In a 5-2 decision, in the case of Gallagher v. GEICO, 35 WAP 2017 (Pa. Jan. 23, 2019)(Op. by Baer)(Dissenting Op. by Wecht), handed down by the Pennsylvania Supreme Court today, the Court held that the household exclusion impermissibly narrows the mandates of Section 1738 and, as a result, violates the Pennsylvania Motor Vehicle Financial Responsibility Law. As such, the household exclusion is impermissible as a matter of law.
In this matter, the Plaintiff was operating a motorcycle when he was involved in an accident with another vehicle.
At the time of the accident, the Plaintiff had two policies with GEICO. One policy, which included $50,000 of UIM coverage, only covered the motorcycle. The second policy purchased by the Plaintiff from GEICO covered two other vehicles owned by the Plaintiff and provided for $100,000 of UIM coverage for each vehicle. The Plaintiff opted and paid for stacked UM and UIM coverage when purchasing both policies. Thus, when stacked, the policies amounted to $250,000 in UIM coverage if the household exclusion in the Automobile policy was found not to apply.
GEICO asserted that the household exclusion in the Automobile policy precluded the Plaintiff from recovering the UIM benefits under that policy. The Plaintiff argued that the household exclusion stripped him of the stacked coverage he was entitled to under the MVFRL because he did not waive stacked UIM coverage.
The Court in Gallagher turned to Section 1738 of the MVFRL and noted that that provision provides that the limits of coverage for each vehicle owned by an insured “shall be the sum of the limits for each motor vehicle as to which the injured person is an insured.” The court noted that this Section specifically applies “[w]hen more than one vehicle is insured under one or more policies” providing UM/UIM coverage. The Supreme Court stated that, “[i]n other words, stacked UM/UIM coverage is the default coverage available to every insured and provides stacked coverage on all vehicles and all policies.” See Op. at p. 10.
The Supreme Court sided with the Plaintiff under the basic rationale that the household exclusion “is inconsistent with the unambiguous requirement of 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 [the Plaintiff] did not sign the statutorily prescribed UIM coverage waiver form.” See Op. at p. 11.
The Court went on to note that in a case such as this one where the same carrier issued all of the policies at issue, it could have charged higher premiums and/or secured a valid waiver of stacked coverage between the policies from the insured in order to avoid the result of this decision.
Anyone wishing to read this decision, including the dissent, may click this LINK
Commentary: Going forward, instead of now attempting to rely upon now invalid household exclusions, carriers may be charging higher premiums for stacked coverage or requiring its insureds to sign more stacking waiver forms.
I send thanks to Attorney Scott Cooper of the Harrisburg, PA law firm of Schmidt Kramer for bringing this decision to my attention. I also send thanks to the numerous other attorneys who forwarded this decision as well. Thank you.