Another post-Gallagher Household Exclusion has been issued by a judge in the Eastern Federal District of Pennsylvania — this one favoring the carrier’s statute of limitations argument on a plaintiff’s effort to revive an old UIM claim that was previously denied by the carrier under an application of a Household Exclusion in the policy.
In O’Brien v. GEICO, No. 19-01920 (E.D. Pa. July 3, 2019 Pappert, J.), a plaintiff sued GEICO for breach of contract and bad faith based upon allegations that GEICO breached the contract by applying the Household Exclusion contained in the policy.
With the suit being originally filed in Philadelphia County Court, GEICO removed the case to the Federal District Court for the Eastern District of Pennsylvania.
GEICO then filed a motion to dismiss based upon a statute of limitations argument.
By way of background, the plaintiff was injured back on May 31, 2014 while operating a motorcycle which was not covered by the GEICO policy at issue in this matter. Although the opinion does not explain, the plaintiff presumably recovered from the tortfeasor, then recovered under the UIM policy that covered his motorcycle. He then likely turned to another UIM policy under which he was insured but which covered a separate vehicle in the same household.
The court’s Opinion does explain that, following that accident, the plaintiff presented a UIM claim to GEICO under a separate policy with GEICO. That claim was denied by the carrier on September 19, 2014 under an application of the Household Exclusion in the policy.
Fast forward to January 23, 2019 at which point the Pennsylvania Supreme Court issued its Gallagher v. GEICO decision in which it found the GEICO Household Exclusion to be void as violating the stacking statute under the MVFRL (in footnote 8 the Pennsylvania Supreme Court noted that it was voiding the Household Exclusion across the board and not just in the Gallagher case).
After the issuance of this Gallagher v. GEICO decision by the Pennsylvania Supreme Court, the plaintiff in this O’Brien case revived his previous UIM claim and requested, on February 12, 2019, that GEICO now tender to him the $100,000 UIM limits under that policy. GEICO denied the demand on March 1, 2019.
The plaintiff filed this breach of contract and bad faith action against GEICO on April 3, 2019. The plaintiff alleged that GEICO had breached the insurance contract by previously applying the Household Exclusion and denying the plaintiff’s claims back on September 19, 2014.
Judge Gerald J. Pappert of the Eastern District granted GEICO’s motion to dismiss after finding that this plaintiff could have made the same arguments as made in the Gallagher v. GEICO case before the four year statute of limitations applicable to his breach of contract claim had expired. The court cited to recent case law holding that the statute of limitations in this context begins to run when a UIM claim is denied by the carrier.
More specifically, Judge Pappert noted that, with GEICO’s original denial of the claim being back on September 19, 2014, the statute of limitations expired on September 19, 2018 and the Plaintiff did not file this suit until April 3, 2019.
Notably, Judge Pappert also ruled that the discovery rule did not apply in this matter to extend the statute of limitations. As noted, the court found that this plaintiff could have raised the same types of issues and arguments as asserted in the Gallagher v. GEICO when his claim was denied.
The Court in this O’Brien case went on to also hold that the plaintiff’s bad faith claim was also barred by the statute of limitations. The court additionally found that the plaintiff’s bare bones and conclusory allegations of bad faith were insufficient to survive the F.R.C.P. 12(b)(6) motion to dismiss challenge.
Please click this LINK to view the O’Brien decision.
I send thanks to Attorney Scott Cooper of the Harrisburg, PA firm of Schmidt Kramer for bringing this case to my attention.