United States District Court, E.D. Pennsylvania
Austin McHugh, United States District Judge
case raises two related questions under Pennsylvania's
Motor Vehicle Financial Responsibility Law (MVFRL). The first
involves the right to aggregate or “stack” the
limits of coverage for underinsured (UIM) benefits between
two separate policies of insurance, commonly referred to as
“inter-policy” stacking. The second is whether a
commonly used exclusion to prevent the stacking of benefits
by combing the limits of separate policies, commonly referred
to as the “household exclusion, ” remains viable
following the Pennsylvania Supreme Court's decision in
Gallagher v. GEICO Indem. Co., 201 A.3d 131 (Pa.
defendant carrier concedes that inter-policy stacking of UIM
benefits is permissible under Pennsylvania law but contends
that its insureds waived such stacking when the policies were
purchased. I agree that inter-policy stacking can be waived,
but further conclude as a matter of law that no waiver was
effectuated in this case as to the policy through which
coverage is sought. With respect to the enforceability of the
household exclusion, the broad language of the Supreme Court
in Gallagher favors a conclusion that such
provisions are per se unenforceable. But even if
Gallagher were to be limited to cases where a policy
provides for stacked coverage, as urged by the defense, the
household exclusion is still unenforceable in this case,
because inter-policy stacking was not validly waived.
Consequently, I will grant Plaintiffs' Motion for Summary
Judgment and deny Defendant's Cross-Motion.
2015, Plaintiff Corey Donovan was involved in an accident
while riding his motorcycle. The motorist who struck
Plaintiff maintained insurance coverage, and the carrier
tendered the full liability limit of $25, 000 available under
the motorist's policy. Plaintiff then filed a claim for
underinsured motorist (UIM) benefits under the motorcycle
policy he held with Defendant State Farm Mutual Automobile
Insurance Company. The policy, which he had purchased in
April 2015, provided UIM coverage up to $50, 000 per person.
State Farm tendered the full limit available under the
Donovan resides with his mother, Plaintiff Linda Donovan, who
maintains a Personal Automobile Policy with State Farm. Her
policy extends UIM coverage to “resident relatives,
” defined as a relative who resides primarily with the
named insured. After the motorcycle accident, Mr. Donovan
filed a claim for UIM benefits under his mother's policy,
which provides for UIM benefits of up to $100, 000 per
Farm denied this claim, stating that Ms. Donovan's policy
did not allow for additional coverage of Mr. Donovan.
Defendant State Farm's automobile policy sets forth
different coverage terms for UIM benefits depending on
whether the insured selected stacked or unstacked UIM
coverage. Under Pennsylvania's Motor Vehicle Financial
Responsibility Law (MVFRL), a motorist with stacked coverage
is entitled to UIM benefits equal to the aggregate amount of
liability limits applicable to each vehicle for which the
individual is insured. See 75 Pa. Cons. Stat. §
1738(a). Under some circumstances, an insured can aggregate
coverage under one policy issued by a carrier with one or
more other policies issued by that carrier, which is known as
inter-policy stacking. An insured can elect to waive
stacking, in which case UIM coverage is limited to the amount
stated for a single vehicle in the policy in return for a
lower premium. Id. §§ 1738(b), (d).
Donovan's policy covered three vehicles, but in 2012, she
signed a waiver declining stacked UIM benefits under her
automobile policy. Pls.' Compl. Ex. D, ECF No. 1-6. It
By signing this waiver, I am rejecting stacked limits of
underinsured motorist coverage under the policy for myself
and members of my household under which the limits of
coverage available would be the sum of limits for each motor
vehicle insured under the policy. Instead, the limits of
coverage that I am purchasing shall be reduced to the limits
stated in the policy. I knowingly and voluntarily reject
stacked limits of coverage. I understand my premiums will be
reduced if I reject this coverage.
Id. According to State Farm, this waiver eliminated
both the right to stack limits of coverage as to the vehicles
identified in the policy-intra-policy stacking-and the right
to combine the policy the UIM benefits with any other State
Farm policy-inter-policy stacking. Plaintiffs contend that
the waiver applies only to intra-policy
policy differentiates stacked versus unstacked coverage by
the codes Coverage W and Coverage W3, respectively. For W3
unstacked coverage, the policy sets forth an exclusion which
provides: “THERE IS NO COVERAGE FOR AN
INSURED WHO SUSTAINS
BODILY INJURY WHILE
OCCUPYING A MOTOR VEHICLE
OWNED BY YOU OR ANY
RESIDENT RELATIVE IF IT IS NOT
YOUR CAR OR A NEWLY
ACQUIRED CAR.” Def.'s Mot. Summ. J.
Ex. 2, at 37, ECF No. 16-6. This language represents the
“household exclusion, ” which disclaims UIM
coverage for an otherwise insured relative residing in the
household if they are injured while occupying a vehicle other
than a car belonging to the named policy holder.
denying Plaintiff Corey Donovan's claim, State Farm
offered the following explanation in a June 22, 2016 letter:
We see no coverage opportunities for Corey under the auto
policy of Linda Donovan. With Corey having non stacking
underinsured coverage on the vehicle involved in the
accident. [sic] And with Linda Donovan having
non-stacking underinsured coverage on her auto policy of
insurance, it is our position that the only source of
underinsured coverage for Corey is his motorcycle policy with
a $50, 000 per person limit.
Pls.' Compl. Ex. C, ECF No. 1-5.
receiving this denial letter, Plaintiffs filed this action
seeking declaratory relief. In Count I, Plaintiffs request an
order declaring that Corey Donovan may, at a minimum, recover
up to $50, 000 in additional UIM benefits under the literal
terms of his mother's policy. Pls.' Compl. at 7, ECF
No. 1-1. In Count II, Plaintiffs seek an order declaring that
Corey Donovan may recover up to $100, 000 in additional UIM
benefits under his mother's policy, on the ground that
Ms. Donovan waived only intra-policy stacking but did not
waive inter-policy stacking. Id. at 8-11.
In supplemental briefing requested by the Court, the parties
have addressed the implication of Gallagher v.
Geico, 201 A.3d 131 (Pa. 2019).
parties have agreed to proceed on a stipulated record by
filing cross-motions for summary judgment.