On January 23, 2019, in Gallagher v. GEICO, 35 WAP 2017 (2019), the Pennsylvania Supreme Court held that that the household / family car exclusion violates the Motor Vehicle Financial Responsibility Law. This opinion will impact claims for stacked uninsured and underinsured motorist coverage arising out of the use of vehicles in the same household, but insured under different policies.
GEICO’s policy contained a household vehicle exclusion that stated, “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 was operating his motorcycle when he collided with a third party sustaining injuries. At the time, he had two GEICO policies, one providing UIM coverage for his motorcycle (motorcycle policy), and the other providing UIM coverage for his two automobiles (auto policy). Importantly, Gallagher did not reject stacking on either policy.
Plaintiff alleged that he was entitled to stack the UIM coverage on both the motorcycle and auto policies because he paid for stacking on both policies. Moreover, Gallagher contended that GEICO was aware of all three vehicles. GEICO contended he was limited to only the motorcycle policy limits based on the family car / household vehicle exclusion because the motorcycle was not listed as a stacked vehicle on the auto policy.
The Court noted that Gallagher had paid for stacked limits and had not signed a waiver of stacking. The Court also noted that the policy’s exclusion was “buried in an amendment” and therefore was inconsistent with the unambiguous requirements of Section 1738 that required stacking of UM/UIM benefits, unless waived, if more than one vehicle is insured under one or more policy’s of insurance. The Court held that the exclusion was contrary to Section 1738’s explicit requirement that an insurer must receive a written and knowing waiver of such coverage.
The Court’s holding went further than the facts of the instant matter, and was applied to all family car / household vehicle exclusions, regardless of which carriers were involved. So, if an insured pays for stacked coverage, the exclusion will not prevent stacking the UM/UIM coverage on all of the vehicles in the family. The Court stated in a footnote that insurers “can and will employ [their] considerable resources to minimize the impact of our holding.” The Court suggested requiring disclosure by insureds of the other vehicles and policies in the household during the application process.
Justice Wecht’s dissent opined the majority conflates the rejection of stacking with policy exclusions, such as injuries which occur while racing or in intentional acts. He noted that the policy excluded from coverage UM/UIM claims while operating a motorcycle. Justice Wecht lamented that the majority’s ruling could be utilized to argue that all exclusions are inapplicable and that the insurer would be obligated to cover unknown risks which were never calculated into the premium. The majority replied in its Opinion that the ruling was only on this one narrow exclusion and other exclusions would be dealt with independently.
It is expected that a wave of new claims will now be presented that were previously denied, or not presented, due to this previously valid and longstanding exclusion. Many claimants were specifically waiting for this opinion before determining how to proceed. We suspect that, additionally, counsel will be emboldened to challenge other exclusions with a similar stacking argument, including the “regularly used non owned vehicle” exclusion. We will update you as those issues proceed through the Courts.
As of the writing of this alert, a class action has been filed against various carriers by a class of those previously effected by the exclusion.
Questions regarding this issue can be directed to David R. Friedman or James W. Watson.
