A bad faith class action lawsuit has been filed against Liberty Mutual and its subsidiaries in Arizona that alleges insurance companies have barred or not informed policyholders of their ability to use both uninsured and underinsured coverages.

In allegedly doing so, Liberty Mutual “breached its contractual and legal duties to its customers, including underpaying the benefits due,” the lawsuit states.

“Because UM/UIM coverage is personal coverage — despite being associated with a vehicle — it covers the person, not the vehicle. “When there are multiple vehicles, multiple UM/UIM coverages exist, and unless the insurer disclaims stacking, those coverage limits are added together to provide ‘stacked’ benefits for a single claim.

“Each separate coverage limit can be accessed to provide benefits for the same covered loss. When stacking coverages, the coverage limit is determined by adding together the UM/UIM benefits limits available under each vehicle’s UM/UIM coverage… In handling UM/UIM claims for its customers with multiple covered vehicles, defendants breached each of these duties as well as the insurance contracts themselves.”

As of Tuesday afternoon, none of the defendants had filed a response to the lawsuit.

The proposed class, which hasn’t been certified yet, is made up of more than 100 policyholders, including plaintiff Daniel Capane, insured by at least one policy by any of the defendant companies on multiple vehicles in Arizona and who experienced a covered loss in which the insured person received UM/UIM benefits and either:

• • “The UM/UIM benefits were limited to the limits of coverage of a single vehicle, or
  • “The UM/UIM benefits were reduced due to apportionment among multiple claimants, with the collective claim limited to the limits of coverage of a single vehicle.”

The monetary amount in question exceeds $5 million on policies issued since Jan. 1, 2006 to the date of judgment entry.

The lawsuit alleges, according to an Arizona state law as amended in 1997, that insurers are allowed to prohibit UM/UIM stacking but only under a strict method.

“Insurers wishing to prohibit stacking must clearly disclaim stacking multiple policies and coverages as well as informing insureds of their right to select which policy or coverage will apply to the accident by either drafting the policy to ‘contain a statement that informs the insured of the insured’s right to select one policy or coverage as required by this subsection,’ or, absent such policy language, ‘within thirty days after the insurer receives notice of an accident… notify the insured in writing of the insured’s right to select one policy or coverage.'”

Specific to Capane’s claim, its alleged in the suit that Liberty Mutual was “responsible for disclosing and providing UM/UIM coverage up to the stacked limits required by Arizona law and the properly construed insurance policy but failed to do so.”

“As a matter of uniform and standard practice and procedure… no defendant (1) included clear and unambiguous policy language disavowing the insured’s ability to stack multiple policies or coverages or (2) informed the customer of the right to select which coverage to apply to the accident under either of the methods prescribed by statute… It merely states that the limit of liability for uninsured and underinsured motorist coverage is ‘shown in the declarations for each person for underinsured motorists coverage,’ no matter how many vehicles are listed…”

The suit alleges as well that Capane wasn’t informed his policy didn’t contain any of the requisite disclosures, and notice wasn’t sent to him of his right to select coverage to apply to his claim within 30 days.

The class seeks compensatory and punitive damages as well as a jury trial and a declaratory judgment that the class is entitled to stacked UM/UIM coverages under their policies.

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