NEIL V. WAKE, District Judge.
Before the Court is Defendant American Family Mutual Insurance Company's Motion for Summary Judgment (Doc. 63), Plaintiff's Response, and the Reply. American Family Mutual Insurance (American Family) moves for summary judgment on the grounds that it is entitled to judgment as a matter of law that Todd Schwallie cannot recover underinsured motorist benefits under his American Family automobile insurance policy. For the following reasons, American Family's Motion will be denied.
A. Arizona Uninsured/Underinsured Motorist Act
Arizona's Uninsured/Underinsured Motorist Act (UMA) requires that every insurer make underinsured motorist coverage available and provide such coverage upon the request of the insured. A.R.S. § 20-259.01(B). Underinsured motorist coverage applies when an insured's total damages exceed all applicable liability limits, subject to any valid limitations the insurer imposes. In order to comply with the UMA, insurers must extend the offer of underinsured motorist coverage in writing, and the "selection of limits or rejection of coverage by a named insured or applicant on a form approved by the director shall be valid for all insureds under the policy." Id. Because the mandatory language from the statute is clear, the requirement that the offer of underinsured motorist coverage be in writing cannot be waived by either party. Estate of Ball By & Through Sayre v. Am. Motorists Ins. Co., 181 Ariz. 124, 127, 888 P.2d 1311, 1314 (1995). As a result, in Arizona, an insurer must obtain proof that it offered underinsured motorist coverage and that the insured either selected a limit or rejected the coverage in writing. Id. When an insurer fails to make a written offer of underinsured motorist coverage, if the insured has an accident in which an underinsured motorist claim is available, the insurer must impute underinsured motorist coverage equal to the policy's liability limits. Id.
The UMA also provides for situations in which underinsured motorist coverage may be limited. The most important limitation is found in A.R.S. § 20-259.01(H):
If multiple policies or coverages purchased by one insured on different vehicles apply to an accident or claim, the insurer may limit the coverage so that only one policy or coverage, selected by the insured, shall be applicable to any one accident. If the policy does not contain a statement that informs the insured of the insured's right to select one policy or coverage as required by this subsection, within thirty days after the insurer receives notice of an accident, the insurer shall notify the insured in writing of the insured's right to select one policy or coverage. For the purposes of this subsection, "insurer" includes every insurer within a group of insurers under a common management.
As a result, when one insured person buys multiple policies on different vehicles with an insurer, an insurer can preclude the insured from aggregating multiple policies. But to incorporate this limitation, the insurer must notify the insured in writing of his right to select which policy will apply. In Arizona, therefore, an insurer may limit the stacking of underinsured motorist claims under multiple policies only by taking affirmative steps set forth in the UMA. Any limitations to underinsured motorist coverage not explicitly set forth in the UMA are void. Taylor v. Travelers Indem. Co. of Am., 198 Ariz. 310, 315, 9 P.3d 1049, 1054 (2000).
B. Factual Background
Mr. Schwallie had two insurance policies with American Family: a motorcycle insurance policy for his 2000 Honda motorcycle (the Cycle Policy), and a family car insurance policy for his 2001 Dodge truck (the Family Car Policy). The Family Car Policy included an endorsement for underinsured motorist bodily injury coverage with bodily injury limits of $100, 000. The endorsement for underinsured motorist coverage under the Family Car Policy contained an "Other Insurance" provision which read "[i]f two or more policies are issued to you by us or any other member company of the American Family Insurance Group of companies, apply [sic] to the same auto accident, only one of the policies will apply. You will select the one policy that will apply." The Cycle Policy did not, before May 2011, contain an underinsured motorist endorsement.
On May 13, 2011, Mr. Schwallie was involved in a motorcycle accident while riding the motorcycle identified in the Cycle Policy and suffered serious injuries. The driver of the other vehicle, who caused the accident, was insured by a policy with liability limits of $15, 000 per person. The other driver's insurance company paid Mr. Schwallie $15, 000, the coverage limit on that policy. Mr. Schwallie's total damages, including medical bills and lost wages, exceeded $115, 000.
On July 1, 2011, Mr. Schwallie contacted American Family to make a demand for payment under his underinsured motorist coverage to cover the costs of the May 13, 2011 accident. That letter did not specify under which policy Mr. Schwallie sought payment. The First Notice of Loss American Family created after that request identifies the claim as one under the Family Car Policy, and noted that the vehicle involved in the accident was Mr. Schwallie's motorcycle. After American Family began the claims process, it became aware that it did not have a signed rejection of the underinsured motorist endorsement for Mr. Schwallie's Cycle Policy. The American Family agents processing his claim determined that, without a signoff of an underinsured motorist endorsement, they were required to reform the Cycle Policy to impute underinsured motorist coverage. An American Family agent contacted Mr. Schwallie and told him that the underinsured motorist coverage would be added to his Cycle Policy and that an additional premium would be charged. American Family later reformed the policy as part of the claims process to add an endorsement for underinsured motorist bodily injury coverage with bodily injury limits of $100, 000. The Underinsured Motorist Coverage portion of the reformed Cycle policy contained an "Other Insurance" provision identical to the one in the Family Car Policy. However, Mr. Schwallie never saw nor read the reformed Cycle Policy until after this litigation commenced.
Ultimately, American Family paid Mr. Schwallie the policy limit of $100, 000 for underinsured motorist coverage under his reformed Cycle Policy on August 25, 2011. The Release and Trust Agreement Mr. Schwallie signed to trigger that payment specified that the payment was pursuant to the policy number of the Cycle Policy. Mr. Schwallie subsequently requested another payment of the $100, 000 underinsured policy limit under his Family Car Policy on October 13, 2011. American Family denied his claim. American Family justified it's denial by arguing ...