Pittsburgh, Jan. 23 – The Pennsylvania Supreme Court has ruled that a household exclusion in an auto insurance policy was unenforceable because it impermissibly took stacked UM/UIM benefits away from the insured in violation of the Pa. Motor Vehicle Financial Responsibility Law (Pa.M.V.F.R.L.).
In Gallagher v. Geico Indem. Co., the Pa. Supreme Court reversed both trial court and the Pa. Superior Court’s grant of Summary Judgment to Geico, in a case where Geico sought to disallow $200,000 in stacked UM/UIM benefits in an automobile policy covering two vehicles owned by the insured, Gallagher. Gallagher also had a separate motorcycle policy with UM/UIM limits of $50,000.00, also issued by Geico.
Gallagher was injured in an August 12, 2012 motorcycle accident, and was paid by both the tortfeasor, and by Geico in the amount of $50,000.00 which was the UM/UIM limit under the motorcycle policy. Gallagher sought the additional $200,000.00 in stacked UM/UIM coverage under the auto policy, but Geico denied that claim on the grounds that the auto policy contained a household vehicle exclusion, which provided:
“This coverage does not apply to bodily injury while occupying or from being struck by a vehicle owned or leased by you or a relative that is not insured for Underinsured Motorists Coverage under this policy.”
Gallagher filed suit against Geico, claiming that Geico placed Gallagher’s motorcycle and automobiles on separate policies, and that he paid for the stacked UM/UIM benefits under his auto policy.
Geico won summary judgment in the Westmoreland County Court of Common Pleas based on the exclusion, and the Superior Court affirmed. On appeal to the state Supreme Court, however, the court, per Justice Baer, reversed in a 5-2 ruling, holding that the household exclusion violated section 1738(b) of the Pa.M.V.F.R.L., which requires that stacked UM/UIM benefits be waived in writing. Justice Baer wrote that Gallagher did not waive stacking under his auto policy, and that he was entitled to those benefits, thereby barring application of the household vehicle exclusion. Of the exclusion, Justice Baer wrote:
“This policy provision, buried in an amendment, is inconsistent with the unambiguous requirements Section 1738 of the MVFRL under the facts of this case insomuch as it acts as a de facto waiver of stacked UIM coverage provided for in the MVFRL, despite the indisputable reality that Gallagher did not sign the statutorily-prescribed UIM coverage waiver form. Instead, Gallagher decided to purchase stacked UM/UIM coverage under both of his policies, and he paid GEICO premiums commensurate with that decision. He simply never chose to waive formally stacking as is plainly required by the MVFRL.”
The Court therefore reversed and remanded the Superior Court ruling, sending the case back to the trial court for further proceedings.
Justice Wecht filed a dissenting opinion, in which he criticized the majority for conflating the stacking waiver provisions of section 1738 with the entirely separate question operation of a policy exclusion, arguing that nothing in the Pa.M.V.F.R.L. precluded the valid operation of the household vehicle exclusion. Justice Wecht also warned against the dangerous implication of the majority ruling, and the use of section 1738 to invalidate all UM/UIM exclusions, essentially allowing a waiver provision to trump the terms and conditions of the policy language.
Finally, Justice Wecht wrote that the majority decision violated earlier state Supreme Court precedent in Erie Exchange v. Baker, 601 Pa. 355, 972 A.2d 507, in which the Court made a clear distinction between the primacy of the nature, scope, and extent of UM/UIM coverage as set down in an insurance policy (and its limitations and exclusions), and the secondary consideration of whether coverage, if not otherwise limited or excluded, should be stacked, unstacked or waived.