Article on Case Giving New Life For Household Exclusion

Was called for a quote in the below article by Zack Needles (as was Scott Cooper, Esq.) on the latest decision to come down on the Gallagher v. GEICO Household Exclusion issue:

Trial Judge: 'Gallagher' Doesn't Apply Where Insureds Waived Stacking

By Zack Needles | December 12, 2019


Photo credit: Rawpixel.com/Shutterstock.com

A Columbia County trial judge has ruled that the Pennsylvania Supreme Court’s landmark ruling from earlier this year in Gallagher v. Geico barred insurers from using the household exclusion to block stacked underinsured motorist coverage that had already been paid for, but did not apply in situations where stacking was voluntarily waived by the insureds.

In Nationwide Property and Casualty Insurance v. Ryman, the estate of Wyatt Ryman, who was killed in a motor vehicle accident, sought to recover underinsured motorist benefits under both Ryman’s policy and a policy issued to defendants Franklin and Yvonne Ent, relatives with whom Ryman lived at the time of his death.

The insurer who issued those policies, Nationwide Property and Casualty Insurance Co., denied coverage under the Ents’ policy, citing the household exclusion. Nationwide filed a complaint in May in the Columbia County Court of Common Pleas seeking a declaration that it does not owe coverage.

The defendants, in a motion for judgment on the pleadings, pointed to Gallagher, arguing that the household exclusion is never enforceable, but Columbia County Judge Gary Norton denied the motion.

Norton said the defendants’ interpretation of Gallagher was overly broad, explaining that because there’s still a material question as to whether Ryman and the Ents waived their right to stacked coverage, Gallagher may not even apply.

Norton said the fact that the plaintiff in Gallagher had not voluntarily waived inter-policy stacking was essential the Supreme Court’s ruling in that case.

“It is clear that the undisputed fact that the plaintiff in Gallagher selected and paid for stacking rights was pivotal in the Gallagher decision by the Supreme Court,” Norton said. “Defendants in the present case point to the final paragraph in Gallagher for their expansive reading: ‘For all of these reasons, we hold that the household vehicle exclusion violates the MVFRL; therefore, these exclusions are unenforceable as a matter of law.’ Giving effect to the language ‘For all of these reasons…,’ which included the fact that the plaintiffs paid for and secured stacking benefits in both policies, we believe defendants’ expansive reading of Gallagher is in error. The most fair interpretation of Gallagher is to read it in the context of its facts and in view of all of the language used by the Supreme Court, especially in citing the importance of the fact that the plaintiff selected and paid for the right to stack benefits under both policies.”

If it’s ultimately determined that Ryman and the Ents legitimately waived stacking, Norton said, the case would be more similar to the state Supreme Court’s 2006 ruling in Craley v. State Farm, in which the estate of a woman who died in an automobile accident was unable to collect UIM benefits under the decedent’s husband’s policy because both the decedent and her husband had elected to waive stacking.

Craley, Norton said, stood for the proposition that, “where there has been a valid waiver of stacking UIM benefits as to both policies, inter-policy stacking may be legitimately prohibited in a motor vehicle insurance policy.”

Scott Cooper of Schmidt Kramer in Harrisburg, who represented the plaintiffs in Gallagher but was not involved in the Ryman case, said Norton’s ruling simply said it was too early to determine whether stacking was waived in this case. Cooper also acknowledged that the mere invocation of the household exclusion was not necessarily fatal to an insurer’s case, though he added that insurers still have a heavy burden to prove that stacked coverage was knowingly and voluntarily waived.

Daniel Cummins, an insurance defense lawyer with [Cummins Law] in Scranton who also was not involved in the Ryman case, said Norton’s ruling “puts the brakes on Gallagher somewhat.”

“Until this decision came down, everybody was starting to think, ‘Gallagher eradicated the household exclusion, so we don’t have to worry about it,’” he said, but under the Ryman ruling, the first step in the inquiry has to be whether there was a valid waiver of stacking.

Counsel for the defendants, Ryan Molitoris of Hourigan, Kluger & Quinn in Scranton, could not be reached for comment; nor could Nationwide’s attorney, John Anastasia of the Mayers Firm in Plymouth Meeting.