Motor vehicle insurance, inter-policy stacking; motorcycles; whether “household vehicle exclusion” violates Section 1738 of the MVFRL    

Gallagher v. GEICO Indemnity Co., 2017 WL 394337 (unreported), allocatur granted Aug. 8, 2017, 35 WAP 2017




Insured elected and paid for stacked coverage on two GEICO insurance policies, one for his motorcycle and one for his two automobiles. The decision to write two separate policies, rather than one policy covering all three vehicles, was GEICO’s. Insured was injured in an accident while operating his motorcycle. GEICO paid $50,000 of underinsured motorist (“UIM”) coverage under the motorcycle policy, but denied insured’s claim for additional UIM benefits under the automobile policy, based on the “household vehicle exclusion” which stated: “This coverage does not apply to bodily injury while occupying or from being struck by a vehicle owned or leased by you or a relative that is not insured for [UIM] [c]overage under the policy.”  Trial court granted summary judgment for GEICO and Superior Court affirmed on the basis of Government Employees Insurance Co. v. Ayers, 955 A.2d 1025 (Pa.Super. 2008), affirmed by an equally divided court, 18 A.3d 1093 (Pa. 2011), and Erie Insurance Exchange v. Baker, 972 A.2d 507 (Pa. 2009).

The Superior Court majority noted “the significance of this legal issue and the divided nature of the Supreme Court in both Ayers and Baker,” and suggested that the insured “may wish to petition the Pennsylvania Supreme Court for allowance of appeal.”  In concurrence, Judge Musmanno quoted his dissent in Ayers, and stated “the issue warrants review by our Supreme Court”:

[b]ecause insurance companies routinely require motorcycle owners to insure their motorcycles under a separate insurance policy from the owners’ other vehicles, those motorcycle owners who elected and paid for inter-policy stacking will be stripped of these benefits when they are injured while riding their motorcycles. I do not characterize this as a “narrow circumstance” and permit the insurance companies to receive a windfall, as they would be permitted to withhold benefits for which the insured has paid. Id. [955 A.2d] at 1031.

The Supreme Court has now granted allocatur as to two issues as stated by the petitioner insured:

(1) Whether the “household vehicle exclusion” violates Section 1738 of the Pennsylvania Motor Vehicle Financial Responsibility Law (MVFRL) where GEICO issued all household policies and unilaterally decided to issue two separate policies, when the insured desired stacking, elected stacking, paid additional premiums for stacking and never knowingly waived stacking of underinsured motorist benefits?

(2) Whether the “household vehicle exclusion” impermissibly narrows or conflicts with the statutory mandates of the Pennsylvania Motor Vehicle Financial Responsibility Law and the evidence of record is that GEICO was fully aware of the risks of insuring a motorcycle in the same household as other family vehicles but unilaterally decided to write a separate motorcycle policy?

For more information, contact Kevin McKeon or Dennis Whitaker.