Thursday, July 8, 2021

Pennsylvania Superior Court Again Confirms that the Household Exclusion Remains a Viable Exclusion Under Facts Distinguishable From Gallagher Decision (Non-Precedential)

In an important decision that it, for some inexplicable reason, was marked as “Non-Precedential,” the Pennsylvania Superior Court again confirmed that the effort by the Pennsylvania Supreme Court in the case of Gallagher v. Geico, 201A.3d131 (Pa. 2019), to eradicate the household exclusion under automobile insurance policies across the board was invalid. 

Rather, in its Non-Precedential decision issued on July 7, 2021 in the case of Erie Insurance Exchange v. Sutherland, No. 1113 WDA 2020 (Pa Super July 7, 2021 McLaughlin, J., King, J., and McCaffery, J.) (Op. by McCaffery, J.), the Pennsylvania Superior Court has again confirmed that the household exclusion can still be enforced under facts distinguishable from those facts at issue in the Gallagher case.

In this case, the trial court had denied the carrier’s motion for judgment on the pleadings filed in its declaratory judgment action in which the carrier sought a judicial declaration that it was within its rights to deny the Plaintiff's claims for UIM benefits on the basis of a household exclusion under the policy.

According to the Opinion, the plaintiff was allegedly injured while operating his motorcycle when he was allegedly struck by an underinsured motorist.

The plaintiff’s motorcycle was insured through a policy issued by Progressive Insurance Company.

Notably, according to the opinion, the plaintiff had waived underinsured motorists coverage under that Progressive motorcycle policy.

At the time of the accident, the plaintiff also maintained an insurance policy issued by Erie Insurance which provided coverage to two other vehicles. The court emphasized that the plaintiff did not execute a waiver of stacking for that Erie insurance policy. It was also emphasized that the plaintiff paid premiums consistent with obtaining stacked coverage under those policies. However, the Erie Insurance policy contained a household exclusion.

After the plaintiff requested Erie Insurance to pay UIM benefits for the injuries sustained as a result of the motorcycle accident, Erie denied the request and relied upon the household exclusion. That denial was issued back in June of 2017.

Fast forward to March of 2019 at which point the plaintiff requested Erie Insurance to reconsider its previous denial of the UIM coverage in light of what was then the recent Pennsylvania Supreme Court decision issued in Gallagher. Erie refused and, instead initiated this declaratory judgment action seeking to enforce its household exclusion under the facts presented.

As noted, the trial court in this matter denied Erie’s motion for judgment on the pleadings. The trial court concluded that the case of Eichelman v. Nationwide Ins. Co., 711 A.2d 1006 (Pa. 1998), was effectively abrogated by the Pennsylvania Supreme Court's decision in Gallagher v Geico, 201 A.3d 131 (Pa. 2019). The trial court had also applied the Gallagher decision to conclude that the household exclusion clause was not enforceable as it conflicted with Section 1738 of the Motor Vehicle Financial Responsibility Law.

Erie Insurance appealed the trial court's decision to the Superior Court.   

On appeal, in this Non-Precedential opinion, the Pennsylvania Superior Court reversed the trial court and instead concluded that the issue presented in this case governed by the Pennsylvania Superior Court’s recent decision in the case of Erie Insurance Exchange v. Mione, __ A.3d __, 2021 WL1847751 (Pa. Super. May 10, 2021).

The facts in Mione were similar to the Sutherland case in that the plaintiff in Mione also did not pay for stacked UIM coverage on his separately insured motorcycle policy. The plaintiff in Mione was operating his motorcycle as well when he was involved in his accident. That motorcycle was also insured under a policy from Progressive, under which the plaintiff did not pay for stacked UIM coverage. The plaintiff in Mione also had separate automobile policies with Erie Insurance and sought to recover UIM benefits under those policies.

In its opinion in this Sutherland case, Pennsylvania Superior Court reiterated that this area of Pennsylvania law is not particularly clear or straightforward. The Pennsylvania Superior Court directly addressed the Pennsylvania Supreme Court and requested clarification on these issues presented.

The Pennsylvania Superior Court in this case, as well as in the Mione case ruled that, where there is no UIM policy upon which to stack, the Gallagher decision is factually irrelevant and distinguishable in that, instead, the Eichelman decision applied.

The court found that in this Sutherland case, like the plaintiff in Eichelman, the plaintiff was attempting to use a separate automobile insurance policy in order to "procure" UIM coverage in the first place and for which the plaintiff had not paid. 

The court in this Sutherland decision emphasized that the Eichelman decision had not been abrogated by the Gallagher decision. 

The Superior Court also emphasized that the decisions of Eichelman and Gallagher “are not inconsistent as they address different factual scenarios – saliently, whether an insured has waived or purchased UIM coverage on a vehicle that is involved in an accident or other incident.” See Op. at p. 20.

The Superior Court noted that where, as in this Sutherland case and as in the Eichelman case, a plaintiff did not purchase UIM coverage on his motorcycle policy, that plaintiff is not entitled to stack UIM coverage under his separate policies issued by another insurance company on other vehicles, as there was no UIM coverage covering the motorcycle upon which the other policies could stack onto.

The court noted that this result is consistent with the Motor Vehicle Financial Responsibility Law, as the plaintiff voluntarily chose not to purchase UIM coverage on his motorcycle policy, and, in return, received reduced insurance premiums. See Op. at p. 20-21.

The court noted that, if the plaintiff had indeed purchase UIM coverage on his Progressive Insurance motorcycle policy, as well as under his separate Erie Insurance automobile insurance policies, then Gallagher would apply under those facts and the household exclusion would be unenforceable under Gallagher.

Here however, under the different facts presented, the Superior Court ruled in Sutherland (and just like it ruled in Mione) that the trial court had erred in concluding that the household exclusion was not enforceable. As such, the trial court’s opinion was reversed.

At the end of its decision in this Sutherland case, Pennsylvania Superior Court noted that the issues presented are poised to be reviewed again by the Pennsylvania Supreme Court in the case of Donovan v. State Farm. It was also noted by the Pennsylvania Superior Court that the plaintiffs in the Mione case have petitioned the Pennsylvania Supreme Court for allowance to appeal the issue in that matter as well.

In this Sutherland decision, Pennsylvania Superior Court noted that the issues may be clarified by the Pennsylvania Supreme Court upon further review of those cases.

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

Source of image above: Photo by Anne Nygard on

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