Pennsylvania Supreme Court Provides Clarity Regarding Stacking of Underinsured Motorist Benefits
Since the Pennsylvania Supreme Court’s 2019 decision in Gallagher v. Geico Indemnity Company, 201 A.3d 131 (Pa. 2019), the Pennsylvania courts have continued to grapple with that decision’s implications for insureds seeking to stack underinsured motorist (“UIM”) coverage across multiple automobile insurance policies. The Pennsylvania Supreme Court’s February 15, 2023 decision in Erie Insurance Exchange v. Mione is the latest word from the Court on the stacking issue.
The Court’s unanimous decision in Mione held that Gallagher should be restricted to its “unique facts,” and that it did not render all “household vehicle” exclusions ipso facto unenforceable. Rather, the Court held, such a “household vehicle” exclusion could be enforced when the insured has waived UM/UIM benefits on the policy that covers the vehicle the insured was occupying at the time of the accident—in other words, when there is nothing upon which to “stack” the UIM benefits under another household policy. The Mione decision thus provides substantial clarity and guidance for insureds, insurers, and courts when disputes about stacking arise.
The Mione case arose from a 2018 automobile accident. At the time of the accident, Albert Mione was operating a motorcycle that he owned and insured under a policy issued to him by Progressive Insurance Company. The Progressive policy did not contain UM/UIM coverage, as Mr. Mione had expressly waived that coverage as permitted under the Pennsylvania Motor Vehicle Financial Responsibility Law (“MVFRL”). At the time of the accident, Mr. Mione and his wife Lisa jointly owned a car that was insured on a single-vehicle policy issued by Erie Insurance Exchange. The Miones were the named insureds on this Erie policy. The Miones also qualified as “insureds” under their daughter Angela’s automobile policy—which was also issued by Erie—because Angela lived in their household. According to the Miones, both the Miones’ Erie policy and Angela’s Erie policy contained stacked UM/UIM benefits. The Erie policies also contained “household vehicle” exclusions, which precluded coverage for UM/UIM benefits where the injuries sustained by the insured occurred while the insured was operating a household vehicle not insured on the Erie policy for UM/UIM benefits.
When Mr. Mione was injured in the 2018 accident, he and his wife submitted claims for UIM benefits to Erie under both their own automobile policy and Angela’s policy. Erie denied coverage because the motorcycle that Mr. Mione was operating at the time of the accident was not insured for UM/UIM benefits under either of the Erie policies, and the “household vehicle” exclusion therefore precluded coverage. Following its denial of the Miones’ claims, Erie filed a declaratory judgment action in the Lehigh County Court of Common Pleas. In this lawsuit, Erie sought confirmation that it was not required to pay UIM benefits to the Miones under either of its policies.
The Lehigh County Court agreed with Erie, and it concluded that the “household vehicle” exclusions in the Erie policies were enforceable notwithstanding Gallagher. The Lehigh County Court based its decision on the Pennsylvania Supreme Court’s decision in Eichelman v. Nationwide, 711 A.2d 1006 (Pa. 1998). In Eichelman, the plaintiff was injured while operating a motorcycle that he owned, but which was not insured for UIM benefits under his family’s Nationwide policy. The Pennsylvania Supreme Court held that the “household vehicle” exclusion in the Nationwide policy was enforceable and precluded the plaintiff from collecting UIM benefits under that policy. Notably, the plaintiff in Eichelman—like the Miones—had waived UM/UIM coverage for the motorcycle he was operating at the time of the accident. It was this fact, according to the Lehigh County Court, that distinguished the Miones’ claim from the facts of Gallagher.
On appeal to the Pennsylvania Superior Court, the Miones argued that Gallagher precluded application of Erie’s “household vehicle” exclusions because the Erie policies contained stacked UIM benefits, even if the policy covering the vehicle Mr. Mione was operating at the time of the accident did not. The Miones also claimed that Gallagher overruled Eichelman sub silentio, and that the trial court therefore erred when it held that the Erie “household vehicle” exclusions were not void based on public policy. The Superior Court rejected these arguments, and it affirmed the Lehigh County Court of Common Pleas’ holding in favor of Erie.
Appeal to the Pennsylvania Supreme Court
The Miones then appealed the Superior Court’s decision to the Pennsylvania Supreme Court. In an opinion authored by Justice Wecht and joined by all members of the Court, the Court confirmed that Erie’s interpretation of its policies was consistent with Pennsylvania law. The Court began its analysis by noting that § 1738 of the MVFRL provides that UM/UIM benefits will be stacked unless the insured expressly waives stacking in the precise manner set forth in § 1738.
