Since the Pennsylvania Supreme Court’s decision in Gallagher v. GEICO Indem. Co., 201. A.3d 131 (2019), voluminous litigations ensued between the Plaintiffs’ and Defense bar regarding whether a “household exclusion” contained in Pennsylvania auto insurance policies remains valid. The cryptic holding within Gallagher left open the door for questions as to both its breadth and effect on prior precedential decisions that have upheld the exclusion.
Recently in Erie Ins. Exch. v. Mione, 2021 PA Super 91 (May 10, 2021), the Superior Court weighed in on the scope and applicability of Gallagher v. GEICO Indem. Co., 201. A.3d 131 (2019). In Mione, the claimant was involved in an accident while occupying a motorcycle he owned and insured under a Progressive Insurance policy which did not contain UM/UIM coverage. After an accident, the claimant made a claim for underinsured motorist benefits under two Erie household policies, one issued in his own name and the other in his resident-relative daughter’s. Neither policy listed the subject motorcycle as an insured vehicle. Accordingly, Erie denied coverage under both policies by virtue of the “household exclusion.” Plaintiff in turn argued that the household exclusion is void under Gallagher.
The Mione Court declined such a broad interpretation of Gallagher, indicating that Gallagher did not invalidate household exclusions in all cases. “Instead, Gallagher has been interpreted by this Court to hold that a household exclusion cannot be used to evade Section 1738’s explicit requirements for waiving stacking.” In other circumstances, the Court explained that the Supreme Court’s decision in Eichelman v. Nationwide Ins. Co., 711 A.2d 1006 (Pa. 1998), which upheld the exclusion to bar recovery from household policies to a Plaintiff that operated an owned motorcycle that was not insured for UM/UIM coverage, remains valid.
Turning to the facts of the case, the Court noted that the motorcycle policy at issue did not contain UM/UIM benefits at all. As such, the Court found that “stacking and Section 1738 are not implicated in this case.” Where stacking does not apply, the rationale of Gallagher does not either. Accordingly, the Court enforced the household exclusion under the principles outlined in Eichelman “where the insured was operating a vehicle at the time of the accident that was covered by a separate policy not providing the insured with UM/UIM coverage because the insured had voluntarily, and validly, waived such coverage.”
The landmark decision in Gallagher v. GEICO issued by the Pennsylvania Supreme Court in early 2019 has caused confusion amongst the auto insurance industry and attorneys alike. This holding yet again emphasizes the continued validity of the household exclusion in instances where no violation of Section 1738 of the MVFRL is applicable under the facts of a given case and should be of interest to all professionals working in the insurance law field.
The Mione decision can be found here.
For additional questions, please contact Elizabeth Hines, Esq, Glen Shikunov, Esq. and/or Scott Tredwell, Esq.
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