Tuesday, July 21, 2020

Import of Gallagher v. Geico Household Exclusion Decision Reviewed by Eastern Federal District Court

In the case of LM Gen. Ins. Co. v. LeBrum, No. 19-2144-KSM (E.D. Pa. July 1, 2020 Marston, J.) (Mem. Op.), the court addressed a declaratory judgment issue pertaining to whether the injured Plaintiff’s claims for UIM benefits were barred by a household exclusion and whether the Plaintiffs were entitled to stacked coverage.

The issue came before the court on the insurance company’s Motion to Dismiss the counterclaims asserted by the injured party Plaintiffs. The carrier asserted that the household exclusion barred the injured parties from receiving UIM benefits and also that the injured parties were not entitled to stacked coverage because the injured party had signed the statutorily mandated waiver form. 

The court granted the motion in part and denied it in part. 

According to the Opinion, the injured party Plaintiff was injured while riding a motorcycle. At the time of the accident, the injured party had two (2) insurance policies, one was a motorcycle policy issued by State Farm and the other was a personal automobile insurance policy issued by LM General. The LM General policy did not cover the motorcycle. 

The Plaintiff recovered the policy limits from the tortfeasor’s liability policy as well as the UIM coverage under the State Farm motorcycle policy. The Plaintiff then filed a claim for additional UIM coverage under the separate policy issued by LM General which covered the Plaintiff’s vehicle. The carrier responded by citing to the household exclusion in the policy, which excluded UIM coverage for bodily injury suffered by an insured when using or being struck by a vehicle owned by a member of the household, which vehicle was not covered under the LM General policy. 

The insurance company also asserted that the injured party was not entitled to stacked coverage given that the injured party’s wife had executed the rejection form when the policy was purchased from LM General. It was noted that the injured parties also signed a form indicating that their selection would apply throughout this policy period, regardless of the replacement or addition of new vehicles to the policies. 

According to the record, the injured parties had added a vehicle a few years after securing a policy from LM General. Also, although the insurance company generated an amended declarations page, it did not have the injured parties sign a new stacking waiver. 

On the issue of the manner in which the injured party’s new vehicle was added to the policy, the court declined to decide any issues in that regard at this Motion to Dismiss stage. The court noted that issues in that respect were typically decided at the summary judgment stage. 

The court also held that the issue of whether the injured party had effectively waived inter-policy stacking should also be decided after further discovery and under a possible Motion for Summary Judgment. 

The court in this case additionally noted that the Pennsylvania courts have held that the household exclusion provision could not be used to serve as a de facto waiver of UM/UIM coverage. The court in this case reviewed a number of trial court decisions indicating that the Gallagher v. Geico decision by the Pennsylvania Superior Court should be viewed broadly as well as those other decisions that have indicated that the Gallagher v. Geico decision should be interpreted narrowly. 

The court in this case indicated that, at the Motion to Dismiss stage, it was not inclined to interpret Gallagher’s holding narrowly. The court invited the parties to brief the issue again at the summary judgment stage after discovery has been completed. 

In so ruling, the court in this case did indicate that the Gallagher decision could be applied retroactively.  

With regards to a statute of limitations defense asserted by the carrier on the Gallagher v. Geico issue, the court agreed that a four (4) year statute of limitations would apply on any retroactive claims. 

Anyone wishing to review a copy of this decision may click this LINK.  The companion Order can be reviewed HERE

Source: “Digest of Recent Opinions.” Pennsylvania Law Weekly (July 14, 2020).

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