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Erie Insurance Exchange v. Baker

June 22, 2009

ERIE INSURANCE EXCHANGE, APPELLEE
v.
LINDA J. BAKER, ADMINISTRATRIX OF THE ESTATE OF EUGENE BAKER, APPELLANT



Appeal from the Order of the Superior Court entered August 8, 2007 at No. 1175 WDA 2006 affirming the Order of the Court of Common Pleas of Allegheny County entered June 19, 2007 at No. GD 01-013165.

The opinion of the court was delivered by: Madame Justice Greenspan

CASTILLE, C.J., SAYLOR, EAKIN, BAER, TODD, McCAFFERY, GREENSPAN, JJ.

ARGUED: September 10, 2008

OPINION ANNOUNCING THE JUDGMENT OF THE COURT

We decide whether the so-called "household exclusion" in a motor vehicle insurance policy is valid and enforceable to preclude the payment of underinsured motorist benefits under the circumstances of this case. We hold the exclusion is valid, and accordingly affirm the order of the Superior Court.

Appellee Erie Insurance Exchange (Erie) filed this action seeking a declaration of rights and obligations regarding a motor vehicle insurance policy it issued to appellant Eugene Baker, covering three vehicles he owned.*fn1 The Erie policy included $100,000/$300,000 in underinsured motorist (UIM) coverage on each of these vehicles. Baker did not sign a waiver of his rights to "stack" the coverages of these three vehicles.*fn2

In June 1999, Baker was in an accident while operating his motorcycle. The motorcycle was not insured by Erie, but rather by Universal Underwriters Insurance Company (Universal). The Universal motorcycle policy included $15,000 in UIM coverage. Because the tortfeasor's insurance was insufficient to cover Baker's injuries, Baker sought UIM coverage under his own policies with Erie and Universal.

Universal paid its UIM limits to Baker. Baker then sought additional UIM benefits from the Erie policy. Erie denied coverage, relying on the following exclusion language in its policy:

This insurance does not apply to. damages sustained by anyone we protect while occupying or being struck by a motor vehicle owned by you or a relative, but not insured for Uninsured or Underinsured Motorists Coverage under this policy.*fn3

In the instant declaratory judgment action, Erie filed a motion for judgment on the pleadings. Erie argued the plain language of its household exclusion denies coverage to Baker because, at the time of the accident, he was driving a vehicle owned by him but not insured under the Erie policy, i.e., his Universal-insured motorcycle. The trial court agreed with Erie and entered judgment in its favor. The Superior Court affirmed in an unpublished memorandum opinion.

This Court granted Baker's petition for allowance of appeal, limited to the following issue:

Whether Section 1738(a) of the [Motor Vehicle Financial Responsibility Law] precludes application of the so-called "household exclusion" to prevent inter-policy stacking of UIM benefits when there has been no valid stacking waiver by the insured.

In his argument to this Court, Baker concedes that the unambiguous terms of Erie's household exclusion apply to preclude UIM coverage under the circumstances of this case. But Baker claims that Erie's household exclusion violates the Motor Vehicle Financial Responsibility Law (MVFRL), specifically the provisions regarding stacking contained in 75 Pa.C.S. § 1738. Section 1738(a) provides:

ยง 1738. Stacking of uninsured and underinsured benefits and option to waive (a) Limit for each vehicle.--When more than one vehicle is insured under one or more policies providing uninsured or underinsured motorist coverage, the stated limit for uninsured or underinsured coverage shall apply separately to each vehicle so insured. The limits of coverages available under this subchapter for an ...


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