INSURANCE-FINANCIAL RESPONSIBILITY LAW-UM/UIM-HOUSEHOLD EXCLUSION

February 6th, 2019 by Rieders Travis in Insurance

Gallagher v. Geico Indem. Co., 2019 S. C. of PA, LEXIS 345 (January 23, 2019) Baer, J- This appeal requires the Court to determine whether a “household vehicle exclusion” contained in a motor vehicle insurance policy violates Section 1738 of the Motor Vehicle Financial Responsibility Law (“MVFRL”), 75 Pa.C.S. § 1738, because the exclusion impermissibly acts as a de facto waiver of stacked uninsured and underinsured motorist (“UM” and “UIM,” respectively) coverages.1 We hold that the household vehicle exclusion violates the MVFRL. Accordingly, we vacate the Superior Court’s judgment, reverse the trial court’s order granting summary judgment in favor of Appellee GEICO Indemnity Company (“GEICO”), and remand to the trial court for further proceedings.

The facts underlying this appeal are undisputed. On the morning of August 22, 2012, Appellant Brian Gallagher (“Gallagher”) was operating his motorcycle when William Stouffer (“Stouffer”) failed to stop his pickup truck at a stop sign. Stouffer’s truck collided with Gallagher’s motorcycle, causing Gallagher to suffer severe injuries. At the time of the accident, Gallagher had two insurance policies; he purchased both of the policies from GEICO. One policy, which included $50,000 of UIM coverage, insured only Gallagher’s motorcycle (“Motorcycle Policy”). The second policy insured Gallagher’s two automobiles and provided for $100,000 of UIM coverage for each vehicle (“Automobile Policy”). Gallagher opted and paid for stacked UM and UIM coverage when purchasing both policies. Stouffer was insured by Progressive Insurance Company (“Progressive”), and Gallagher eventually settled his claim against Stouffer and Progressive. However, Stouffer’s insurance coverage was insufficient to compensate Gallagher in full. Gallagher filed claims with GEICO seeking stacked UIM benefits under both of his GEICO policies. While GEICO paid Gallagher the $50,000 policy limits of UIM coverage available under the Motorcycle Policy, it denied his claim for stacked UIM benefits under the Automobile Policy. GEICO based its decision on a household vehicle exclusion found in an amendment to the Automobile Policy. The exclusion states as follows: “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.” Because Gallagher suffered bodily injury while occupying his motorcycle, which was not insured under the Automobile Policy, GEICO took the position that the household vehicle exclusion precluded Gallagher from receiving stacked UIM coverage pursuant to that policy. Gallagher claimed that, because he purchased stacked UIM coverage as part of the Automobile Policy, GEICO is required to provide that coverage. GEICO responded by filing an answer with new matter, wherein it contended that stacked UIM coverage was unavailable to Gallagher due to the Automobile Policy’s household vehicle exclusion. Gallagher pointed out that GEICO placed his motorcycle and automobiles on separate policies and, thus, had full knowledge of all of his vehicles. He further stated that, because he opted and paid for stacked UM/UIM coverage, GEICO charged him a higher premium on both policies. According to Gallagher, by denying him stacked UIM coverage based upon the household vehicle exclusion, GEICO was depriving him of the stacked UIM coverage for which he paid. Gallagher highlighted that GEICO was well aware that he had not waived stacked coverage on either of his policies and that he had paid increased premiums for that coverage; yet, GEICO refused to honor his claim for stacked UIM coverage, rendering that coverage illusory. We hold that the household vehicle exclusion violates the MVFRL; therefore, these exclusions are unenforceable as a matter of law. Accordingly, we vacate the Superior Court’s judgment, reverse the trial court’s order granting GEICO’s motion for summary judgment, and remand the matter to the trial court for further proceedings consistent with this opinion.

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