Two disputes between State Farm Mutual Auto Insurance Co. and its policyholders were brought to an end by the approval of two settlements — one for $45 million and another for $14 million.

The disputes, which grew into a pair of full-fledged class action lawsuits, centered on State Farm's policy of refusing to "stack" benefits for uninsured/underinsured motorist (UM/UIM) insurance after an accident.

Stacking UM/UIM coverage allows you to collect benefits on more than one policy. For example, if you had a two-car policy with $50,000 worth of bodily injury UM/UIM coverage per person on each car, you could collect up to $100,000 to cover your medical bills and property damage by stacking the coverage for both cars after an accident.

While stacking UM/UIM coverage is not always allowed, Arizona is one of a number of states that permit the practice, but since 1982 insurers have been allowed to prevent stacking through the terms of their auto insurance policies.

"State Farm felt that our policy was consistent with Arizona law. This dispute was over policy language that we felt was clear," says Mark Brandt, a spokesperson for State Farm. "When the Arizona Supreme Court disagreed with us, we went back to make things right by our policyholders."

The larger settlement, approved by Pima County Superior Court Judge Kenneth Lee on Nov. 13, 2001, calls for State Farm to pay damages totaling more than $33 million to policyholders for claims between 1988 and 1995, with each member of the class receiving no less than $50,000. An additional $11 million will go to the attorneys representing the policyholders.

Furthermore, the lawyers for the policyholders believe that the Pima County class action lawsuit caused State Farm to pay approximately $35 million in stacked benefits that were previously denied, bringing the total compensation for those policyholders to more than $68 million.

Although they were confident that they could win at trial, in a memorandum before the court the policyholders' lawyers argued for the settlement because "litigating the actions through trial would be, at minimum, expensive, time-consuming, and fraught with risk" in the face of "vigorous" opposition from State Farm's lawyers.

A similar lawsuit arising from claims prior to 1988 was settled in the U.S. District Court in Tucson for $14 million on Nov. 14, 2001.

For the Tucson settlement State Farm will set aside $11.3 million to pay policyholder claims — up to $30,000 per policyholder — and $2.8 million in attorney fees.