According to the Mione Court, Gallagher’s holding was based on the Court’s concern that the “household vehicle” exclusion at issue in that case would operate as a de facto waiver of stacking. This was because the policies at issue in Gallagher—specifically, the policy covering the motorcycle the insured was operating at the time of the accident and his household vehicle policy, which did not insure the motorcycle—both included stacked UM/UIM coverage, and the insured had paid Geico premiums commensurate with his decision not to reject stacking. Thus, according to the Court, applying the “household vehicle” exclusion under the facts of Gallagher would result in the insured being denied the benefit of stacking even though he had not expressly waived stacking, thereby making the policies inconsistent with §1738.
Turning to the facts before it, the Court noted that the Miones—unlike the plaintiff in Gallagher—had expressly waived UM/UIM coverage on the policy that covered Mr. Mione’s motorcycle. Because this policy did not have UM/UIM benefits in the first instance, the Miones were therefore not attempting to “stack” the UM/UIM coverage under the Erie policies onto anything. As such, according to the Court, the concerns expressed in Gallagher about a “household vehicle” exclusion acting as a de facto waiver of stacking were simply not implicated by the facts of Mione. The Court also rejected the Miones’ claim that the Erie policies could provide UM/UIM coverage in the first instance, as the application of the “household vehicle” exclusion precluded coverage for Mr. Miones’ injuries. Based on the unambiguous terms of §1738 and the Erie policies alone, the Court therefore affirmed the trial court’s declaratory judgment in favor of Erie.
Addressing the Miones’ claim that Gallagher overruled Eichelman, the Court stated that its holding in Gallagher was to be limited to the “unique facts” of that case, and that the Gallagher decision “should be construed narrowly.” According to the Court:
[W]hen an insured is seeking UM/UIM benefits under a household policy but does not have UM/UIM coverage on the vehicle that he or she was occupying at the time of the collision, it cannot be said that a household vehicle exclusion in the UM/UIM containing policy is operating as the sort of disguised waiver of stacking that was disapproved in Gallagher. Rather, in such circumstances, the household vehicle exclusion serves as an unambiguous preclusion of all UM/UIM coverage (even unstacked coverage) for damages sustained while operating an unlisted household vehicle.
Because its decision was based on the language of § 1738 itself, the Court concluded that it was unnecessary to address the other factors that the Pennsylvania courts use to guide their interpretation of the MVFRL, such as the MVFRL’s remedial purpose or the concern about cost-containment. Notwithstanding this conclusion, however, the Court nevertheless felt compelled to address the public policy implications of the Miones’ argument:
[W]e highlight that the Miones’ argument, if we accepted it, would create a system prone to abuse. One could waive the (expensive) UM/UIM coverage on one’s motorcycle policy with one insurer, knowing full well that one has ample UM/UIM coverage on another (less expensive) household automobile policy with another insurer. As we have said in the past, interpretations of the MVFRL that opened the door to such abuses are strongly disfavored, unless the plain language of the statute clearly states otherwise.”
The Court concluded its decision by reiterating that it “continue[s] to reject the view that household vehicle exclusions are ipso facto unenforceable. Gallagher did not undermine Eichelman’s central holding in that regard; it simply held that a household vehicle exclusion cannot conflict with §1738 by purporting to take away coverage that the law says is mandatory unless waived using a specific form.”
The Mione decision is yet another opinion in a long line of cases attempting to clarify and apply the stacking provisions of the MVFRL. Although the Mione decision does not fully resolve all of the questions that have arisen since the Supreme Court’s decision in Gallagher, it does make clear that a “household vehicle” exclusion is not automatically rendered void as a matter of public policy.
The decision further clarifies that if the insured is injured while operating a vehicle that is not insured for UM/UIM coverage, the insured’s attempt to seek UM/UIM coverage under another household policy is not “stacking,” as that concept is set forth in §1738. Because there is therefore nothing to stack the household policy’s UM/UIM coverage on top of, a “household vehicle” exclusion under those facts will be enforceable even after Gallagher.
Both insureds and insurers would be wise to take note of the important factual distinction between Mione and Gallagher; and to be guided by those decisions and their “unique facts” when determining whether an insured is entitled to stacked UM/UIM coverage under a household vehicle policy.