Gallagher v. GEICO Household Exclusion Decision Extended Yet Again by Eastern District Federal Court

The Pennsylvania Supreme Court’s monumental decision in Gallagher v. GEICO eradicating the Household Exclusion continues to be expanded by the Federal District Court Judges in the Eastern District of Pennsylvania.

In Gallagher v. GEICO, the Pennsylvania Supreme Court ruled that the Household Exclusion was void in a case in which the same carrier had issued both insurance policies at issue, i.e., the policy that covered the vehicle the plaintiff was operating at the time of the accident and another policy on another vehicle in the same household, and where stacking had not been waived with respect to either of the policies.

In the case of Donovan v. State Farm Mut. Auto. Ins. Co., No. 17-03940 (E.D. Pa. June 28, 2019 McHugh, J.)(Mem. Op.), the eradication of the Household Exclusion by the Pennsylvania Supreme Court in Gallagher v. GEICO was extended to apply to cases even where an insured had waived stacking on both policies at issue.

In Donovan, a plaintiff was injured while riding his motorcycle.  The Plaintiff had a motorcycle policy with State Farm providing unstacked coverage of $25,000 in UIM benefits on the motorcycle.

The plaintiff lived with his mother who had her own State Farm policy with unstacked UIM benefits of $100,000 per person.

State Farm tendered the $25,000 unstacked UIM limits under the motorcycle policy but denied the claim under the mother’s policy on the basis of the Household Exclusion in the policy and on the basis of the mother's waiver of stacking.

Judge McHugh of the Eastern District Federal Court found that the Plaintiff was entitled to recovery the UIM coverage under the mother’s policy.  

The court found that the waiver of stacking utilized by State Farm only served to waive intra-policy stacking and not inter-policy stacking, as was at issue in this case involving separately issued insurance policies to different named insureds.

The Court also held that, even though the policy at issue provided for unstacked coverage, the Gallagher v. GEICO decision still applied to render the Household Exclusion in the State Farm policy to be invalid.  Judge McHugh also went on to offer his assessment that the Gallagher v. GEICO decision is not to be limited to its facts.

Anyone wishing to review the Donovan Opinion may click this LINK.  The companion Order can be viewed HERE.

To review the recent trend of Household Exclusion cases reported here on Tort Talk, please go to Tort Talk at www.TortTalk.com, scroll all the way down the right hand side until you get to the "Labels," and then scroll down to the label of "Household Exclusion" and click on that label.

I send thanks to Attorney Scott Cooper of the Harrisburg, PA office of Schmidt Kramer for bringing this decision to my attention.  Please consider joining Scott Cooper and myself for a PBI CLE Webinar on the Gallagher v. GEICO decision and its progeny on July 8, 2019 at noon.  More details are provided in the separate Tort Talk post from today.