Gallagher v. GEICO Indem. Co.
January 28, 2019
Gallagher v. GEICO Indem. Co.
Pennsylvania Supreme Court
No. 35 WAP 2017, 2019 Pa. LEXIS 345
Decided: January 23, 2019
Supreme Court invalidates UM/UIM household vehicle exclusion in inter-policy stacking case. The Plaintiffs’ Bar is declaring this case a landmark victory that will trigger an expansion of risk for insurance companies and, among other things, breathe new life into previously-denied UM/UIM claims. Class action litigation is already underway as a result of this case.
The Plaintiffs’ Bar contends that this case is a complete invalidation of the UM/UIM household vehicle exclusion—or, worse, all exclusions that are not expressly permitted by statute. However, the precise holding of the Pennsylvania Supreme Court was that the household exclusion of UM/UIM coverage was unenforceable where the insurer required separate policies for the policyholder’s motorcycle and his cars, but the plaintiff-policyholder did not reject stacking on either policy. While Plaintiffs’ lawyers argue that Gallagher v. GEICO renders the household exclusion invalid generally, insurers will argue that the holding is limited to those specific facts.
Gallagher was injured while riding his motorcycle. He was paid the limit of the other driver’s liability insurance. Gallagher insured his motorcycle and two cars with GEICO. GEICO required that the motorcycle be insured under a separate policy. The motorcycle policy’s UIM limit was $50,000, while the auto policy’s UIM limit was $100,000, on two cars. Gallagher did not reject stacking with respect to either policy.
GEICO paid Gallagher the $50,000 UIM coverage limit under the motorcycle policy, but denied his claim for stacked UIM benefits under the automobile policy, based on a household vehicle exclusion, which excluded coverage for injury while occupying a vehicle owned by the Named Insured or a resident relative that is not insured under that policy. The Westmoreland County Court of Common Pleas and the Pennsylvania Superior Court, following extensive precedent, agreed with GEICO that the household vehicle exclusion was valid. The Supreme Court reversed, ruling that Gallagher was entitled to a total of $250,000, in stacked coverages.
The Supreme Court reversed, holding that the household exclusion violated the Motor Vehicle Financial Responsibility Law (“MVFRL”). The Court, however, also specifically noted that it was “deciding the discrete issue before the Court . . . .” See id. at n.8.
Although the Court used some unnecessarily broad language—e.g., “we hold that the household vehicle exclusion violates the MVFRL”—the decision should be applied very narrowly to the factual scenario before the Court, particularly since the Court indicated that it was deciding only the “discrete issue” before the Court, while also suggesting that it was respecting the doctrine of stare decisis.
The “discrete” or precise issues before the Court were framed by Gallagher in his petition for allowance of appeal, granted by the Supreme Court:
(1) Whether the “household vehicle exclusion” violates Section 1738 of the [MVFRL] where GEICO issued all household policies and unilaterally decided to issue two separate policies, when the insured desired stacking, elected stacking, paid additional premiums for stacking and never knowingly waived stacking of underinsured motorist benefits?
(2) Whether the “household vehicle exclusion” impermissibly narrows or conflicts with the statutory mandates of the [MVFRL] and the evidence of record is that GEICO was fully aware of the risks of insuring a motorcycle in the same household as other family vehicles but unilaterally decided to write a separate motorcycle policy?
See Gallagher v. GEICO Indem. Co., 170 A.3d 974 (Pa. 2017) (granting allowance of appeal) (quoted in the Majority Opinion at 2019 Pa. LEXIS 345, at *9-10). Thus the discrete issue was whether the household vehicle exclusion was invalid when the insurer “unilaterally decided” to put the policyholder’s vehicles on separate policies and the policyholder chose stacked coverage.
In the course of the Gallagher opinion, the Court noted specifically that Gallagher purchased both policies from GEICO, that he paid extra for stacked coverage on both policies, and that it was GEICO that decided the motorcycle and the cars had to go on separate policies.
The Gallagher Court took great pains to explain that stare decisis concerns were not implicated by the Majority’s rejection of Gov’t Employees Ins. Co. v. Ayers, 955 A.2d 1025 (Pa. Super. 2008), aff’d, 18 A.3d 1093 (Pa. 2011), which upheld the validity of the exclusion in the same circumstances (insurer required separate policy for motorcycles and policyholder elected stacked coverage on both policies), because Ayers was merely a decision of the Superior Court that was deemed affirmed only because the Supreme Court was equally split. Furthermore, stare decisis was not a concern with respect to Erie Ins. Exch. v. Baker, 972 A.2d 507 (Pa. 2009) (household vehicle exclusion in stacked policy does not violate MVFRL), because Baker was a “plurality decision” without a majority agreement on any single opinion. Therefore, neither of those cases constituted “binding precedent” with respect to the Supreme Court.
