Tuesday, June 16, 2020

Gallagher v. Geico Continues to Be Troublesome

In the case of Erie Insurance Exchange v. Sutherland, No. 10437 of 2019, C.A. (C.P. Lawr. Co. May 22, 2020 Motto, P.J.), the court addressed a Motion for Judgment on the Pleadings filed on behalf of the insurance company asserting that the insured Defendants were not entitled to stacked UIM coverage under the policy for injuries sustained while the injured party was operating a motorcycle, as the injured party had waived UIM coverage on the policy that covered the motorcycle. 

According to the Opinion, the injured party was injured while operating his motorcycle which was covered under a Progressive Insurance policy. Under that policy, the injured party had waived any underinsured motorist coverages for all vehicles insured pursuant to that policy.

The injured party and his wife also maintained a separate insurance policy issued by Erie Insurance which covered two (2) SUVs that the Plaintiffs owned. Underinsured motorist coverage was purchased under that separate Erie Insurance policy.

The court noted that the injured party did not execute a waiver of stacking for the Erie Insurance policy and paid premiums consistent with obtaining stacked UIM coverage. 

The court also noted that the Erie Insurance policy contained a household exclusion. 

After the injured party requested Erie Insurance to pay UIM benefits for the injuries that he sustained in the motorcycle accident, the carrier rejected this request for coverage and referenced the application of the household exclusion. That initial denial was issued back on June 23, 2017, which was long before the 2019 Gallagher v Geico decision was handed down by the Pennsylvania Supreme Court. 

On March 27, 2019, the injured party requested Erie Insurance to reconsider its previous denial in light of the Pennsylvania Supreme Court’s decision in Gallagher v. Geico, 201 A.3d 131 (Pa. 2019). Erie Insurance refused to approve the injured party’s claim as Erie took the position that the injured party was still not entitled to UIM coverage concerning the motorcycle under the facts presented. 

Thereafter, the carrier initiated this declaratory judgment action seeking enforcement of the household exclusion. The injured party counterclaimed with claims of breach of contract.

After reviewing Gallagher v. Geico decision as well as more recent decisions from the Eastern District Federal Court following the issuance of the Gallagher decision, the court in this Lawrence County case found that the Gallagher was controlling and that the Gallagher court had “clearly held [that the] household exclusions violate the MVFRL and are unenforceable.”

The court in this matter also pointed to the other more recent Eastern District Court decisions in which those courts consistently permitted the recovery of stacked UIM benefits even though a household exclusion existed on the policies at issues in those cases.

The court in this matter also felt that the facts before it were more compelling than the Eastern District case in that the injured party in this matter was a named insured on both policies (the motorcycle policy and the separate auto policies) while the other cases included stacked coverage for a mere member of the named insured’s household.

In the end, this court held that Gallagher applies if the effect of applying a household exclusion is to cause a de facto waiver of coverage, i.e. one in which the insured did not sign a waiver of stacking form, which would make the exclusion unenforceable.

The court noted that the injured party’s waiver of UIM coverage under the Progressive policy covering the motorcycle cannot be read to preclude his ability to recover under the Erie policy as the injured party paid premiums for stacked UIM coverage under the Erie policy and did not execute any waiver form relative to the Erie policy.

As such, the court in this matter denied the carrier’s Motion for Judgment on the Pleadings and allowed for stacked coverage..

Anyone wishing to review a copy of this decision may click this LINK.

I send thanks to Attorney Scott Cooper of the Harrisburg, PA law firm of Schmidt Kramer for bringing this case to my attention.

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