Presented by the Insurance Services – Coverage and Bad Faith Litigation Practice Group

The Third Circuit Confirms that Gallagher Does Not Eradicate All Household Exclusions

In William Dunleavy v Mid-Century Ins. Co., D.C. No. 2-19-cv-01304, slip op. (March 18, 2021) (non precedential), the Third Circuit found that Gallagher does not apply to allow an underinsured motorist claimant who waived underinsured coverage on his motorcycle to obtain such coverage from his automobile insurer through the back door. Plaintiff did not pay for underinsured coverage. Mid-Century did not know of and had not accepted the risk of injury of its insured riding a motorcycle that was not identified on the Mid-Century auto policy.

Plaintiffs Dunleavy and Erin Francis were operating an owned motorcycle on August 12, 2015, when they were in a collision with an automobile driven by a tortfeasor. The motorcycle was insured through Progressive. Dunleavy had rejected uninsured/underinsured motorist coverage on the Progressive motorcycle policy. Dunleavy and Francis alleged that the tortfeasors’ $50,000/$100,000 policy limits were insufficient and had been exhausted. They sought underinsured motorist coverage under their Mid-Century auto policy. The Mid-Century policy provided that underinsured motorist coverage does not apply “[T]o bodily injury sustained by you or any family member while occupying or when struck by any motor vehicle owned by you or any family member which is not insured for this coverage under any similar form...”

Mid-Century disclaimed underinsured motorist coverage because Dunleavy and Francis were occupying an owned and unlisted vehicle. The Progressive policy on the motorcycle did not provide for underinsured motorist coverage. Although Dunleavy alleged that he paid for stacked underinsured motorist benefits and did not receive them, this case has nothing to do with stacking and Gallagher does not apply because waiver of underinsured motorist coverage is at issue. Gallagher turned on and waiver of stacking under 75 Pa.C.S. § 1738, which is not at all relevant.

Moreover, the Third Circuit rejected Dunleavy’s argument that Mid-Century’s knowledge of the motorcycle risk was irrelevant allegedly because premiums are set only by geographical region and the type of coverage. The court cited Hall v. Amica Mut. Ins. Co., 648 A.2d 755, 761 (Pa. 1994), which recognized the “obvious...there is a correlation between the premiums paid by the insured and the coverage a claimant could reasonably expect to receive.”

Dunleavy underscores that the Pennsylvania Supreme Court’s opinion in Gallagher does not eradicate all underinsured motorist exclusions.


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