The Gallagher Court’s disagreement with the Superior Court’s decision in Ayers is understandable as a matter of fundamental fairness. In Ayers, the insurer accepted premium for all the policyholder’s vehicles, unilaterally placed them on separate policies, and then excluded coverage because they were on separate policies. Indeed, that unilateral separation of policies is at the core of the Gallagher appeal, as indicated by the discrete issues presented to the Supreme Court. Unfortunately, the Gallagher majority opinion includes what appears to be inadvertently broad dicta that goes beyond the discrete facts and issue presented. As to Baker, which is plainly distinguished from Gallagher in that Erie did not insure the occupied vehicle, it should be noted that the Gallagher majority did not indicate Baker was overruled, but rather, merely that stare decisis was not implicated because there was no majority opinion in Baker.
In view of the Gallagher Court’s implicit recognition of the value of stare decisis, express limitation of the decision to the “discrete issue before the Court,” and specific indication that the Court’s “focus here is narrow,” other precedential decisions of the Supreme Court should remain valid. Specifically, in Eichelman v. Nationwide Ins. Co., 711 A.2d 1006 (Pa. 1998), the Court held, unanimously, that the household vehicle exclusion in a family policy was valid where the motorcyclist had rejected UIM coverage on his motorcycle policy; in Prudential Prop. & Cas. Co. v Colbert, 813 A.2d 747 (Pa. 2002), a majority of the Court held that the household vehicle exclusion was valid where the plaintiff sought coverage under his parents’ policy after collecting the UIM limit on his own policy on his own car that he occupied at the time of the accident; and in Windrim v. Nationwide Ins. Co., 641 A.2d 1154 (Pa. 1994), the Court upheld the exclusion where the claimant occupied his uninsured vehicle and sought UIM benefits under his mother’s policy.
Moreover, the Supreme Court left undisturbed its decision in Williams v. GEICO, 32 A.3d 1195 (Pa. 2011), where the Court upheld the validity of a “regular use exclusion” as against a challenge that it violated the MVFRL and public policy. In that case, a Pennsylvania State Police Trooper was injured in a State Police fleet vehicle (self-insured by the State) and sought UIM coverage under his own, stacked, insurance policy. GEICO denied the UIM claim based on an exclusion that extended to vehicles, not owned by but merely “furnished for the regular use” of the insured. Of course, Williams is distinguishable from Gallagher in that GEICO did not insure the occupied vehicle. All the same, if the regular use exclusion was valid where different insurers or entities covered the vehicles (where the insured–a “first-responder,” no less–was not even involved in insuring the occupied vehicle), then the household vehicle exclusion must also be valid (where it is the insured or his family who control insurance on the occupied vehicle). The Williams decision followed an earlier Supreme Court decision also validating the exclusion. See Burstein v. Prudential Prop. and Cas. Ins. Co., 809 A.2d 204 (Pa. 2002).
Although the dissent in Gallagher warns that the Majority opinion renders “all UM/UIM exclusions . . . unenforceable,” the Majority emphasized that “we offer no opinion or comment on the enforceability of any other exclusion to UM or UIM coverage or to coverage in general . . . .” Indeed, it seems fair to assume that the Supreme Court did not intend to silently overrule its own extensive precedential decisions, including not only the five decisions discussed above, but also Paylor v. Hartford Ins. Co., 640 A.2d 1234 (Pa. 1994) (validating the “family car exclusion,” which excepted family vehicles from the definition of underinsured motor vehicle), Hall v. Amica Mut. Ins. Co., 648 A.2d 755 (Pa. 1994) (territorial exclusion), and Progressive N. Ins. Co. v. Schneck, 813 A.2d 828 (Pa. 2002) (excluded driver).
It should be kept in mind that Gallagher presented but one among innumerable variable scenarios—specifically, claims by the policyholder of two policies issued by the same insurer to the same policyholder, where the insurer required separate policies and the policyholder chose stacked coverage on both policies. Any variation from that scenario (for examples, involvement of more than one insured or insurer, or rejection of UM/UIM coverage on the occupied vehicle, or rejection of stacking on any policy) justifies careful analysis before a determination of coverage. Indeed, the entire policy must be considered carefully in UM/UIM cases, including other potential exclusions, such as the “regular use” exclusion that has been upheld twice by the Supreme Court. Care should be taken to afford insureds the coverage to which they are entitled pursuant to the policy and the law—no more, no less.
Questions about this case can be directed to Pete Speaker, at (717) 255-7644 or email@example.com, Kevin McNamara, at (717) 237-7132 or firstname.lastname@example.org, or Christopher Gallagher, at (215) 564-2928 or email@example.com.