears to the sum of the applicable limits of liability of this insurance and such other insurance.^[172]

This clause contains two essential provisions. First, the policy requires coverage to be prorated. Second, the policy establishes a total coverage limit available for the loss to which the prorated percentage applies. Unless the policy places a limit on the amount of the loss, stacking can occur.^[173] Professor Long explains this concept in his treatise on insurance law:

Under the proper provisions, each carrier may validly limit its liability to the proportion that its policy limits bear to the total coverage involved in the accident. This proportional sharing nevertheless will permit stacking unless the policy also states that the total liability of all insurers shall be the highest limit of liability on any single policy.^[174]

To determine a carrier's pro rata share of the claim, all applicable policies must be evaluated to ascertain the total available coverage for the loss. The next step in the analysis is to calculate the percentage that a particular policy's coverage limits bear to the total aggregate amount of applicable coverages. For example, if there are two applicable uninsured motorist policies-policies A and B-insuring an automobile accident loss and each has policy limits of $50,000, the policy limits of each will be added together to establish the total aggregate coverage amount of $100,000. Then, a percentage calculation will be made to determine the percentage relationship that the limits of policies A and B bear to the $100,000 coverage aggregate. In this example, the proportional sharing of the loss under each policy will be 50%. The policies will each pay 50% of the loss until the loss has been satisfied or the stated coverage limits of the policy are exhausted. Thus, if the claimant's damages were $80,000, each policy would pay 50% of the loss, or $40,000; if the claimant's damages exceeded $100,000 (the aggregate limits of both policies), each policy would pay 50% of the loss until each policy's limits were exhausted. However, if the policy's "other insurance" clause provides (1) that "the damages shall be deemed not to exceed the higher of the applicable limits of liability" of all applicable policies, and (2) that the...