Supreme Court of Pennsylvania Unanimously Upholds Household Vehicle Exclusion, Confirming Limited Scope of Gallagher Regarding Stacked Coverage
In Erie Insurance Exchange v. Mione, ---A.3d--- 2023 WL 2008314 (Pa. Feb. 15, 2023), the insured was involved in an accident while operating his motorcycle, which was insured by a Progressive Insurance policy, wherein he rejected UM/UIM coverages. The insured and his wife also jointly owned a car insured by Erie Insurance Company on a single-vehicle policy, which did include stacked UM/UIM coverages. The insureds’ adult daughter also lived in the household and insured her vehicle, again, through Erie on her respective single-vehicle policy, which contained UM/UIM coverage.
After the accident, the insureds settled with the tortfeasor’s carrier for the bodily injury liability limits and then made claims for UIM coverage under both household Erie policies. Erie denied the claims under both policies and filed suit, seeking a declaratory judgment holding that it was not required to pay the plaintiff’s claims for UIM benefits under either policy. Erie moved for judgment on the pleadings, which was granted by the trial court. That court noted that the facts of this case were nearly identical to those of Eichelman v. Nationwide Insurance Co., 551 Pa. 558, 711 A.2d 1006 (Pa. 1998), where the insured was hit by an underinsured motorist while operating his motorcycle. There, again, UIM coverage was rejected by the insured on the motorcycle policy. In Eichelman the insured’s mother and stepfather lived in the same household and purchased coverage for two vehicles under a policy that contained UIM coverage for both vehicles. The Eichelman court rejected the argument that the household vehicle exclusion violated public policy and also found that the household exclusion was consistent with the cost-containment rationale that underlies the MVFRL.
The insureds in Mione appealed to the Superior Court, which upheld the trial court’s ruling and reasoned that the insureds had not purchased UIM coverage on the “host-vehicle” policy, i.e., the motorcycle policy, so they were attempting to procure UIM coverage from the household Erie policies, rather than stacking coverage. Moreover, that court explained “that ‘Gallagher only invalidated household exclusions where they are used to circumvent [the statute’s] specific requirements for waiving stacking.’”
The Supreme Court distinguished Gallagher v. GEICO Indemnity Co., 650 Pa. 600, 201 A.3d 131 (Pa. 2019), as well. In Gallagher, the appellant owned a motorcycle and two cars, all of which were insured by the same carrier, albeit on separate policies for the motorcycle and the cars. Stacked UIM coverage was purchased on both policies. The Supreme Court, in Gallagher, held that the household vehicle exclusion, as it applied to the facts of that case, was “inconsistent with the unambiguous requirements” of Section 1738, as “it acts as a de facto waiver of stacked UIM coverage provided for in the MVFRL.” The Supreme Court reasoned that Section 1738 provides for stacked UM/UIM coverage as default coverage unless the insured executes a waiver. GEICO could not rely upon an exclusion which “strips an insured of default UM/UIM coverage,” absent that waiver.
In Mione, the Supreme Court reasoned that the insureds did not purchase UIM coverage on the “host-vehicle” policy, so a stacking question was not presented, and the Gallagher ruling was inapposite to this issue. Significantly, in this case, the Supreme Court explicitly “reject[ed] the view that household vehicle exclusions are ipso facto unenforceable.” Significantly, the court states on page 10 of the opinion: “We reiterate today that the holding in Gallagher was based upon the unique facts before us in that case, and that the decision there should be construed narrowly.”
This decision is also consonant with the methodology employed in Craley v. State Farm Fire & Cas. Co., 586 Pa. 484, 895 A.2d 530, 533 (Pa. 2006), insofar as the policies under which coverage was sought both contained unambiguous household vehicle exclusions.
This is a welcome development in the post-Gallagher world, as it clarifies the limited scope of Gallagher and confirms that it is a narrow decision that did not invalidate the household vehicle exclusion in its entirety.
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