On April 19, 2019, Judge Mark A. Kearney of the Eastern District, issued a memorandum opinion, Butta v. GEICO Casualty Company, E. D. Pa. No. 19-675, which predicted that the Pennsylvania Supreme Court’s decision in Gallagher v. GEICO, 201 A.3d 131 (Pa. 2019), issued on January 23, 2019, ending the family car exclusion would apply retroactively. In doing so, Judge Kearney held that the Gallagher decision did not announce a “new rule” but interpreted the law for the first time in a retroactive precedential decision.
As previously reported in Gallagher, (The Supreme Court Ends The Family Car Exclusion) the Pennsylvania Supreme Court held that the household exclusion violates the Motor Vehicle Financial Responsibility Law and was abrogated. Gallagher had two GEICO policies, one providing coverage for his motorcycle, and the other providing coverage for his two automobiles. Gallagher impacted uninsured and underinsured motorist claims arising out of claims for personal injuries brought by an insured person who has multiple stacked motor vehicle policies in their household, despite those vehicles being insured on different policies, even with different carriers. Gallagher held that since the insured had paid for stacked limit and had not signed a waiver of stacking, the insured was entitled to stack the UM/UIM coverages on all the applicable policies in the household, regardless of the carrier. The onus was on the carrier to obtain information of other cars in the household and adjust their premiums for stacked coverage accordingly. The Gallagher Court held that the family vehicle exclusion was contrary to Section 1738’s explicit requirement that an insurer must receive a written and knowing waiver of such coverage. Accordingly, the Gallagher Court invalidated the family vehicle exclusion.
In Butta, the Plaintiff initiated a declaratory judgment seeking to apply Gallagher retroactively. The insurer, GEICO, filed a Motion to Dismiss seeking the opposite result. Judge Kearney examined prior Pennsylvania Supreme Court and Third Circuit Court of Appeal cases to see if any were precedential and controlled this issue, noting several divided 3-3 Pennsylvania Supreme Court panels which resulted in the exclusion being affirmed. The Court held that the decision in Gallagher was not a “new rule” but an interpretation and allowed the Butta matter to continue, denying the dismissal. The Butta court held that even assuming Gallagher established a new rule, this would need to be proved through discovery relative to the prejudice to GEICO based on its reliance on prior cases including, Erie Exchange v. Baker, 972 A.2d 507 (Pa. 2008). Accordingly, the Motion to Dismiss of GEICO was denied.
While the Butta Court did not address the issue, we note that Butta’s claim was filed within the four year statute of limitations, which in this case started when the claim was denied. The Court’s language was not definitive on whether claims that are otherwise too old under the applicable statute of limitations would be allowed to be re-instated under the new case law. If so, that would resurrect cases which had been dismissed, via court action or otherwise denied by the carriers, theoretically back to the early 1990s.
Although State courts are yet not bound by Butta, it can be cited a persuasive authority. We can expect that continued rulings on this evolving issue that will help to further define the end of this long valid exclusion.
