In a recent decision in Mid-Century Insurance Company v. Werley, No. 21-5592, 2023 WL 2727575 (April 30, 2023), Judge Edward G. Smith of the Eastern District of Pennsylvania examined the enforceability of the household exclusion to preclude UM/UIM benefits following the Pennsylvania Supreme Court decisions in Gallagher v. GEICO Indemnity Company, 201 A.3d 131 (Pa. 2019) and Mione v. Erie, No. 89 MAP 2021 (Pa. 2023). In Gallagher, the Supreme Court held the household exclusion was unenforceable when it served to preclude inter-policy stacking. In Mione, however, the Supreme Court clarified that the household exclusion remained viable when it did not serve as a de facto waiver of stacking or, alternatively, where the concept of “stacking” did not apply to a given set of facts. Indeed, in Mione, the claimant was injured in a vehicle that was not insured for UM/UIM benefits but attempted to recover UM/UIM benefits on two second-priority household policies under which he was an insured. The Mione Court held that the claimants were not attempting to “stack” coverage because they had not elected to waive stacking on the host-vehicle policy and could not “stack” these policies on top of a policy without coverage. Consequently, the household exclusion was enforceable because it did not violate the “stacking” requirements of Section 1738 of the Pennsylvania Motor Vehicle Financial Responsibility Law (“MVFRL”).

Werley concerned facts ostensibly similar to Mione at first glance. In Werley, the claimant was operating a dirt bike that was not insured for UM/UIM benefits and not intended for operation on a public roadway. The claimant resided with his parents, who had two Mid-Century motor vehicle policies providing UM/UIM benefits. Mid-Century paid UM/UIM benefits under one of the policies but refused to pay on the other policy because it contained a household exclusion. Like the household exclusion in Mione, this exclusion precluded UIM coverage for injuries sustained on an owned household motor vehicle that was not listed on the policy.

After discussing at length the numerous Pennsylvania decisions interpreting inter-policy stacking, the Court acknowledged the similarity of the claim to Mione. In both instances, the claimant operated a vehicle that provided no UM/UIM coverage and then sought coverage under the second priority. In Werley, however, one of the second-priority policies did not have an applicable household exclusion. Consequently, the Werley claimant had already received UM/UIM benefits under one policy, albeit under a policy on the second priority. The Court found this fact significant. The Court also noted that this case was distinct from Mione and its predecessors in that the claimant was unable to purchase an insurance policy that provided UM/UIM coverage on his dirt bike because the dirt bike was not used for public road operation. Consequently, in contrast to the Mione claimants, the Werley claimant did not intentionally forego UM/UIM coverage and thus the Court was explicitly hesitant to place the Werley claimant in the same situation as these claimants because the lack of coverage was not voluntarily elected.

Moreover, the Werley Court reviewed the “stacking” requirements of Section 1738 of the MVFRL, finding that the concept of inter-policy “stacking” triggers whenever a second policy exists that provides benefits to stack with, regardless of whether that policy does or does not insure the vehicle involved in the accident. Despite the lack of UM/UIM coverage on the dirt bike, the Court held that nonetheless “stacking” applied because the Werley claimant had already received UM/UIM coverage from the second household policy and was now attempting to inter-policy stack UM/UIM coverage of one household policy onto the another. The Court noted there was no statutory restriction in the definition of stacking that would limit the concept of stacking to policies across different levels of priority. Therefore, Gallagher applied, and the household exclusion was unenforceable to bar inter-policy stacking under the facts of the case.

The Werley decision can be found here.

For additional questions, please contact Glen Shikunov, Esq., Christopher Regan, Esq., and/or Scott Tredwell, Esq.

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